Document/Exhibit Description Pages Size
1: 485APOS Post Effective Amendment 148 811K
3: EX-27 ƒ Financial Data Schedule 2± 10K
4: EX-27 ƒ Financial Data Schedule 2± 10K
5: EX-27 ƒ Financial Data Schedule 2± 9K
6: EX-27 ƒ Financial Data Schedule 2± 9K
7: EX-27 ƒ Financial Data Schedule 2± 9K
8: EX-27 ƒ Financial Data Schedule 2± 9K
9: EX-27 ƒ Financial Data Schedule 2± 9K
10: EX-27 ƒ Financial Data Schedule 2± 9K
2: EX-99.B11 Auditor Consent 1 6K
Registration No.2-61391
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. / /
Post-Effective Amendment No.25 /x/
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No.25 /x/
(Check appropriate box or boxes)
--------------------
THE EVERGREEN TOTAL RETURN FUND
(Exact name of registrant as specified in charter)
2500 Westchester Avenue
Purchase, N.Y. 10577
(Address of Principal Executive Offices)
(Registrant's Telephone Number, Including Area Code (914) 694-2020)
James P. Wallin, Esq.
Evergreen Asset Management Corp.
2500 Westchester Avenue, Purchase, N.Y. 10577
(Name and address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
/ / Immediately upon filing pursuant to paragraph (b) or
/ / on (date) pursuant to paragraph (b) or
/X/ 60 days after filing pursuant to paragraph (a)(i) or
/ / on (date) pursuant to paragraph (a)(i) or
/ / 75 days after filing pursuant to paragraph (a)(ii) or
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940.
Registrant's Rule 24f-2 notice for its fiscal year ended January 31, 1996, was
filed on or about March 29, 1996
CROSS REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No. Location in Prospectus(es)
Part A
Item 1. Cover Page Cover Page
Item 2. Synopsis and Fee Table Overview of the Fund(s);
Expense Information
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Cover Page; Description of
the Funds; General
Information
Item 5. Management of the Fund Management of the Fund(s);
General Information
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
Item 8. Redemption or Repurchase Purchase and Redemption of
Shares
Item 9. Pending Legal Proceedings Not Applicable
Location in Statement of
Part B Additional Information
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Objectives and
Policies;Investment
Restrictions; Other
Restrictions and
Operating Policies
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;
Purchase of Shares
Item 17. Brokerage Allocation Allocation of Brokerage
Item 18. Capital Stock and Other Securities Purchase of Shares
Item 19. Purchase, Redemption and Pricing of Distribution Plans; Purchase
Securities Being Offered of Shares; Net Asset Value
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Distribution Plans; Purchase
of Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
Part C
Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C to this Registration Statement.
******************************************************************************
Supplement to Prospectus - January 29, 1997
Effective January 31, 1997, the name of Evergreen Total Return Fund has been
changed to Evergreen Income & Growth Fund.
The table presented below presents for the Evergreen Total Return Fund,
financial highlights for a share outstanding for the six months ended July 31,
1996. The information is unaudited. This information should be read in
conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
semi-annual report to shareholders, which may be obtained without charge.
Evergreen Income & Growth Fund
(formerly Evergreen Total Return Fund)
FINANCIAL HIGHLIGHTS
Six months ended July 31, 1996
(unaudited)
Class A Class B Class C Class Y
Per Share Data:
Net asset value, beginning of period $20.15 $20.08 $20.08 $20.16
Income (loss) from investment operations:
Net investment income 0.49 0.43 0.42 0.52
Net realized and unrealized loss
on investments (0.54) (0.55) (0.54) (0.54)
Total from investment operations (0.05) (0.12) (0.12) (0.02)
Less distributions to shareholders
from net investment income (0.52) (0.46) (0.46) (0.54)
Net asset value, end of period $19.58 $19.50 $19.50 $19.60
Total Return+ -0.3% -0.6% -0.6% -0.2%
Ratios & Supplemental Data:
Net assets, end of period (000's) $6,990 $24,582 $870 $817,280
Ratios to average net assets:
Expenses * 1.44% 2.19% 2.19% 1.18%
Net investment income * 4.81% 4.05% 4.02% 4.99%
Portfolio turnover rate 79% 79% 79% 79%
Average commission paid per share $0.0495 $0.0495 $0.0495 $0.0495
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
* Annualized.
******************************************************************************
PROSPECTUS April 1, 1996
(Evergreen tree logo)
EVERGREEN(SM) GROWTH AND INCOME FUNDS
EVERGREEN BALANCED FUND
EVERGREEN GROWTH AND INCOME FUND
EVERGREEN VALUE FUND
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN FOUNDATION FUND
EVERGREEN TOTAL RETURN FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Growth and Income Funds (the "Funds") are designed
to provide investors with a selection of investment alternatives which seek
to provide capital growth, income and diversification. This Prospectus
provides information regarding the Class A, Class B and Class C shares
offered by the Funds. Each Fund is, or is a series of, an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Funds that a prospective investor should know
before investing. The address of the Funds is 2500 Westchester Avenue,
Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen group of mutual funds dated April 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 Funds at (800) 807-2940. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED
OR OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
TABLE OF CONTENTS
[Download Table]
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 18
Investment Practices and Restrictions 22
MANAGEMENT OF THE FUNDS
Investment Advisers 27
Sub-Adviser 29
Distribution Plans and Agreements 29
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 30
How to Redeem Shares 32
Exchange Privilege 33
Shareholder Services 34
Effect of Banking Laws 35
OTHER INFORMATION
Dividends, Distributions and Taxes 35
General Information 36
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The investment adviser to EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION FUND, and EVERGREEN TOTAL RETURN
FUND is Evergreen Asset Management Corp. which, with its predecessors, has
served as an investment adviser to the Evergreen mutual funds since 1971.
Evergreen Asset Management Corp. is a wholly-owned subsidiary of First Union
National Bank of North Carolina, which in turn is a subsidiary of First Union
Corporation, the sixth largest bank holding company in the United States. The
Capital Management Group of First Union National Bank of North Carolina serves
as investment adviser to EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND.
EVERGREEN BALANCED FUND (formerly First Union Balanced Portfolio) seeks
to produce long-term total return through capital appreciation, dividends, and
interest income.
EVERGREEN GROWTH AND INCOME FUND seeks to achieve a return composed of
capital appreciation in the value of its shares and current income. The Fund
will attempt to meet its objective by investing in the securities of companies
which are undervalued in the marketplace relative to those companies' assets,
breakup value, earnings, or potential earnings growth.
EVERGREEN VALUE FUND (formerly First Union Value Portfolio) seeks
long-term capital growth, with current income as a secondary objective.
EVERGREEN AMERICAN RETIREMENT FUND seeks, in order of priority,
conservation of capital, reasonable income and capital growth. To achieve these
objectives, the Fund invests in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital appreciation. Investments in equity
securities will be limited to 75% of the value of the Fund's total assets
measured at the time any such investment is made. Normally, the Fund anticipates
that approximately half of the fixed income portion of the Fund's portfolio will
be invested in marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities.
EVERGREEN FOUNDATION FUND seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities.
EVERGREEN TOTAL RETURN FUND attempts to maximize the "total return" on
its portfolio of investments. It invests primarily in common and preferred
stocks, securities convertible into or exchangeable for common stocks and fixed
income securities.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in each Class A, Class B and Class C Shares of the
Funds. For further information see "Purchase and Redemption of Fund Shares" and
"General Information -- Other Classes of Shares".
[Enlarge/Download Table]
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares Class C Shares
Maximum Sales Charge Imposed on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Dividend Reinvestments None None None
Contingent Deferred Sales Charge (as a % of None 5% during the first year, 4% during the 1% during the
original purchase price or redemption second year, 3% during the third and fourth first year and
proceeds, whichever is lower) years, 2% during the fifth year, 1% during 0% thereafter
the sixth year and 0% after the sixth year
Redemption Fee None None None
Exchange Fee None None None
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return, and (ii) redemption at the end of each period and,
additionally for Class B and C, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B Shares and Class C Shares assume deduction at the time of
redemption (if applicable) of the maximum contingent deferred sales charge
applicable for that time period, and (iii) the expenses for Class B Shares
reflects the conversion to Class A Shares eight years after purchase (years
eight through ten, therefore, reflect Class A expenses).
EVERGREEN BALANCED FUND
[Enlarge/Download Table]
EXAMPLES
Assuming Redemption at End of Assuming no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
Management Fees .50% .50% .50%
After 1 Year $ 56 $ 66 $ 26 $ 16 $ 16
12b-1 Fees* .25% .75% .75%
After 3 Years $ 74 $ 81 $ 51 $ 51 $ 51
Shareholder Service
Fees -- .25% .25% After 5 Years $ 93 $ 108 $ 88 $ 88 $ 88
After 10 Years $ 150 $ 163 $ 192 $ 163 $ 192
Other Expenses .12% .12% .12%
Total .87% 1.62% 1.62%
EVERGREEN GROWTH & INCOME FUND
[Enlarge/Download Table]
EXAMPLES
Assuming Redemption at End of Assuming no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
Management Fees 1.00% 1.00% 1.00%
After 1 Year $ 62 $ 73 $ 33 $ 23 $ 23
12b-1 Fees* .25% 1.00% 1.00%
After 3 Years $ 93 $ 101 $ 71 $ 71 $ 71
Other Expenses** .27% .27% .27%
After 5 Years $ 126 $ 142 $ 122 $ 122 $ 122
After 10 Years $ 220 $ 233 $ 261 $ 233 $ 261
Total 1.52% 2.27% 2.27%
EVERGREEN VALUE FUND
[Enlarge/Download Table]
EXAMPLES
Assuming Redemption at End of Assuming no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
Management Fees .50% .50% .50%
After 1 Year $ 56 $ 67 $ 27 $ 17 $ 17
12b-1 Fees* .25% .75% .75%
After 3 Years $ 75 $ 82 $ 52 $ 52 $ 52
Shareholder Service
Fees -- .25% .25% After 5 Years $ 95 $ 110 $ 90 $ 90 $ 90
After 10 Years $ 153 $ 166 $ 195 $ 166 $ 195
Other Expenses .15% .15% .15%
Total .90% 1.65% 1.65%
3
EVERGREEN AMERICAN RETIREMENT FUND
[Enlarge/Download Table]
EXAMPLES
Assuming Redemption at End of Assuming No
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
Management Fees .75% .75% .75%
After 1 Year $ 62 $ 73 $ 33 $ 23 $ 23
12b-1 Fees* .25% 1.00% 1.00%
After 3 Years $ 93 $ 101 $ 71 $ 71 $ 71
Other Expenses** .51% .51% .51%
After 5 Years $ 126 $ 141 $ 121 $ 121 $ 121
After 10 Years $ 219 $ 232 $ 260 $ 232 $ 260
Total 1.51% 2.26% 2.26%
EVERGREEN FOUNDATION FUND
[Enlarge/Download Table]
EXAMPLES
Assuming Redemption at End of Assuming No
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
Management Fees .875% .875% .875%
After 1 Year $ 60 $ 71 $ 31 $ 21 $ 21
12b-1 Fees* .250% 1.000% 1.000%
After 3 Years $ 87 $ 95 $ 65 $ 65 $ 65
Other Expenses** .195% .195% .195%
After 5 Years $ 116 $ 131 $ 111 $ 111 $ 111
After 10 Years $ 199 $ 212 $ 240 $ 212 $ 240
Total 1.320% 2.070% 2.070%
EVERGREEN TOTAL RETURN FUND
[Enlarge/Download Table]
EXAMPLES
Assuming Redemption at End of Assuming No
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
Management Fees 1.00% 1.00% 1.00%
After 1 Year $ 61 $ 72 $ 32 $ 22 $ 22
12b-1 Fees* .25% 1.00% 1.00%
After 3 Years $ 91 $ 99 $ 69 $ 69 $ 69
Other Expenses** .19% .19% .19%
After 5 Years $ 122 $ 137 $ 117 $ 117 $ 117
After 10 Years $ 212 $ 224 $ 252 $ 224 $ 252
Total 1.44% 2.19% 2.19%
*Class A Shares can pay up to .75 of 1% of average net assets as a 12b-1 Fee.
For the forseeable future, the Class A 12b-1 Fees will be limited to .25 of 1%
of average net assets. For Class B and Class C Shares of EVERGREEN GROWTH &
INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION FUND and
EVERGREEN TOTAL RETURN FUND, a portion of the 12b-1 Fees equivalent to .25 of 1%
of average net assets will be shareholder servicing-related.
Distribution-related 12b-1 Fees will be limited to .75 of 1% of average net
assets as permitted under the rules of the National Association of Securities
Dealers, Inc.
**Reflects agreements by Evergreen Asset Management Corp. to voluntarily
reimburse the following Funds for certain class specific expenses. Absent such
agreements, the actual operating expenses for the year ended December 31, 1995
or January 31, 1996, as applicable, were as follows:
[Download Table]
Class A Class B Class C
Evergreen Growth & Income Fund 1.64% 2.26% 4.94%
Evergreen American Retirement Fund 10.96% 4.20% 103.52%
Evergreen Foundation Fund 1.34% 2.07% 2.37%
Evergreen Total Return Fund 2.50% 2.25% 13.03%
From time to time, each Fund's investment adviser may, at its
descretion, reduce or waive its fees or reimburse the Funds for certain of their
expenses in order to reduce their expense ratios. Each Fund's investment adviser
may cease these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND
ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of the various costs and expenses borne by the Funds see "Management
of the Funds". As a result of asset-based sales charges, long-term shareholders
may pay more than the economic equivalent of the maximum front-end charges
permitted under the rules of the National Association of Securities Dealers,
Inc.
4
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND has
been audited by KPMG Peat Marwick LLP, each Fund's independent auditors, for
EVERGREEN FOUNDATION FUND has been audited by Price Waterhouse LLP, the Fund's
independent auditors and for EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN
GROWTH & INCOME FUND and EVERGREEN TOTAL RETURN FUND has been audited by Ernst &
Young LLP, each Fund's independent auditors. A report of KPMG Peat Marwick LLP,
Price Waterhouse LLP, or Ernst & Young LLP, as the case may be, on the audited
information with respect to each Fund is incorporated by reference in the Fund's
Statement of Additional Information. The following information for each Fund
should be read in conjunction with the financial statements and related notes
which are incorporated by reference in the Fund's Statement of Additional
Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN BALANCED FUND -- CLASS A, B, C SHARES
[Enlarge/Download Table]
CLASS A SHARES CLASS B SHARES
CLASS C
JUNE 10, JANUARY 26,
1991* 1993* SHARES
YEAR ENDED THROUGH YEAR ENDED THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992 1991 1995 1994 1993 1995
PER SHARE DATA:
Net asset value, beginning
of period................ $11.17 $12.07 $11.41 $11.02 $10.00 $11.18 $12.08 $11.54 $11.17
Income (loss) from
investment operations:
Net investment income.... .51 .43 .42 .42 .30 .42 .36 .34 .41
Net realized and
unrealized gain (loss)
on investments......... 2.40 (.71) .75 .43 1.08 2.40 (.71) .65 2.40
Total from investment
operations........... 2.91 (.28) 1.17 .85 1.38 2.82 (.35) .99 2.81
Less distributions to
shareholders from:
Net investment income.... (.50) (.43) (.42) (.42) (.35) (.41) (.36) (.34) (.41)
Net realized gain on
investments............ (.46) (.19) (.09) (.04) (.01) (.46) (.19) (.09) (.46)
In excess of net
investment income...... -- -- -- -- -- -- -- (.02) --
Total distributions.... (.96) (.62) (.51) (.46) (.36) (.87) (.55) (.45) (.87)
Net asset value, end of
period................... $13.12 $11.17 $12.07 $11.41 $11.02 $13.13 $11.18 $12.08 $13.11
TOTAL RETURN+............. 26.5% (2.4%) 10.4% 7.9% 11.8% 25.6% (3.0%) 8.7% 25.5%
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted).......... $41,849 $41,010 $35,032 $17,408 $334 $108,993 $100,052 $ 65,475 $300
Ratios to average net
assets:
Expenses................. .88% .89% .91% .91% .92%++ 1.62% 1.48% 1.41%++ 1.62%
Net investment income.... 4.05% 3.69% 3.61% 3.93% 4.38%++ 3.30% 3.12% 3.09%++ 3.31%
Portfolio turnover rate... 37% 35% 19% 12% 19% 37% 35% 19% 37%
SEPTEMBER 2,
1994*
THROUGH
DECEMBER 31,
1994
PER SHARE DATA:
Net asset value, beginning
of period................ $12.00
Income (loss) from
investment operations:
Net investment income.... .18
Net realized and
unrealized gain (loss)
on investments......... (.61)
Total from investment
operations........... (.43)
Less distributions to
shareholders from:
Net investment income.... (.21)
Net realized gain on
investments............ (.19)
In excess of net
investment income...... --
Total distributions.... (.40)
Net asset value, end of
period................... $11.17
TOTAL RETURN+............. (3.6%)
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted).......... $195
Ratios to average net
assets:
Expenses................. 1.64%++
Net investment income.... 3.23%++
Portfolio turnover rate... 35%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
5
EVERGREEN BALANCED FUND -- CLASS Y SHARES
[Enlarge/Download Table]
CLASS Y SHARES
APRIL 1,
1991*
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992 1991
PER SHARE DATA:
Net asset value, beginning of period.................................... $11.17 $12.07 $11.41 $11.02 $10.00
Income (loss) from investment operations:
Net investment income................................................. .54 .46 .45 .46 .36
Net realized and unrealized gain (loss) on investments................ 2.40 (.71) .75 .42 1.03
Total from investment operations.................................... 2.94 (.25) 1.20 .88 1.39
Less distributions to shareholders from:
Net investment income................................................. (.53) (.46) (.45) (.45) (.36)
Net realized gain on investments...................................... (.46) (.19) (.09) (.04) (.01)
Total distributions................................................. (.99) (.65) (.54) (.49) (.37)
Net asset value, end of period.......................................... $13.12 $11.17 $12.07 $11.41 $11.02
TOTAL RETURN+........................................................... 26.8% (2.2%) 10.7% 8.2% 15.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................... $818,137 $778,657 $760,147 $520,232 $247,472
Ratios to average net assets:
Expenses.............................................................. .62% .64% .66% .66% .68%++
Net investment income................................................. 4.30% 3.93% 3.86% 4.20% 4.86%++
Portfolio turnover rate................................................. 37% 35% 19% 12% 19%
* Commencement of operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
6
EVERGREEN GROWTH & INCOME FUND -- CLASS A, B AND C SHARES
[Enlarge/Download Table]
JANUARY 3, 1995*
THROUGH
DECEMBER 31, 1995
CLASS A
SHARES
PER SHARE DATA:
Net asset value, beginning of period..................................................... $14.48
Income from investment operations:
Net investment income.................................................................. .13
Net realized and unrealized gain on investments........................................ 4.64
Total from investment operations....................................................... 4.77
Less distributions to shareholders from:
Net investment income.................................................................. (.14)
Net realized gain on investments....................................................... (.48)
Total distributions.................................................................... (.62)
Net asset value, end of period........................................................... $18.63
TOTAL RETURN+............................................................................ 33.0%
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of period (in millions).................................................. $19
Ratios to average net assets:
Expenses............................................................................... 1.55%++#
Net investment income.................................................................. .99%++#
Portfolio turnover rate.................................................................. 17%
CLASS B
SHARES
PER SHARE DATA:
Net asset value, beginning of period..................................................... $14.48
Income from investment operations:
Net investment income.................................................................. .05
Net realized and unrealized gain on investments........................................ 4.61
Total from investment operations....................................................... 4.66
Less distributions to shareholders from:
Net investment income.................................................................. (.07 )
Net realized gain on investments....................................................... (.48 )
Total distributions.................................................................... (.55 )
Net asset value, end of period........................................................... $18.59
TOTAL RETURN+............................................................................ 32.2%
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of period (in millions).................................................. $46
Ratios to average net assets:
Expenses............................................................................... 2.24% ++#
Net investment income.................................................................. .30% ++#
Portfolio turnover rate.................................................................. 17%
CLASS C
SHARES
PER SHARE DATA:
Net asset value, beginning of period..................................................... $14.48
Income from investment operations:
Net investment income.................................................................. .06
Net realized and unrealized gain on investments........................................ 4.60
Total from investment operations....................................................... 4.66
Less distributions to shareholders from:
Net investment income.................................................................. (.08)
Net realized gain on investments....................................................... (.48)
Total distributions.................................................................... (.56)
Net asset value, end of period........................................................... $18.58
TOTAL RETURN+............................................................................ 32.2%
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of period (in millions).................................................. $2
Ratios to average net assets:
Expenses............................................................................... 2.15%++#
Net investment income.................................................................. .35%++#
Portfolio turnover rate.................................................................. 17%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income (loss) to average net assets, exclusive
of any applicable state expense limitations, would have been the following:
[Enlarge/Download Table]
JANUARY 3, 1995*
THROUGH
DECEMBER 31, 1995
CLASS A
SHARES
Expenses................................................................................. 1.64%
Net Investment income (loss)............................................................. .90%
CLASS B
SHARES
Expenses................................................................................. 2.26%
Net Investment income (loss)............................................................. .28%
CLASS C
SHARES
Expenses................................................................................. 4.94%
Net Investment income (loss)............................................................. (2.44%)
7
EVERGREEN GROWTH & INCOME FUND -- CLASS Y SHARES
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991 1990 1989 1988**
PER SHARE DATA:
Net asset value, beginning
of period.................... $14.52 $15.41 $14.18 $12.99 $10.72 $12.03 $10.62 $9.38
Income (loss) from
investment operations:
Net investment income........ .18 .14 .14 .15 .19 .30 .52 .19
Net realized and unrealized
gain (loss) on
investments................ 4.59 .12 1.91 1.65 2.58 (.84) 2.17 2.10
Total from investment
operations............... 4.77 .26 2.05 1.80 2.77 (.54) 2.69 2.29
Less distributions to
shareholders from:
Net investment income........ (.17) (.14) (.14) (.15) (.19) (.30) (.52) (.19)
Net realized gain on
investments................ (.48) (1.01) (.68) (.46) (.31) (.47) (.76) (.86)
Total distributions........ (.65) (1.15) (.82) (.61) (.50) (.77) (1.28) (1.05)
Net asset value, end of
period....................... $18.64 $14.52 $15.41 $14.18 $12.99 $10.72 $12.03 $10.62
TOTAL RETURN+.................. 32.9% 1.7% 14.4% 13.8% 25.8% (4.5%) 25.4% 24.6%
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of period
(in millions)................ $141 $73 $77 $64 $48 $36 $32 $24
Ratios to average net
assets:
Expenses..................... 1.27% 1.33% 1.26% 1.33% 1.41% 1.50% 1.54% 1.56%
Net investment income........ 1.11% .96% .99% 1.18% 1.55% 2.62% 4.13% 1.70%
Portfolio turnover rate........ 17% 29% 28% 30% 23% 41% 53% 41%
OCTOBER 15,
1986* THROUGH
DECEMBER 31,
1987** 1986**
PER SHARE DATA:
Net asset value, beginning
of period.................... $10.05 $10.00
Income (loss) from
investment operations:
Net investment income........ .20 .07
Net realized and unrealized
gain (loss) on
investments................ (.63) (.02)
Total from investment
operations............... (.43) .05
Less distributions to
shareholders from:
Net investment income........ (.24) --
Net realized gain on
investments................ -- --
Total distributions........ (.24) --
Net asset value, end of
period....................... $9.38 $10.05
TOTAL RETURN+.................. (4.3%) .5%
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of period
(in millions)................ $21 $21
Ratios to average net
assets:
Expenses..................... 1.76% 1.73%++
Net investment income........ 1.90% 3.23%++
Portfolio turnover rate........ 48% 4%
* Commencement of operations.
** Net investment income is based on the average monthly shares outstanding for
the periods indicated.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
8
EVERGREEN VALUE FUND -- CLASS A SHARES
[Enlarge/Download Table]
NINE
MONTHS
ENDED YEAR ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1994 1993 1992 1991 1990* 1990 1989
PER SHARE DATA:
Net asset value, beginning of
period............................................. $16.62 $17.63 $17.11 $17.08 $14.61 $15.12 $14.45 $12.83
Income (loss) from investment
operations.........................................
Net investment income.............................. .55 .52 .47 .44 .46 .36 .54 .36
Net realized and unrealized gain (loss) on
investments...................................... 4.69 (.20) 1.10 .89 3.17 (.44) 1.70 2.11
Total from investment operations................... 5.24 .32 1.57 1.33 3.63 (.08) 2.24 2.47
Less distributions to shareholders from:
Net investment income.............................. (.51) (.51) (.47) (.43) (.43) (.36) (.57) (.38)
Net realized gain on investments................... (.90) (.82) (.58) (.87) (.73) (.02) (1.00) (.47)
In excess of net investment income................. -- -- -- -- -- (.05) -- --
Total distributions................................ (1.41) (1.33) (1.05) (1.30) (1.16) (.43) (1.57) (.85)
Net asset value, end of
period............................................. $20.45 $16.62 $17.63 $17.11 $17.08 $14.61 $15.12 $14.45
TOTAL RETURN+....................................... 31.8% 1.9% 9.3% 8.0% 25.1% (.5%) 15.5% 19.7%
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of period
(in millions)...................................... $292 $189 $190 $169 $136 $105 $96 $83
Ratios to average net assets:
Expenses........................................... .90% .93% .99% 1.01%# .96%# 1.39%++ 1.55% 1.71%
Net investment income.............................. 2.78% 2.96% 2.63% 2.37%# 2.78%# 3.28%++ 3.42% 2.72%
Portfolio turnover rate............................. 53% 70% 46% 56% 69% 13% 11% 24%
1988 1987
PER SHARE DATA:
Net asset value, beginning of
period............................................. $14.66 $12.35
Income (loss) from investment
operations.........................................
Net investment income.............................. .26 .15
Net realized and unrealized gain (loss) on
investments...................................... (1.30) 2.38
Total from investment operations................... (1.04) 2.53
Less distributions to shareholders from:
Net investment income.............................. (.26) (.13)
Net realized gain on investments................... (.53) (.09)
In excess of net investment income................. -- --
Total distributions................................ (.79) (.22)
Net asset value, end of
period............................................. $12.83 $14.66
TOTAL RETURN+....................................... (7.1%) 20.8%
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of period
(in millions)...................................... $22 $23
Ratios to average net assets:
Expenses........................................... 1.74% 1.97%
Net investment income.............................. 1.92% 1.41%
Portfolio turnover rate............................. 24% 20%
* The Fund changed its fiscal year end from March 31 to December 31.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
[Enlarge/Download Table]
YEAR ENDED
DECEMBER 31,
1992 1991
Expenses........................................................................... 1.02% 1.05%
Net investment income.............................................................. 2.36% 2.69%
9
EVERGREEN VALUE FUND -- CLASS B AND C SHARES
[Enlarge/Download Table]
CLASS B SHARES
CLASS C SHARES
FEBRUARY 2, SEPTEMBER 2,
1993* 1994*
YEAR ENDED THROUGH YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1995 1994
PER SHARE DATA:
Net asset value, beginning of period................... $16.62 $17.63 $17.24 $16.61 $18.28
Income (loss) from investment operations:
Net investment income................................ .39 .42 .35 .39 .19
Net realized and unrealized gain (loss) on
investments........................................ 4.70 (.20) 1.01 4.70 (.81)
Total from investment operations..................... 5.09 .22 1.36 5.09 (.62)
Less distributions to shareholders from:
Net investment income................................ (.36) (.41) (.35) (.36) (.19)
Net realized gain on investments..................... (.90) (.82) (.58) (.90) (.82)
In excess of net investment income................... -- -- (.04) -- (.04)
Total distributions.................................. (1.26) (1.23) (.97) (1.26) (1.05)
Net asset value, end of period......................... $20.45 $16.62 $17.63 20.44 $16.61
TOTAL RETURN+.......................................... 30.9% 1.3% 8.0% 30.9% (3.4%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).............. $141,072 $104,297 $ 59,953 $811 $485
Ratios to average net assets:
Expenses............................................. 1.65% 1.53% 1.48%++ 1.65% 1.68%++
Net investment income................................ 2.04% 2.36% 2.09%++ 2.03% 2.16%++
Portfolio turnover rate................................ 53% 70% 46% 53% 70%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charges are not
reflected.
++ Annualized.
10
EVERGREEN VALUE FUND -- CLASS Y SHARES
[Enlarge/Download Table]
JANUARY 3, 1991*
THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992 1991
PER SHARE DATA:
Net asset value, beginning of period.......................... $16.61 $17.63 $17.11 $17.08 $14.28
Income from investment operations:
Net investment income....................................... .57 .56 .52 .49 .47
Net realized and unrealized gain (loss) on investments...... 4.72 (.20) 1.12 .90 3.53
Total from investment operations.......................... 5.29 .36 1.64 1.39 4.00
Less distributions to shareholders from:
Net investment income....................................... (.55) (.56) (.52) (.49) (.47)
Net realized gain on investments............................ (.90) (.82) (.58) (.87) (.73)
In excess of net investment income............................ -- -- (.02) -- --
Total distributions....................................... (1.45) (1.38) (1.12) (1.36) (1.20)
Net asset value, end of period................................ $20.45 $16.61 $17.63 $17.11 $17.08
TOTAL RETURN+................................................. 32.2% 2.1% 9.7% 8.3% 25.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)..................... $760,733 $507,028 $463,087 $326,154 $271,391
Ratios to average net assets:
Expenses.................................................... .65% .68% .65% .68%# .69%++#
Net investment income....................................... 3.02% 3.21% 2.98% 2.90%# 3.04%++#
Portfolio turnover rate....................................... 53% 70% 46% 56% 69%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
[Enlarge/Download Table]
JANUARY 3, 1991*
YEAR ENDED THROUGH
DECEMBER 31, 1992 DECEMBER 31, 1991
Expenses.................................................. .69% .77%
Net investment income..................................... 2.89% 2.96%
11
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS A, B AND C SHARES
[Enlarge/Download Table]
JANUARY 3, 1995* THROUGH
DECEMBER 31, 1995
CLASS A
SHARES
PER SHARE DATA:
Net asset value, beginning of period................................................ $10.65
Income from investment operations:
Net investment income............................................................. .41
Net realized and unrealized gain on investments................................... 2.22
Total from investment operations................................................ 2.63
Less distributions to shareholders from net investment income....................... (.46)
Net asset value, end of period...................................................... $12.82
TOTAL RETURN+....................................................................... 24.9%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)........................................... $ 1,335
Ratios to average net assets:
Expenses.......................................................................... 1.37%++#
Net investment income............................................................. 3.73%++#
Portfolio turnover rate............................................................. 49%
CLASS B
SHARES
PER SHARE DATA:
Net asset value, beginning of period................................................ $10.65
Income from investment operations:
Net investment income............................................................. .35
Net realized and unrealized gain on investments................................... 2.20
Total from investment operations................................................ 2.55
Less distributions to shareholders from net investment income....................... (.40 )
Net asset value, end of period...................................................... $ 12.80
TOTAL RETURN+....................................................................... 24.1%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)........................................... $ 4,839
Ratios to average net assets:
Expenses.......................................................................... 2.12% ++#
Net investment income............................................................. 2.97% ++#
Portfolio turnover rate............................................................. 49%
CLASS C
SHARES
PER SHARE DATA:
Net asset value, beginning of period................................................ $10.65
Income from investment operations:
Net investment income............................................................. .36
Net realized and unrealized gain on investments................................... 2.19
Total from investment operations................................................ 2.55
Less distributions to shareholders from net investment income....................... (.39)
Net asset value, end of period...................................................... $ 12.81
TOTAL RETURN+....................................................................... 24.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)........................................... $110
Ratios to average net assets:
Expenses.......................................................................... 2.10%++#
Net investment income............................................................. 2.96%++#
Portfolio turnover rate............................................................. 49%
* Commencement of class operations.
+ Total return is calculated on net asset value for the periods indicated and
is not annualized.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income (loss) to average net assets, exclusive
of any applicable state expense limitations, would have been the following:
[Enlarge/Download Table]
JANUARY 3, 1995* THROUGH
DECEMBER 31, 1995
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
Expenses.................................................................................... 10.96% 4.20% 103.52%
Net investment income (loss)................................................................ (5.86% ) .89% (98.46)
12
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS Y SHARES
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991 1990 1989
PER SHARE DATA:
Net asset value, beginning of
period............................. $10.67 $11.60 $10.95 $10.52 $9.59 $10.41 $10.09
Income (loss) from investment
operations:
Net investment income.............. .47 .60 .56 .66 .60 .60 .57
Net realized and unrealized gain
(loss) on investments............ 2.16 (.93) .96 .55 1.15 (.66) .76
Total from investment operations... 2.63 (.33) 1.52 1.21 1.75 (.06) 1.33
Less distributions to shareholders
from:
Net investment income.............. (.47) (.60) (.60) (.61) (.60) (.60) (.59)
Net realized gain on investments... -- -- (.24) (.17) (.22) (.16) (.42)
In excess of net realized gains.... -- -- (.03) -- -- -- --
Total distributions................ (.47) (.60) (.87) (.78) (.82) (.76) (1.01)
Net asset value, end of period....... $12.83 $10.67 $11.60 $10.95 $10.52 $9.59 $10.41
TOTAL RETURN+........................ 25.1% (2.9%) 14.1% 11.8% 18.8% (.5%) 13.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)........................... $39,327 $37,176 $37,336 $23,781 $15,632 $12,351 $11,610
Ratios to average net assets:
Expenses........................... 1.26% 1.28% 1.36% 1.51%# 1.50%# 1.50%# 1.88%#
Net investment income.............. 3.96% 5.40% 5.13% 6.23%# 5.91%# 6.04%# 5.49%#
Portfolio turnover rate.............. 49% 136% 92% 151% 97% 33% 152%
MARCH 14,
1988*
THROUGH
DECEMBER 31,
1988**
PER SHARE DATA:
Net asset value, beginning of
period............................. $10.00
Income (loss) from investment
operations:
Net investment income.............. .39
Net realized and unrealized gain
(loss) on investments............ .18
Total from investment operations... .57
Less distributions to shareholders
from:
Net investment income.............. (.36)
Net realized gain on investments... (.12)
In excess of net realized gains.... --
Total distributions................ (.48)
Net asset value, end of period....... $10.09
TOTAL RETURN+........................ 5.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)........................... $9,449
Ratios to average net assets:
Expenses........................... 2.00%++
Net investment income.............. 5.01%++
Portfolio turnover rate.............. 52%
* Commencement of operations.
** Investment income, expenses and net investment income are based upon the
average monthly shares outstanding for the period indicated.
+ Total return is calculated on net asset value for the periods indicated and
is not annualized.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
1992 1991 1990 1989
Expenses.................................................... 1.59% 1.82% 1.95% 2.03%
Net investment income....................................... 6.15% 5.59% 5.59% 5.34%
13
EVERGREEN FOUNDATION FUND -- CLASS A, B AND C SHARES
[Enlarge/Download Table]
JANUARY 3, 1995* THROUGH
DECEMBER 31, 1995
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
PER SHARE DATA:
Net asset value, beginning of period.......................................................... $12.24 $12.24 $12.24
Income from investment operations:
Net investment income....................................................................... .44 .36 .34
Net realized and unrealized gain on investments............................................. 3.14 3.09 3.09
Total from investment operations............................................................ 3.58 3.45 3.43
Less distributions to shareholders from:
Net investment income....................................................................... (.47) (.39) (.37)
Net realized gain on investments............................................................ (.23) (.23) (.23)
Total distributions......................................................................... (.70) (.62) (.60)
Net asset value, end of period................................................................ $15.12 $15.07 $15.07
TOTAL RETURN+................................................................................. 29.7% 28.7% 28.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)....................................................... $107 $296 $11
Ratios to average net assets:
Expenses.................................................................................... 1.33%++# 2.07%++ 2.23%++#
Net investment income....................................................................... 3.73%++# 2.99%++ 2.83%++#
Portfolio turnover rate....................................................................... 28% 28% 28%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
[Download Table]
JANUARY 3, 1995*
THROUGH
DECEMBER 31, 1995
CLASS A CLASS C
SHARES SHARES
Expenses.................................................. 1.34% 2.37%
Net investment income..................................... 3.72% 2.69%
14
EVERGREEN FOUNDATION FUND -- CLASS Y SHARES
[Enlarge/Download Table]
JANUARY 2, 1990*
YEAR ENDED DECEMBER 31, THROUGH
1995 1994 1993 1992 1991 DECEMBER 31, 1990
PER SHARE DATA:
Net asset value, beginning of period........................ $12.27 $13.12 $11.98 $10.75 $8.95 $10.00
Income (loss) from investment operations:
Net investment income..................................... .51 .42 .31 .27 .33 1.23(a)
Net realized and unrealized gain (loss) on investments.... 3.07 (.57) 1.55 1.83 2.77 (.59)
Total from investment operations........................ 3.58 (.15) 1.86 2.10 3.10 .64
Less distributions to shareholders from:
Net investment income..................................... (.49) (.42) (.31) (.24) (.33) (1.17)
Net realized gain on investments.......................... (.23) (.28) (.41) (.63) (.97) (.52)
Total distributions..................................... (.72) (.70) (.72) (.87) (1.30) (1.69)
Net asset value, end of period.............................. $15.13 $12.27 $13.12 $11.98 $10.75 $8.95
TOTAL RETURN+............................................... 29.7% (1.1%) 15.7% 20.0% 36.4% 6.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)..................... $623 $332 $240 $64 $11 $2
Ratios to average net assets:
Expenses.................................................. 1.07% 1.14% 1.20% 1.40%# 1.20%# 0%#++
Net investment income..................................... 3.89% 3.51% 2.81% 2.93%# 2.86%# 15.07%#(a)++
Portfolio turnover rate..................................... 28% 33% 60% 127% 178% 131%
* Commencement of operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized
# Net of expense waivers and reimbursements by the Adviser. If the Fund had
borne all expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
[Enlarge/Download Table]
JANUARY 2, 1990*
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1992 1991 1990
Expenses................................................... 1.43% 2.58% 3.64%
Net investment income...................................... 2.90% 1.48% 11.43%
(a) Includes receipt of a special dividend representing $.62 per share net
investment income and 7.59% of average net assets.
15
EVERGREEN TOTAL RETURN FUND -- CLASS A, B AND C SHARES
[Enlarge/Download Table]
CLASS A SHARES CLASS B SHARES CLASS C SHARES
JANUARY 3, JANUARY 3, JANUARY 3,
YEAR 1995* YEAR 1995* YEAR 1995*
ENDED THROUGH ENDED THROUGH ENDED THROUGH
JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31,
1996 1995 1996 1995 1996 1995
PER SHARE DATA:
Net asset value, beginning of period.................. $17.28 $ 17.09 $17.28 $ 17.09 $17.27 $ 17.09
Income from investment operations:
Net investment income............................... 1.01 .02 .91 .02 .90 .01
Net realized and unrealized gain on investments..... 2.94 .17 2.87 .17 2.89 .17
Total from investment operations.................. 3.95 .19 3.78 .19 3.79 .18
Less distributions to shareholders from:
Net investment income............................... (1.08) -- (.98) -- (.98) --
Net asset value, end of period........................ $20.15 $ 17.28 $20.08 $ 17.28 $20.08 $ 17.27
TOTAL RETURN+......................................... 23.4% 1.1% 22.4% 1.1% 22.4% 1.1%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............. $4,412 $119 $14,750 $599 $523 $24
Ratios to average net assets:
Expenses............................................ 1.36%# 1.45%++ 2.11%# 2.23%++ 2.11%# 2.22%++
Net investment income............................... 5.39%# 4.09%++ 4.69%# 3.23%++ 4.67%# 2.68%++
Portfolio turnover rate............................... 138% 151% 138% 151% 138% 151%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of operating expenses and net investment income (loss) to average net assets,
exclusive of any applicable state expense limitations, would have been the
following:
[Enlarge/Download Table]
YEAR ENDED
JANUARY 31, 1996
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
Expenses............................................................ 2.50% 2.25% 13.03%
Net investment income (loss)........................................ 4.25% 4.55% (6.25% )
16
EVERGREEN TOTAL RETURN FUND -- CLASS Y SHARES
[Enlarge/Download Table]
TEN MONTHS
YEAR ENDED ENDED
JANUARY 31, JANUARY YEAR ENDED MARCH 31,
1996 31, 1995* 1994 1993 1992 1991 1990 1989 1988
PER SHARE DATA:
Net asset value, beginning
of period........................... $ 17.28 $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11 $20.37
Income (loss) from investment
operations:
Net investment income............... 1.10 .87 1.08 1.11 1.08 1.02 1.07 1.12 1.06
Net realized and unrealized gain
(loss) on investments............. 2.87 (.55) (1.41) 2.51 .70 (.08) .36 .79 (2.64)
Total from investment
operations........................ 3.97 .32 (.33) 3.62 1.78 .94 1.43 1.91 (1.58)
Less distributions to shareholders
from:
Net investment income............... (1.09) (1.08) (1.08) (1.08) (1.08) (1.08) (1.09) (1.08) (.80)
Net realized gain on investments.... -- (.25) (1.20) (.46) -- -- -- (.02) (.88)
Total distributions................. (1.09) (1.33) (2.28) (1.54) (1.08) (1.08) (1.09) (1.10) (1.68)
Net asset value, end of period........ $ 20.16 $17.28 $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11
TOTAL RETURN+......................... 23.5% 1.9% (2.1%) 20.2% 10.2% 5.8% 7.9% 1.3% (7.8%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions)....................... $914 $942 $1,065 $1,142 $1,032 $1,151 $1,292 $1,312 $1,346
Ratios to average net assets:
Expenses............................ 1.19% 1.24%++ 1.18% 1.18% 1.21% 1.23% 1.18% 1.02%** 1.01%**
Net investment income............... 5.70% 5.70%++ 5.29% 5.65% 5.73% 5.90% 5.64% 6.36%** 5.80%**
Portfolio turnover rate............... 138% 151% 106% 164% 137% 137% 89% 86% 81%
1987
PER SHARE DATA:
Net asset value, beginning
of period........................... $19.72
Income (loss) from investment
operations:
Net investment income............... 1.14
Net realized and unrealized gain
(loss) on investments............. 1.76
Total from investment
operations........................ 2.90
Less distributions to shareholders
from:
Net investment income............... (1.14)
Net realized gain on investments.... (1.11)
Total distributions................. (2.25)
Net asset value, end of period........ $20.37
TOTAL RETURN+......................... 15.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions)....................... $1,636
Ratios to average net assets:
Expenses............................ 1.02%**
Net investment income............... 5.68%**
Portfolio turnover rate............... 44%
* The Fund changed its fiscal year end from March 31 to January 31.
** Net of expense limitation in fiscal years 1987, 1988 and 1989.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
17
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective is fundamental and may not be changed
without shareholder approval.
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Policies" below. There can be no assurance that any
Fund's investment objective will be achieved.
EVERGREEN BALANCED FUND
The investment objective of the EVERGREEN BALANCED FUND is to achieve a
long-term total return through capital appreciation, dividends and interest
income. This objective is a fundamental policy and may not be changed without
shareholder approval. The Fund invests in common and preferred stocks for growth
and fixed income securities to provide a stable income flow.
The percentage of the Fund's assets invested in common and preferred
stocks will vary from time to time in accordance with changing economic and
market conditions. It is anticipated that over the long term the Fund's
portfolio will average 60% in common and preferred stocks and 40% in bonds.
However, normally the Fund's asset allocation will range between 40-75% in
common and preferred stocks, 25-50% fixed income securities (including some
convertible securities) and 0-25% cash equivalents. Moderate shifts between
types of assets are made in an attempt to maximize returns or reduce risk. As of
December 31, 1993, 1994 and 1995, approximately 63%, 55%, and 60%, respectively,
of the Fund's portfolio consisted of equity securities.
The Fund invests in common, preferred and convertible preferred stocks
and bonds of U.S. companies with a minimum of $100 million in market
capitalization and which are listed on major stock exchanges or traded
over-the-counter. The criteria for such investment selection include a company's
financial strength (such as cash flow and low debt-to-equity ratio), earnings
growth and price in relation to current earnings, dividends and book value to
identify growth opportunities. The Fund may also invest in American Depositary
Receipts ("ADRs") of foreign companies which are traded on the New York or
American Stock Exchanges or the over-the-counter market.
The fixed income portion of the Fund's portfolio may be invested in
corporate bonds (including convertible bonds) which are rated A or higher by
Standard & Poor's Ratings Service, a division of McGraw-Hill Companies, Inc.
("S&P") or Moody's Investors Service, Inc. ("Moody's") or any other nationally
recognized statistical rating organization ("SRO"), or which, if unrated, are
considered to be of comparable quality by the Fund's investment adviser. For a
description of such ratings see the Statement of Additional Information. Bonds
are selected based upon the outlook for interest rates and their yield in
relation to other bonds of similar quality and maturity. The maturities of these
bonds may be medium (i.e., from five to ten years) to long-term (i.e., over ten
years), but in no event will they be longer than twenty years.
The Fund also invests in securities which are either issued or guaranteed
by the U.S. government, its agencies or instrumentalities. These securities
include direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and notes, bonds and discount notes of U.S. government agencies
or instrumentalities, such as the Farm Credit System, including the National
Bank for Cooperatives, Farm Credit Banks and Banks for Cooperatives, Farmers
Home Administration, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Government National Mortgage
Association, Student Loan Marketing Association, Tennessee Valley Authority,
Export-Import Bank of the United States, Commodity Credit Corporation, Federal
Financing Bank and National Credit Union Administration. Some of these
securities are supported by the full faith and credit of the U.S. government,
and others are supported only by the credit of the agency or instrumentality.
EVERGREEN GROWTH AND INCOME FUND
The investment objective of EVERGREEN GROWTH AND INCOME FUND (formerly
known as the Evergreen Value Timing Fund) is to achieve a return composed of
capital appreciation in the value of its shares and current income.
18
The Fund seeks to achieve its investment objective by investing in the
securities of companies which are undervalued in the marketplace relative to
those companies' assets, breakup value, earnings or potential earnings growth.
These companies are often found among those which have had a record of financial
success but are currently in disfavor in the marketplace for reasons the Fund's
investment adviser perceives as temporary or erroneous. Such investments when
successfully timed are expected to be the means for achieving the Fund's
investment objective. This inherently contrarian approach may require greater
reliance upon the analytical and research capabilities of the Fund's investment
adviser than an investment in certain other equity funds. Consequently, an
investment in the Fund may involve more risk than other equity funds. The Fund
should not be considered suitable for investors who are unable or unwilling to
assume the risks of loss inherent in such a program. Nor should the Fund be
considered a balanced or complete investment program.
The Fund will use the "value timing" approach as a process for purchasing
securities when events indicate that fundamental investment values are being
ignored in the marketplace. Fundamental investment value is based on one or more
of the following: assets -- tangible and intangible (examples of the latter
include brand names or licenses), capitalization of earnings, cash flow or
potential earnings growth. A discrepancy between market valuation and
fundamental value often arises due to the presence of unrecognized assets or
business opportunities, or as a result of incorrectly perceived or short-term
negative factors. Changes in regulations, basic economic or monetary shifts and
legal action (including the initiation of bankruptcy proceedings) are some of
the factors that create these capital appreciation opportunities. If the
securities in which the Fund invests never reach their perceived potential or
the valuation of such securities in the marketplace does not in fact reflect
significant undervaluation, there may be little or no appreciation or a
depreciation in the value of such securities.
The Fund will invest primarily in common stocks and securities
convertible into or exchangeable for common stock. It is anticipated that the
Fund's investments in these securities will contribute to the Fund's return
primarily through capital appreciation. In addition, the Fund will invest in
nonconvertible preferred stocks and debt securities. It is anticipated that the
Fund's investments in these securities will also produce capital appreciation
but the current income component of return will be a more significant factor in
their selection. However, the Fund will invest in nonconvertible preferred stock
and debt securities only if the anticipated capital appreciation plus income
from such investments is equivalent to that anticipated from investments in
equity or equity-related securities. The Fund may invest up to 5% of its total
assets in debt securities which are rated below investment grade, commonly known
as "junk bonds". Investments of this type are subject to greater risk of loss of
principal and interest.
EVERGREEN VALUE FUND
The investment objective of the EVERGREEN VALUE FUND is long-term capital
appreciation with current income as a secondary objective. Normally, at least
75% of the Fund's assets will be invested in equity securities of U.S. companies
with prospects for earnings growth and dividends. As of December 31, 1993, 1994
and 1995 approximately 95%, 97% and 89%, respectively, of the Fund's portfolio
consisted of equity securities.
The Fund's investments, in order of priority, consist of:
common and preferred stocks, bonds and convertible preferred stock
of U.S. companies with a minimum market capitalization of $100 million
which are listed on the New York or American Stock Exchanges or traded in
over-the-counter markets. The primary consideration is for those industries
and companies with the potential for capital appreciation; income is a
secondary consideration;
ADRs of foreign companies traded on the New York or American Stock
Exchanges or the over-the-counter market;
foreign securities (either foreign or U.S. securities traded in
foreign markets). The Fund may also invest in obligations denominated in
foreign currencies. In making these decisions, the Fund's investment
adviser will consider such factors as the condition and growth potential of
various economies and securities markets, currency and taxation
implications and other pertinent financial, social, national and political
factors. (See "Investment Practices and Restrictions -- Special Risk
Considerations");
convertible bonds rated no lower than BBB by S&P or Baa by Moody's
or, if not rated, determined to be of comparable quality by the Fund's
investment adviser;
money market instruments;
19
fixed rate notes and bonds and adjustable and variable rate notes
of companies whose common stock the Fund may acquire rated no lower than
BBB by S&P or Baa by Moody's or which, if not rated, determined to be of
comparable quality by the Fund's investment adviser (up to 5% of total
assets);
zero coupon bonds issued or guaranteed by the U.S. government, its
agencies or instrumentalities (up to 5% of total assets);
obligations, including certificates of deposit and bankers'
acceptances, of banks or savings and loan associations having at least $1
billion in deposits and insured by the Bank Insurance Fund or the Savings
Association Insurance Fund, including U.S. branches of foreign banks and
foreign branches of U.S. banks; and
prime commercial paper, including master demand notes rated no
lower than A-1 by S&P or Prime 1 by Moody's.
Bonds rated BBB by S&P or Baa by Moody's may have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to weaken such bonds' prospects for principal and interests payments than
higher rated bonds. However, like the higher rated bonds, these securities are
considered investment grade. For a description of such ratings see the Statement
of Additional Information.
EVERGREEN AMERICAN RETIREMENT FUND
The investment objectives of EVERGREEN AMERICAN RETIREMENT FUND in order
of priority are conservation of capital, reasonable income and capital growth.
The Fund offers a structured investment approach designed specifically for
retirees and persons contemplating retirement which may also be appropriate for
the qualified retirement plans of smaller companies.
The Fund will invest in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital enhancement. Ordinarily, the Fund
anticipates that approximately 50% of its portfolio will consist of equity
securities (including securities convertible into equity securities) and 50% of
fixed income securities. The Fund's investment adviser may vary the amount
invested in each type of security in response to changing market conditions to
take advantage of relative undervaluation in either the stock or bond markets.
The Fund will, however, not make an additional investment in equity securities
if more than 75% of its total assets at the time the investment is made would
include investments in equity securities. Generally, approximately half of the
equity portion of the Fund's portfolio will be invested in common stocks which
the Fund's investment adviser believes will yield current income and have
potential for long-term capital growth and half in bonds and preferred stocks
convertible into such common stock. As of December 31, 1993, 1994 and 1995,
approximately 64.8%, 74.2% and 65.5%, respectively, of the Fund's portfolio
consisted of equity securities.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring non-speculative issues expected to
fluctuate little in value, except with changes in prevailing interest rates. The
market value of the debt obligations in the Fund's portfolio can be expected to
vary inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short and medium to long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
value.
Normally, the Fund anticipates that approximately half of the fixed
income portion of the Fund's portfolio will be invested in marketable
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities which are supported by the full faith and credit of the United
States or by the right of the issuer to borrow from the U.S. Treasury. These
include issues of the Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established under
the authority of an act of Congress. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks,
20
Federal National Mortgage Association and Tennessee Valley Authority. The
balance will be invested in corporate obligations rated no lower than A by
Moody's or S&P.
EVERGREEN FOUNDATION FUND
The investment objectives of EVERGREEN FOUNDATION FUND, in order of
priority, are reasonable income, conservation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. Government debt obligations,
and short-term debt instruments, such as commercial paper. The Fund's common
stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.
The Fund may make investments in securities regardless of whether or not
such securities are traded on a national securities exchange. The value of
portfolio securities and their yields are expected to fluctuate over time
because of varying general economic and market conditions.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).
In selecting fixed income securities for the Fund's portfolio, emphasis
will be placed on issues expected to fluctuate little in value other than as a
result of changes in prevailing interest rates. The market value of the debt
obligations in the Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates. The Fund may at times emphasize the generation of
interest income by investing in high-yielding debt securities, with short,
medium or long-term maturities. While fixed income investments will generally be
made for the purpose of generating interest income, investments in medium to
long-term debt securities (i.e., those with maturities from five to ten years
and those with maturities over ten years, respectively) may be made with a view
to realizing capital appreciation when the Fund's investment adviser believes
changes in interest rates will lead to an increase in the value of such
securities. The fixed income portion of the Fund's portfolio may include:
1. Marketable obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities, including issues of the U.S. Treasury, such as
bills, certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of Congress. Some of
these securities are supported by the full faith and credit of the U.S.
Government, and others are supported only by the credit of the agency or
instrumentality. Agencies or instrumentalities whose securities are supported by
the full faith and credit of the United States include, but are not limited to,
the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration and Government National
Mortgage Association. Agencies or instrumentalities whose securities are
supported only by the credit of the agency or instrumentality include the
Interamerican Development Bank and the International Bank for Reconstruction and
Development. These obligations are supported by appropriated but unpaid
commitments of their member countries. There are no assurances that the
commitments will be fulfilled in the future.
2. Corporate obligations rated no lower than A by Moody's or S&P.
3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.
4. Commercial paper of high quality (rated no lower than A-2 by S&P or
Prime-2 by Moody's or, if not rated, issued by companies which have an
outstanding long-term debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's). For a description of such ratings see the Statement of Additional
Information.
Certain obligations may be entitled to the benefit of standby letters of
credit or similar commitments issued by banks and, in such instances, the Fund's
investment adviser will take into account the obligation of the bank in
assessing the quality of such security.
21
EVERGREEN TOTAL RETURN FUND
The investment objective of EVERGREEN TOTAL RETURN FUND is to achieve a
return consisting of current income and capital appreciation in the value of its
shares. The emphasis on current income and capital appreciation will be
relatively equal although, over time, changes in the outlook for market
conditions and the level of interest rates will cause the Fund to vary its
emphasis between these two elements in its search for the optimum return for its
shareholders. To the extent that the Fund is emphasizing current income, it may
purchase securities in anticipation of participating in dividends. This practice
may result in a higher rate of portfolio turnover and may affect the Fund's
overall return. The Fund seeks to achieve its investment objective through
investments in common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities. The Fund may invest
up to 20% of its total assets in the securities of foreign issuers either
directly or in the form of ADRs, European Depository Receipts ("EDRs") or other
securities convertible into securities of foreign issuers. The Fund may also
write covered call options.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders.
The Fund may make investments in securities (other than options)
regardless of whether or not such securities are traded on a national securities
exchange. The value of portfolio securities and their yields, as well as
opportunities to realize net gains from a covered call options writing program,
are expected to fluctuate over time because of varying general economic and
market conditions.
The Fund's portfolio will vary over time depending upon the economic
outlook and market conditions. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Ordinarily, the Fund anticipates that approximately 75% of its portfolio will
consist of equity securities and the other 25% of debt securities (including
convertible debt securities). As of March 31, 1994 and January 31, 1995 and
1996, approximately 96%, 91% and 91%, respectively, of the Fund's portfolio
consisted of equity securities. The balance of the Fund's portfolio consisted of
debt securities (including convertible debt securities). If, in the judgment of
the Fund's investment adviser, the appreciation potential for equity securities
exceeds the return available from debt securities or government securities,
investments in equity securities could exceed 75% of the Fund's portfolio. Most
equity investments, however, will be income producing. The quality standards for
debt securities include: Obligations of banks having total assets of at least
one billion dollars which are members of the FDIC; commercial paper rated no
lower than P-2 by Moody's or A-2 by S&P; and non-convertible debt securities
rated no lower than Baa by Moody's or BBB by Standard & Poor's. Securities rated
Baa or BBB may have speculative characteristics. See the discussion above with
respect to EVERGREEN VALUE FUND.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. It is anticipated (i) that the annual
portfolio turnover rate for the EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
and EVERGREEN GROWTH AND INCOME FUND will not exceed 100%; (ii) that the annual
portfolio turnover rate of the EVERGREEN AMERICAN RETIREMENT FUND and the
EVERGREEN FOUNDATION FUND will generally not exceed 100% for the equity portion
of their portfolio and 200% for the fixed income portion; and (iii) that the
annual portfolio turnover rate for the EVERGREEN TOTAL RETURN 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 portfolio turnover rate experienced by
a Fund directly affects brokerage commissions and other transaction costs which
the Fund must pay. A high rate of portfolio turnover will increase such costs.
It is contemplated that Lieber & Company, an affiliate of Evergreen Asset
Management Corp. ("Evergreen Asset") and a member of the New York and American
Stock Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for the EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND
INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION FUND on
those exchanges. The portfolio turnover rate for each Fund is set forth in the
tables contained in the section entitled "Financial Highlights". See the
Statement of Additional Information for further information regarding the
brokerage allocation practices of the Funds.
Borrowing. As a matter of fundamental policy, the Funds, except EVERGREEN
AMERICAN RETIREMENT FUND, may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency
22
purposes. EVERGREEN AMERICAN RETIREMENT FUND may borrow for purposes of
leverage. The proceeds from borrowings may be used to facilitate redemption
requests which might otherwise require the untimely disposition of portfolio
securities. The specific limits applicable to borrowing by each Fund are set
forth in the Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the net assets of the EVERGREEN
TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND, EVERGREEN AMERICAN
RETIREMENT FUND and EVERGREEN FOUNDATION FUND, and 5% of the value of the total
assets of EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND, and must be
collateralized by cash or U.S. government securities that are maintained at all
times in an amount equal to at least 100% of the current market value of the
securities loaned, including accrued interest. While such securities are on
loan, the borrower will pay a Fund any income accruing thereon, and the Fund may
invest the cash collateral in portfolio securities, thereby increasing its
return. Any gain or loss in the market price of the loaned securities which
occurs during the term of the loan would affect a Fund and its investors. A Fund
has the right to call a loan and obtain the securities loaned at any time on
notice of not more than five business days. A Fund may pay reasonable fees in
connection with such loans.
There is the risk that when lending portfolio securities, the securities
may not be available to a Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
Short Sales. The EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND,
EVERGREEN BALANCED FUND, EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN
FOUNDATION FUND may, as a defensive strategy, make short sales of securities. A
short sale occurs when a seller sells a security and makes delivery to the buyer
by borrowing the security. Short sales of a security are generally made in cases
where the seller expects the market value of the security to decline. To
complete a short sale, the seller must replace the security borrowed by
purchasing it at the market price at the time of replacement, or by delivering
securities from the seller's own position to the lender. In the event the market
value of a security sold short were to increase, the seller would realize a loss
to the extent that the cost of purchasing the security for delivery to the
lender were greater than the proceeds from the short sale. In the event a short
sale is completed by delivery of securities to the lender from the seller's own
position, the seller would forego any gain that would otherwise be realized on
such securities. The EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION
FUND may only make short sales "against the box" which means they must own the
securities sold short, or other securities convertible into, or which carry
rights to acquire, such securities.
Illiquid or Restricted Securities. EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION FUND and EVERGREEN TOTAL RETURN
FUND may invest up to 15% of their net assets, and EVERGREEN BALANCED FUND and
EVERGREEN VALUE FUND may invest up to 10% of their net assets, in illiquid
securities and other securities which are not readily marketable, including
non-negotiable time deposits, certain restricted securities not deemed by the
Trustees to be liquid and repurchase agreements with maturities longer than
seven days. Securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, which have been determined to be liquid, will not be
considered by the Funds' investment advisers to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 15% or 10%
limits. The inability of a Fund to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Fund's ability to
raise cash for redemptions or other purposes. The liquidity of securities
purchased by a Fund which are eligible for resale pursuant to Rule 144A will be
monitored by the Funds' investment advisers on an ongoing basis, subject to the
oversight of the Trustees. In the event that such a security is deemed to be no
longer liquid, a Fund's holdings will be reviewed to determine what action, if
any, is required to ensure that the retention of such security does not result
in the EVERGREEN GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND,
EVERGREEN FOUNDATION FUND and EVERGREEN TOTAL RETURN FUND having more than 15%,
or EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND having more than 10%, of
their net assets invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. EVERGREEN GROWTH AND
INCOME FUND, EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND and EVERGREEN TOTAL
RETURN FUND may enter into repurchase agreements with member banks of the
Federal Reserve System, including the Funds custodian or
23
primary dealers in U.S. Government securities. A repurchase agreement is an
arrangement pursuant to which a buyer purchases a security and simultaneously
agrees to resell it to the vendor at a price that results in an agreed-upon
market rate of return which is effective for the period of time (which is
normally one to seven days, but may be longer) the buyer's money is invested in
the security. The arrangement results in a fixed rate of return that is not
subject to market fluctuations during the holding period. A Fund requires
continued maintenance of collateral with its custodian in an amount at least
equal to the repurchase price (including accrued interest). In the event a
vendor defaults on its repurchase obligation, a Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were less than the
repurchase price. If the vendor becomes the subject of bankruptcy proceedings, a
Fund might be delayed in selling the collateral. The Funds' investment advisers
will review and continually monitor the creditworthiness of each institution
with which a Fund enters into a repurchase agreement to evaluate these risks.
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND may borrow money by
entering into a "reverse repurchase agreement" by which it agrees to sell
portfolio securities to financial institutions such as banks and broker-dealers,
and to repurchase them at a mutually agreed upon date and price, for temporary
or emergency purposes. At the time a Fund enters into a reverse repurchase
agreement, it will place in a segregated custodial account cash, U.S. government
securities or liquid high grade debt obligations having a value at least equal
to the repurchase price (including accrued interest) and will subsequently
monitor the account to ensure that such equivalent value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by the Fund may decline below the repurchase price of those securities.
Neither Fund will enter into reverse repurchase agreements exceeding 5% of the
value of its total assets.
When-Issued and Delayed Delivery Transactions. EVERGREEN BALANCED FUND and
EVERGREEN VALUE FUND may purchase securities on a when-issued or delayed
delivery basis. These transactions are arrangements in which a Fund purchases
securities with payment and delivery scheduled for a future time. The seller's
failure to complete these transactions may cause a Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, a Fund may pay more or
less than the market value of the securities on the settlement date. The Funds
may dispose of a commitment prior to settlement if the Funds investment adviser
deems it appropriate to do so. In addition, the Funds may enter into
transactions to sell their purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Funds may realize short-term profits or losses
upon the sale of such commitments.
Fixed Income Securities -- Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Options and Futures. Each of EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND
INCOME FUND and
EVERGREEN AMERICAN RETIREMENT FUND may write covered call options on certain
portfolio securities in an attempt to earn income and realize a higher return on
its portfolio. A call option may not be written by the Funds if, afterwards,
securities comprising more than 25% of the market value of the equity securities
of EVERGREEN GROWTH and INCOME FUND and EVERGREEN TOTAL RETURN FUND, or 15% of
the market value of the equity securities of EVERGREEN AMERICAN RETIREMENT FUND
would be subject to call options. A Fund realizes income from the premium paid
to it in exchange for writing the call option. Once it has written a call option
on a portfolio security and until the expiration of such option, a Fund forgoes
the opportunity to profit from increases in the market price of such security in
excess of the exercise price of the call option. Should the price of the
security on which a call has been written decline, a Fund retains the risk of
loss, which would be offset to the extent the Fund has received premium income.
A Fund will only write "covered" call options traded on U.S. national securities
exchanges. An option will be deemed covered when a Fund either (i) owns the
security (or securities convertible into such security) on which the option has
been written in an amount sufficient to satisfy the obligations arising under
the option; or (ii) a Fund's custodian maintains cash or high-grade liquid debt
securities belonging to the Fund in an amount not less that the amount needed to
satisfy the Fund's obligations with respect to options written on securities it
does not own. A "closing purchase transaction" may be entered into with respect
to a call option written by a Fund for the purpose of closing its position.
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND may engage in options
and futures transactions. Options and futures transactions are intended to
enable a Fund to manage market, interest rate or exchange rate risk. The Funds
do not use these transactions for speculation or leverage.
24
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND may attempt to hedge all
or a portion of their portfolios through the purchase of both put and call
options on their portfolio securities and listed put options on financial
futures contracts for portfolio securities. The Funds may also write covered
call options on their portfolio securities to attempt to increase their current
income. The Funds will maintain their positions in securities, option rights and
segregated cash subject to puts and calls until the options are exercised,
closed or have expired. An option position may be closed out only on an exchange
which provides a secondary market for an option of the same series. The Funds
may purchase listed put options on financial futures contracts. These options
will be used only to protect portfolio securities against decreases in value
resulting from market factors such as an anticipated increase in interest rates.
All the Funds may write (i.e., sell) covered call options and EVERGREEN
BALANCED FUND and EVERGREEN VALUE FUND may write covered put options. By writing
a call option, a Fund becomes obligated during the term of the option to deliver
the securities underlying the option upon payment of the exercise price. By
writing a put option, a Fund becomes obligated during the term of the option to
purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds may also write straddles (combinations of covered
puts and calls on the same underlying security).
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND may only write "covered"
options. This means that so long as a Fund is obligated as the writer of a call
option, it will own the underlying securities subject to the option or, in the
case of call options on U.S. Treasury bills, the Fund might own substantially
similar U.S. Treasury bills. A Fund will be considered "covered" with respect to
a put option it writes if, so long as it is obligated as the writer of the put
option, it deposits and maintains with its custodian in a segregated account
liquid assets having a value equal to or greater than the exercise price of the
option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND may also, as stated
previously, purchase futures contracts and options thereon. A futures contract
is a firm commitment by two parties: the seller, who agrees to make delivery of
the specific type of instrument called for in the contract ("going short"), and
the buyer, who agrees to take delivery of the instrument ("going long") at a
certain time in the future. Financial futures contracts call for the delivery of
particular debt instruments issued or guaranteed by the U.S. Treasury or by
specific agencies or instrumentalities of the U.S. government. If a Fund would
enter into financial futures contracts directly to hedge its holdings of fixed
income securities, it would enter into contracts to deliver securities at an
undetermined price (i.e., "go short") to protect itself against the possibility
that the prices of its fixed income securities may decline during the Fund's
anticipated holding period. A Fund would "go long" (agree to purchase securities
in the future at a predetermined price) to hedge against a decline in market
interest rates.
The Funds may also enter into currency and other financial futures
contracts and write options on such contracts. The Funds intend to enter into
such contracts and related options for hedging purposes. The Funds will enter
into futures on securities, currencies or index-based futures contracts in order
to hedge against changes in interest or exchange rates or securities prices. A
futures contract on securities or currencies is an agreement to buy or sell
securities or currencies during a designated month at whatever price exists at
that time. A futures contact on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. The Funds do not make payment or
deliver securities upon entering into a futures contract. Instead, they put down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which remains in effect until the contract is terminated.
The Funds may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the contract
will tend to rise when the value of the underlying securities or currencies
declines and to fall when the value of such securities or currencies increases.
Thus, the Funds sell futures contracts in order to offset a possible decline in
the profit on their securities or currencies. If a futures contract is purchased
by a Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value of such
securities or currencies declines.
25
The Funds may enter into closing purchase and sale transactions in order
to terminate a futures contract and may buy or sell put and call options for the
purpose of closing out their options positions. The Funds ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Funds will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If the
Funds are not able to enter into an offsetting transaction, the Funds will
continue to be required to maintain the margin deposits on the contract and to
complete the contract according to its terms, in which case the Funds would
continue to bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange or
interest rate risks, these investment devices can be highly volatile, and the
Funds use of them can result in poorer performance (i.e., the Funds return may
be reduced). The Funds attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contract and
options on financial futures contract as hedging devices, there is a risk that
the prices of the securities subject to the financial futures contracts and
options on financial futures contracts may not correlate perfectly with the
prices of the securities in the Funds' portfolios. This may cause the financial
futures contract and any related options to react to market changes differently
than the portfolio securities. In addition, the Funds investment advisers could
be incorrect in its expectations and forecasts about the direction or extent of
market factors, such as interest rates, securities price movements and other
economic factors. Even if the Funds investment advisers correctly predicts
interest rate movements, a hedge could be unsuccessful if changes in the value
of a Fund's futures position did not correspond to changes in the value of its
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Funds investment advisers will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Funds ability to establish and close out financial futures contracts and options
on financial futures contract positions depends on this secondary market. If a
Fund is unable to close out its position due to disruptions in the market or
lack of liquidity, the Fund may lose money on the futures contract or option,
and the losses to the Fund could be significant.
SPECIAL RISK CONSIDERATIONS
Investment in Foreign Securities. EVERGREEN TOTAL RETURN FUND, EVERGREEN
BALANCED FUND and EVERGREEN VALUE FUND may invest in foreign securities.
Investments in foreign securities require consideration of certain factors not
normally associated with investments in securities of U.S. issuers. For example,
a change in the value of any foreign currency relative to the U.S. dollar will
result in a corresponding change in the U.S. dollar value of securities
denominated in that currency. Accordingly, a change in the value of any foreign
currency relative to the U.S. dollar will result in a corresponding change in
the U.S. dollar value of the assets of the Fund denominated or traded in that
currency. If the value of a particular foreign currency falls relative to the
U.S. dollar, the U.S. dollar value of the assets of a Fund denominated in such
currency will also fall. The performance of a Fund will be measured in U.S.
dollars.
Securities markets of foreign countries generally are not subject to the
same degree of regulation as the U.S. markets and may be more volatile and less
liquid. Lack of liquidity may affect a Fund's ability to purchase or sell large
blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, a Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by a Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, a Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
26
Additionally, accounting procedures and government supervision may be
less stringent than those applicable to U.S. companies. It may also be more
difficult to enforce contractual obligations abroad than would be the case in
the United States because of differences in the legal systems. Foreign
securities may be subject to foreign taxes, which may reduce yield, and may be
less marketable than comparable U.S. securities. All these factors are
considered by each Fund's investment adviser before making any of these types of
investments.
ADRs and EDRs and other securities convertible into securities of foreign
issuers may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. ADRs are receipts typically issued by an
American bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe by banks or
depositories which evidence a similar ownership arrangement. Generally ADRs, in
registered form, are designed for use in United States securities markets and
EDRs, in bearer form, are designed for use in European securities markets.
Investments Related to Real Estate. EVERGREEN TOTAL RETURN FUND, EVERGREEN
FOUNDATION FUND and EVERGREEN BALANCED FUND may invest up to 15% of their net
assets in investments related to real estate, including real estate investment
trust ("REITS"). Risks associated with investment in securities of companies in
the real estate industry include: declines in the value of real estate, risks
related to general and local economic conditions, overbuilding and increased
competition, increases in property taxes and operating expenses, changes in
zoning laws, casualty or condemnation losses, variations in rental income,
changes in neighborhood values, the appeal of properties to tenants and
increases in interest rates. In addition, equity real estate investment trusts
may be affected by changes in the value of the underlying property owned by the
trusts, while mortgage real estate investment trusts may be affected by the
quality of credit extended. Equity and mortgage real estate investment trusts
are dependent upon management skills, may not be diversified and are subject to
the risks of financing projects. Such trusts are also subject to heavy cash flow
dependency, defaults by borrowers, self liquidation and the possibility of
failing to qualify for tax-free pass-through of income under the Internal
Revenue Code of 1986, as amended (the "Code") and to maintain exemption from the
Investment Company Act of 1940, as amended (the "1940 Act"). In the event an
issuer of debt securities collateralized by real estate defaulted, it is
conceivable that a Fund could end up holding the underlying real estate.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). Evergreen Asset has been
retained by EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND,
EVERGREEN AMERICAN RETIREMENT FUND AND EVERGREEN FOUNDATION FUND as investment
adviser. Evergreen Asset succeeded on June 30, 1994 to the advisory business of
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. The Capital
Management Group of FUNB ("CMG") serves as investment adviser to EVERGREEN
BALANCED FUND and EVERGREEN VALUE FUND.
First Union is headquartered in Charlotte, North Carolina, and had $132
billion in consolidated assets as of February 29, 1996. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States. CMG manages or otherwise oversees the
investment of over $45 billion in assets belonging to a wide range of clients,
including all the series of Evergreen Investment Trust (formerly
27
known as First Union Funds) the two series of The Evergreen Lexicon Fund
(formerly The FFB Lexicon Fund) and the two series of Evergreen Tax Free Trust
(formerly the FFB Funds Trust). First Union Brokerage Services, Inc., a
wholly-owned subsidiary of FUNB, is a registered broker-dealer that is
principally engaged in providing retail brokerage services consistent with its
federal banking authorizations. First Union Capital Markets Corp., a wholly-
owned subsidiary of First Union, is a registered broker-dealer principally
engaged in providing, consistent with its federal banking authorizations,
private placement, securities dealing, and underwriting services.
As investment adviser to EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH
AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION
FUND, Evergreen Asset manages each Fund's investments, provides various
administrative services and supervises each Fund's daily business affairs,
subject to the authority of the Trustees. Evergreen Asset is entitled to receive
from each of EVERGREEN TOTAL RETURN FUND and EVERGREEN GROWTH AND INCOME FUND a
fee equal to 1% of average daily net assets on an annual basis on the first $750
million in assets, .9 of 1% of average daily net assets on an annual basis on
the next $250 million in assets, and .8 of 1% of average daily net assets on an
annual basis on assets over $1 billion. Evergreen Asset is entitled to receive
from EVERGREEN FOUNDATION FUND a fee equal to .875 of 1% of average daily net
assets on an annual basis on the first $750 million in assets, .75 of 1% of
average daily net assets on an annual basis on the next $250 million in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion, and from EVERGREEN AMERICAN RETIREMENT FUND a fee equal to .75 of 1% of
average daily net assets on an annual basis on the first $1 billion in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion. The fees paid by EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND
INCOME FUND AND EVERGREEN FOUNDATION FUND are higher than the rate paid by most
other investment companies.
CMG manages investments and supervises the daily business affairs of
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND and, as compensation therefor,
is entitled to receive an annual fee equal to .50 of 1% of average daily net
assets of each Fund.
The total annualized operating expenses of each Fund for the fiscal year
ended December 31, 1995 (January 31, 1996 in the case of EVERGREEN TOTAL RETURN
FUND) expressed as a percentage of average net assets on an annual basis are set
forth in the section entitled "Financial Highlights". Such expenses reflect all
voluntary expense reimbursements which may be revised or terminated at any time.
Evergreen Asset serves as administrator to EVERGREEN BALANCED FUND and
EVERGREEN VALUE FUND and is entitled to receive a fee based on the average daily
net assets of these Funds at a rate based on the total assets of the mutual
funds administered by Evergreen Asset for which CMG or Evergreen Asset also
serve as investment adviser, calculated in accordance with the following
schedule: .050% of the first $7 billion; .035% on the next $3 billion; .030% on
the next $5 billion; .020% on the next $10 billion; .015% on the next $5
billion; and .010% on assets in excess of $30 billion. Furman Selz LLC, an
affiliate of Evergreen Funds Distributor, Inc., distributor for the Evergreen
group of mutual funds, serves as sub-administrator to EVERGREEN BALANCED FUND
and EVERGREEN VALUE FUND and is entitled to receive a fee from each Fund
calculated on the average daily net assets of each Fund at a rate based on the
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset also serve as investment adviser, calculated in accordance
with the following schedule: .0100% of the first $7 billion; .0075% on the next
$3 billion; .0050% on the next $15 billion; and .0040% on assets in excess of
$25 billion. The total assets of the mutual funds administered by Evergreen
Asset for which CMG or Evergreen Asset serve as investment adviser were
approximately $14.4 billion as of February 29, 1996.
The portfolio manager for EVERGREEN TOTAL RETURN FUND is Nola Maddox
Falcone, C.F.A., who is President and Co-Chief Executive Officer of Evergreen
Asset. Ms. Falcone has served as the principal manager of the Fund since 1985.
The portfolio manager for EVERGREEN FOUNDATION FUND is Stephen A. Lieber, who is
Chairman and Co-Chief Executive Officer of Evergreen Asset. Mr. Lieber has
served as such Fund's principal manager since its inception. The portfolio
manager for EVERGREEN GROWTH AND INCOME FUND is Edmund H. Nicklin, Jr. C.F.A.
Mr. Nicklin has served as the Fund's principal manager since its inception. The
portfolio manager for EVERGREEN AMERICAN RETIREMENT FUND is Irene D. O'Neill,
C.F.A. Ms. O'Neill has served as the Fund's principal manager since its
inception. Mrs. Falcone, Mr. Lieber, Mr. Nicklin and Mrs. O'Neill have been
associated with Evergreen Asset and its predecessor since 1974, 1969, 1982 and
1981, respectively.
The portfolio manager for EVERGREEN BALANCED FUND since its inception in
1991 is R. Dean Hawes, who is a Vice President of FUNB and the Director of
Employee Benefit Portfolio Management. Mr. Hawes joined FUNB in 1981. EVERGREEN
VALUE FUND is currently being managed by experienced members of the CMG staff.
CMG has been managing trust assets for over fifty years.
28
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provide that Lieber & Company's research department and staff will
furnish Evergreen Asset with information, investment recommendations, advice and
assistance, and will be generally available for consultation on the portfolios
of EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION FUND. Lieber & Company will be
reimbursed by Evergreen Asset in connection with the rendering of services on
the basis of the direct and indirect costs of performing such services. There is
no additional charge to EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME
FUND, EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION FUND for the
services provided by Lieber & Company. The address of Lieber & Company is 2500
Westchester Avenue, Purchase, New York 10577. Lieber & Company is an indirect,
wholly-owned, subsidiary of First Union.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the 1940 Act permits an investment company to pay
expenses associated with the distribution of its shares in accordance with a
duly adopted plan. Each Fund has adopted for each of its Class A, Class B and
Class C shares a Rule 12b-1 plan (each, a "Plan" or collectively the "Plans").
Under the Plans, each Fund may incur distribution-related and shareholder
servicing-related expenses which may not exceed an annual rate of .75 of 1% of
the aggregate average daily net assets attributable to each Fund's Class A
shares, 1% of the aggregate average daily net assets attributable to the Class B
and Class C shares of EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME
FUND, EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION FUND, and .75
of 1% of the aggregate average daily net assets attributable to the Class B and
Class C shares of EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND. Payments
under the Plans adopted with respect to Class A shares are currently voluntarily
limited to .25 of 1% of each Fund's aggregate average daily net assets
attributable to Class A shares. The Plans provide that a portion of the fee
payable thereunder may constitute a service fee to be used for providing ongoing
personal services and/or the maintenance of shareholder accounts. EVERGREEN
BALANCED FUND and EVERGREEN VALUE FUND have each, in addition to the Plans
adopted with respect to their Class B and Class C shares, adopted shareholder
service plans ("Service Plans") relating to the Class B and Class C shares which
permit each Fund to incur a fee of up to .25 of 1% of the aggregate average
daily net assets attributable to the Class B and Class C shares for ongoing
personal services and/or the maintenance of shareholder accounts. Such service
fee payments to financial intermediaries for such purposes, whether pursuant to
a Plan or Service Plan, will not exceed .25 of 1% of the aggregate average daily
net assets attributable to each Class of shares of each Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares, .75 of 1% of a Fund's
aggregate average daily net assets attributable to the Class B shares and .75 of
1% of a Fund's aggregate average daily net assets attributable to the Class C
shares. The Distribution Agreements provide that EFD will use the distribution
fee received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by FUNB or its affiliates. The
Funds may also make payments under the Plans (and in the case of EVERGREEN
BALANCED FUND and EVERGREEN VALUE FUND, the Service Plans), in amounts up to .25
of 1% of a Fund's aggregate average daily net assets on an annual basis
attributable to Class B and Class C shares, to compensate organizations, which
may include EFD and each Fund's investment adviser or their affiliates, for
personal services rendered to shareholders and/or the maintenance of shareholder
accounts.
The Funds may not pay any distribution or services fees during any fiscal
period in excess of the amounts set forth above. Since EFD's compensation under
the Distribution Agreements is not directly tied to the expenses incurred by
EFD, the amount of compensation received by it under the Distribution Agreements
during any year may be more or less than its actual expenses and may result in a
profit to EFD. Distribution expenses incurred by
29
EFD in one fiscal year that exceed the level of compensation paid to EFD for
that year may be paid from distribution fees received from a Fund in subsequent
fiscal years.
The Plans are in compliance with rules of the National Association of
Securities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to .75
of 1% and .25 of 1%, respectively, of the average annual net assets attributable
to that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mutual
fund that also charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per annum.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers, banks
or other financial intermediaries, or directly through EFD. The minimum initial
investment is $1,000, which may be waived in certain situations. There is no
minimum for subsequent investments. Investments of $25 or more are allowed under
the Systematic Investment Program. Share certificates are not issued. In states
where EFD is not registered as a broker-dealer shares of a Fund will only be
sold through other broker-dealers or other financial institutions that are
registered. See the Share Purchase Application and Statement of Additional
Information for more information. Only Class A, Class B and Class C shares are
offered through this Prospectus (see "General Information" -- "Other Classes of
Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge on purchases under
$1,000,000. On purchases of $1,000,000 or more, a contingent deferred sales
charge ("CDSC") equal to 1% of the lesser of the purchase price or redemption
value will be imposed on shares redeemed during the first year after purchase.
The schedule of charges for Class A shares is as follows:
Initial Sales Charge
[Enlarge/Download Table]
as a % of the Net as a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
Less than $50,000 4.99% 4.75% 4.25%
$50,000 - $99,999 4.71% 4.50% 4.25%
$100,000 - $249,999 3.90% 3.75% 3.25%
$250,000 - $499,999 2.56% 2.50% 2.00%
$500,000 - $999,999 2.04% 2.00% 1.75%
Over $1,000,000 None None 1.00% on the first $2,999,999;
plus .50 of 1% on amounts of
$3,000,000 and up to $4,999,999;
plus .25 of 1% on amounts of
$5,000,000 and over
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; employees of FUNB and its affiliates, EFD and any
broker-dealer with whom EFD has entered into an agreement to sell shares of the
Funds, and members of the immediate families of such employees; and upon the
initial purchase of an Evergreen mutual fund by investors reinvesting the
proceeds from a redemption within the preceding thirty days of shares of other
mutual funds, provided such shares were initially
30
purchased with a front-end sales charge or subject to a CDSC. Certain
broker-dealers or other financial institutions may impose a fee on transactions
in shares of a Fund.
Class A shares may also be purchased at net asset value by qualified and
non-qualified employee benefit and savings plans which make shares of the Funds
and the other Evergreen mutual funds available to their participants, and which:
(a) are employee benefit plans having at least $1,000,000 in investable assets,
or 250 or more eligible participants; or (b) are non-qualified benefit or profit
sharing plans which are sponsored by an organization which also makes the
Evergreen mutual funds available through a qualified plan meeting the criteria
specified under (a). In connection with sales made to plans of the type
described in the preceding sentence that are clients of broker-dealers, and
which do not qualify for sales at net asset value under the conditions set forth
in the paragraph above, payments may be made in an amount equal to .50 of 1% of
the net asset value of shares purchased. These payments are subject to reclaim
in the event shares are redeemed within twelve months after purchase.
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .25 of 1% of the
average daily value on an annual basis of Class A shares held by their clients.
Certain purchases of Class A shares may qualify for reduced sales charges in
accordance with a Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain Retirement Plans and
Reinstatement Privilege. Consult the Share Purchase Application and Statement of
Additional Information for additional information concerning these reduced sales
charges.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a CDSC if you redeem shares within seven years after purchase. Shares obtained
from dividend or distribution reinvestment are not subject to the CDSC. The
amount of the CDSC (expressed as a percentage of the lesser of the current net
asset value or original cost) will vary according to the number of years from
the purchase of Class B shares as set forth below.
[Download Table]
Year Since
Purchase Contingent Deferred Sales Charge
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH 1%
The CDSC is deducted from the amount of the redemption and is paid to
EFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet distribution requirements for certain
qualified retirement plans or in the case of certain redemptions made under a
Fund's Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which it is expected that they will convert to Class A
shares). The higher fees mean a higher expense ratio, so Class B shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares. See the Statement of Additional Information for further details.
Class C Shares -- Level-Load Alternative. You can purchase Class C shares
without any initial sales charge and, therefore, the full amount of your
investment will be used to purchase Fund shares. However, you will pay a 1% CDSC
if you redeem shares during the first year after purchase. Class C shares incur
higher distribution and/or shareholder service fees than Class A shares but,
unlike Class B shares, do not convert to any other class of shares of the Fund.
The higher fees mean a higher expense ratio, so Class C shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares. Shares obtained from dividend or distribution reinvestment are not
subject to the CDSC. The maximum amount of Class C shares that may be purchased
is $500,000.
With respect to Class B shares and Class C shares, no CDSC will be
imposed on: (1) the portion of redemption proceeds attributable to increases in
the value of the account due to increases in the net asset value per share, (2)
shares acquired through reinvestment of dividends and capital gains, (3) shares
held for more than seven years (in the case of Class B shares) or one year (in
the case of Class C shares) after the end of the
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calendar month of acquisition, (4) accounts following the death or disability of
a shareholder, or (5) minimum required distributions to a shareholder over the
age of 70 1/2 from an IRA or other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees of each Trust under which each Fund operates
believe would accurately reflect fair value. Non-dollar denominated securities
will be valued as of the close of the Exchange at the closing price of such
securities in their principal trading market.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution charges and/or shareholder service fees, after
seven years. If you are unsure of the time period of your investment, you might
consider Class C shares since there are no initial sales charges and, although
there is no conversion feature, the CDSC only applies to redemptions made during
the first year. Consult your financial intermediary for further information. The
compensation received by dealers and agents may differ depending on whether they
sell Class A, Class B or Class C shares. There is no size limit on purchases of
Class A shares.
In addition to the discount or commission paid to dealers, EFD will from
time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen mutual funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments. EFD may also limit the availability of such incentives to
certain specified dealers. EFD from time to time sponsors promotions involving
First Union Brokerage Services, Inc. ("FUBS"), an affiliate of each Fund's
investment adviser, and other selected dealers, pursuant to which incentives are
paid, including gift certificates and payments in amounts up to 1% of the dollar
amount of shares of a Fund sold. Awards may also be made based on the opening of
a minimum number of accounts. Such promotions are not being made available to
all dealers. Certain broker-dealers may also receive payments from EFD or a
Fund's investment adviser over and above the usual trail commissions or
shareholder servicing payments applicable to a given Class of shares.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or its investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
The Funds will not accept third party checks other than those payable directly
to a shareholder whose account has been in existence at least thirty days.
HOW TO REDEEM SHARES
You may "redeem", i.e. sell, your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value (less any applicable CDSC for
Class B or Class C shares) next calculated after the Fund receives your request
in proper form. Proceeds generally will be sent to you within seven days.
However, for shares recently purchased by check, a Fund will not send proceeds
until it is reasonably satisfied that the check has been collected (which may
take up to ten days). Once a redemption request has been telephoned or mailed,
it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value (less any applicable CDSC for Class B
or Class C shares). Your financial intermediary is responsible for furnishing
all necessary
32
documentation to a Fund and may charge you for this service. Certain financial
intermediaries may require that you give instructions earlier than 4:00 p.m.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the telephone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If a Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, each Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The redemption of shares is a taxable transaction for Federal income
tax purposes. Under unusual circumstances, a Fund may suspend redemptions or
postpone payment for up to seven days or longer, as permitted by Federal
securities law. The Funds reserve the right to close an account that through
redemption has remained below $1,000 for thirty days. Shareholders will receive
sixty days' written notice to increase the account value before the account is
closed. The Funds have elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which each Fund is obligated to redeem shares solely in cash, up to
the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. An exchange which
represents an initial investment in another Evergreen mutual fund must amount to
at least $1,000. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled.
33
Exchanges will be made on the basis of the relative net asset value of the
shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the Fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B or Class C shares are
exchanged for Class B or Class C shares, respectively, of other Evergreen mutual
funds. If you redeem shares, the CDSC applicable to the Class B or Class C
shares of the Evergreen mutual fund originally purchased for cash is applied.
Also, Class B shares will continue to age following an exchange for purposes of
conversion to Class A shares and determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling the telephone number on the front page of this
Prospectus. Exchange requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone exchanges. You should follow the procedures
outlined below for exchanges by mail if you are unable to reach State Street by
telephone. If you wish to use the telephone exchange service you should indicate
this on the Share Purchase Application. As noted above, each Fund will employ
reasonable procedures to confirm that instructions for the redemption or
exchange of shares communicated by telephone are genuine. A telephone exchange
may be refused by a Fund or State Street if it is believed advisable to do so.
Procedures for exchanging Fund shares by telephone may be modified or terminated
at any time. Written requests for exchanges should follow the same procedures
outlined for written redemption requests in the section entitled "How to Redeem
Shares", however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary, EFD
or the toll-free number on the front page of this Prospectus. Some services are
described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation or termination of the Systematic Investment Plan has not reached a
minimum balance of $1,000 ($250 for retirement accounts) within 24 months of the
initial investment. You can open a Systematic Investment Plan in the EVERGREEN
GROWTH AND INCOME FUND, EVERGREEN FOUNDATION FUND, EVERGREEN BALANCED FUND and
EVERGREEN VALUE FUND for a minimum of only $50 per month with no initial
investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Shares purchased under a Fund's Systematic Investment Plan or Telephone
Investment Plan may not be redeemed for ten days from the date of investment.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Funds
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions
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reinvested automatically. Any applicable Class B CDSC will be waived with
respect to redemptions occurring under a Systematic Cash Withdrawal Plan during
a calendar year to the extent that such redemptions do not exceed 10% of (i) the
initial value of the account plus (ii) the value, at the time of purchase, of
any subsequent investments.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Funds and the
other Evergreen mutual funds available to their participants. Investments made
by such employee benefit plans may be exempt from front-end sales charges if
they meet the criteria set forth under "Class A Shares-Front End Sales Charge
Alternative". Each Fund's investment adviser may provide compensation to
organizations providing administrative and recordkeeping services to plans which
make shares of the Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Funds at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income) under the following prototype retirement plans: (i)
Individual Retirement Accounts ("IRAs") and Rollover IRAs; (ii) Simplified
Employee Pension (SEP) for sole proprietors, partnerships and corporations; and
(iii) Profit-Sharing and Money Purchase Pension Plans for corporations and their
employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable income, if any, quarterly and any net realized
capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Code. Dividends
and distributions generally are taxable in the year in which they are paid,
except any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in December of the previous year. Income
dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund making the distribution at the net asset value per
share at the close of business on the record date, unless the shareholder has
made a written request for payment in cash.
35
Each Fund has qualified and intends to continue to qualify to be treated
as a regulated investment company under the Code. While so qualified, it is
expected that each Fund will not be required to pay any Federal income tax on
that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income tax and any state or local taxes on the dividends and distributions they
receive from a Fund whether such dividends and distributions are made in cash or
in additional shares. Questions on how any distributions will be taxed to the
investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to net
long-term capital gains realized by individuals is 28%. The rate applicable to
corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce the
yield on its investments. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The EVERGREEN TOTAL RETURN FUND is a Massachusetts business trust
organized in 1986, and was originally organized as Maryland corporation in 1978.
EVERGREEN GROWTH AND INCOME FUND is a Massachusetts business trust organized in
1986. The EVERGREEN AMERICAN RETIREMENT FUND is a separate series of The
Evergreen American Retirement Trust, a Massachusetts business trust organized in
1987. EVERGREEN FOUNDATION FUND is a separate series of the Evergreen Foundation
Trust, a Massachusetts business trust organized in 1989. EVERGREEN BALANCED FUND
and EVERGREEN VALUE FUND are separate investment series of Evergreen Investment
Trust (formerly First Union Funds), a Massachusetts business trust organized in
1984. The Funds do not intend to hold annual shareholder meetings; shareholder
meetings will be held only when required by applicable law. Shareholders have
available certain procedures for the removal of Trustees.
A shareholder in each Class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional Classes of shares for any existing or future series. If an
additional series or Class were established in a Fund, each share of the series
or Class would normally be entitled to one vote for all purposes.
36
Generally, shares of each series and Class would vote together as a single Class
on matters, such as the election of Trustees, that affect each series and Class
in substantially the same manner. Class A, B, C and Y shares have identical
voting, dividend, liquidation and other rights, except that each Class bears, to
the extent applicable, its own distribution, shareholder service and transfer
agency expenses as well as any other expenses applicable only to a specific
Class. Each Class of shares votes separately with respect to Rule 12b-1
distribution plans and other matters for which separate class voting is
appropriate under applicable law. Shares are entitled to dividends as determined
by the Trustees and, in liquidation of a Fund, are entitled to receive the net
assets of the Fund.
Custodian, Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
each Fund's custodian, registrar, transfer agent and dividend-disbursing agent.
State Street is compensated for its services as transfer agent by a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, an affiliate of Furman Selz LLC, located 230 Park
Avenue, New York, New York 10169, is the principal underwriter of the Funds.
Furman Selz LLC also acts as sub-administrator to EVERGREEN BALANCED FUND and
EVERGREEN VALUE FUND and provides certain sub-administrative services to
Evergreen Asset in connection with its role as investment adviser to EVERGREEN
GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION
FUND and EVERGREEN TOTAL RETURN FUND, including providing personnel to serve as
officers of the Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this Prospectus and are only
available to (i) persons who at or prior to December 31, 1994, owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain institutional investors and
(iii) investment advisory clients of CMG, Evergreen Asset or their affiliates.
The dividends payable with respect to Class A, Class B and Class C shares will
be less than those payable with respect to Class Y shares due to the
distribution and shareholder servicing related expenses borne by Class A, Class
B and Class C shares and the fact that such expenses are not borne by Class Y
shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders. Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission ("SEC"), the average annual compounded rate
of return over the period that would equate an assumed initial amount invested
to the value of the investment at the end of the period. For purposes of
computing total return, dividends and capital gains distributions paid on shares
of a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases of a Fund's shares are assumed to have been
paid. Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in the Fund's financial statements. To calculate yield, the Fund takes
the interest income it earned from its portfolio of investments (as defined by
the SEC formula) for a 30-day period (net of expenses), divides it by the
average number of shares entitled to receive dividends, and expresses the result
as an annualized percentage rate based on the Fund's share price at the end of
the 30-day period. This yield does not reflect gains or losses from selling
securities.
Performance data for each Class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices. A
Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
37
alternatives. The information provided to investors may also include discussions
of other Evergreen mutual funds, products, and services, which may include:
retirement investing; brokerage products, and services, the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. The materials may also reprint, and use as advertising
and sales literature, articles from EVERGREEN EVENTS, a quarterly magazine
provided free of charge to Evergreen mutual fund shareholders.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the 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.
38
INVESTMENT ADVISERS
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND,
EVERGREEN FOUNDATION FUND, EVERGREEN TOTAL RETURN FUND
Capital Management Group of First Union National Bank of North Carolina, 210
South College Street, Charlotte, North Carolina, 28228
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
CUSTODIAN AND 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 ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FOUNDATION FUND
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116-5072
EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10169
42430 536115REV01
******************************************************************************
PROSPECTUS April 1, 1996
(Evergreen tree logo)
EVERGREEN(SM) GROWTH AND INCOME FUNDS
EVERGREEN BALANCED FUND
EVERGREEN GROWTH AND INCOME FUND
EVERGREEN VALUE FUND
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN FOUNDATION FUND
EVERGREEN TOTAL RETURN FUND
CLASS Y SHARES
The Evergreen Growth and Income Funds (the "Funds") are designed
to provide investors with a selection of investment alternatives which seek
to provide capital growth, income and diversification. This Prospectus
provides information regarding the Class Y shares offered by the Funds.
Each Fund is, or is a series of, an open-end, diversified, management
investment company. This Prospectus sets forth concise information about
the Funds that a prospective investor should know before investing. The
address of the Funds is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen group of mutual funds dated April 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 Funds at (800) 235-0064. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED
OR OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
TABLE OF CONTENTS
[Download Table]
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 18
Investment Practices and Restrictions 22
MANAGEMENT OF THE FUNDS
Investment Advisers 27
Sub-Adviser 29
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 29
How to Redeem Shares 30
Exchange Privilege 31
Shareholder Services 31
Effect of Banking Laws 32
OTHER INFORMATION
Dividends, Distributions and Taxes 32
General Information 33
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The investment adviser to EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION FUND, and EVERGREEN TOTAL RETURN
FUND is Evergreen Asset Management Corp. which, with its predecessors, has
served as an investment adviser to the Evergreen mutual funds since 1971.
Evergreen Asset Management Corp. is a wholly-owned subsidiary of First Union
National Bank of North Carolina, which in turn is a subsidiary of First Union
Corporation, the sixth largest bank holding company in the United States. The
Capital Management Group of First Union National Bank of North Carolina serves
as investment adviser to EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND.
EVERGREEN BALANCED FUND (formerly First Union Balanced Portfolio) seeks
to produce long-term total return through capital appreciation, dividends, and
interest income.
EVERGREEN GROWTH AND INCOME FUND seeks to achieve a return composed of
capital appreciation in the value of its shares and current income. The Fund
will attempt to meet its objective by investing in the securities of companies
which are undervalued in the marketplace relative to those companies' assets,
breakup value, earnings, or potential earnings growth.
EVERGREEN VALUE FUND (formerly First Union Value Portfolio) seeks
long-term capital growth, with current income as a secondary objective.
EVERGREEN AMERICAN RETIREMENT FUND seeks, in order of priority,
conservation of capital, reasonable income and capital growth. To achieve these
objectives, the Fund invests in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital appreciation. Investments in equity
securities will be limited to 75% of the value of the Fund's total assets
measured at the time any such investment is made. Normally, the Fund anticipates
that approximately half of the fixed income portion of the Fund's portfolio will
be invested in marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities.
EVERGREEN FOUNDATION FUND seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities.
EVERGREEN TOTAL RETURN FUND attempts to maximize the "total return" on
its portfolio of investments. It invests primarily in common and preferred
stocks, securities convertible into or exchangeable for common stocks and fixed
income securities.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Funds. For further
information see "Purchase and Redemption of Shares".
[Download Table]
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per year) $5.00
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN BALANCED FUND
[Download Table]
ANNUAL OPERATING
EXPENSES EXAMPLE
Management Fees .50%
After 1 Year $ 6
12b-1 Fees --
After 3 Years $ 20
Other Expenses .12%
After 5 Years $ 35
After 10 Years $ 77
Total .62%
EVERGREEN GROWTH & INCOME FUND
[Download Table]
ANNUAL OPERATING
EXPENSES EXAMPLE
Management Fees 1.00%
After 1 Year $ 13
12b-1 Fees --
After 3 Years $ 40
Other Expenses .27%
After 5 Years $ 70
After 10 Years $ 153
Total 1.27%
EVERGREEN VALUE FUND
[Download Table]
ANNUAL OPERATING
EXPENSES EXAMPLE
Management Fees .50%
After 1 Year $ 7
12b-1 Fees --
After 3 Years $ 21
Other Expenses .15%
After 5 Years $ 36
After 10 Years $ 81
Total .65%
EVERGREEN AMERICAN RETIREMENT FUND
[Download Table]
ANNUAL OPERATING
EXPENSES EXAMPLE
Management Fees .75%
After 1 Year $ 13
12b-1 Fees --
After 3 Years $ 40
Other Expenses .51%
After 5 Years $ 69
After 10 Years $ 152
Total 1.26%
3
EVERGREEN FOUNDATION FUND
[Download Table]
ANNUAL OPERATING
EXPENSES EXAMPLE
Management Fees .875%
After 1 Year $ 11
12b-1 Fees --
After 3 Years $ 34
Other Expenses .195%
After 5 Years $ 59
After 10 Years $ 131
Total 1.070%
EVERGREEN TOTAL RETURN FUND
[Download Table]
ANNUAL OPERATING
EXPENSES EXAMPLE
Management Fees 1.00%
After 1 Year $ 12
12b-1 Fees --
After 3 Years $ 38
Other Expenses .19%
After 5 Years $ 65
After 10 Years $ 144
Total 1.19%
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund's Y Class for the most recent fiscal period. THE EXAMPLES SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN.
ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a
more complete description of the various costs and expenses borne by the Funds
see "Management of the Funds".
4
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent years or the life of the Fund
if shorter for EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND has been audited
by KPMG Peat Marwick LLP, each Fund's independent auditors, for EVERGREEN
FOUNDATION FUND has been audited by Price Waterhouse LLP, the Fund's independent
auditors and for EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN GROWTH & INCOME
FUND and EVERGREEN TOTAL RETURN FUND has been audited by Ernst & Young LLP, each
Fund's independent auditors. A report of KPMG Peat Marwick LLP, Price Waterhouse
LLP, or Ernst & Young LLP, as the case may be, on the audited information with
respect to each Fund is incorporated by reference in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN BALANCED FUND -- CLASS A, B, AND C SHARES
[Enlarge/Download Table]
CLASS A SHARES CLASS B SHARES
CLASS C
JUNE 10, JANUARY 26, SHARES
1991* 1993* YEAR
YEAR ENDED THROUGH YEAR ENDED THROUGH ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992 1991 1995 1994 1993 1995
PER SHARE DATA:
Net asset value, beginning of
period...................... $11.17 $12.07 $11.41 $11.02 $10.00 $11.18 $12.08 $11.54 $11.17
Income (loss) from investment
operations:
Net investment income....... .51 .43 .42 .42 .30 .42 .36 .34 .41
Net realized and unrealized
gain (loss) on
investments................. 2.40 (.71) .75 .43 1.08 2.40 (.71) .65 2.40
Total from investment
operations................ 2.91 (.28) 1.17 .85 1.38 2.82 (.35) .99 2.81
Less distributions to
shareholders from:
Net investment income....... (.50) (.43) (.42) (.42) (.35) (.41) (.36) (.34) (.41)
Net realized gain on
investments................. (.46) (.19) (.09) (.04) (.01) (.46) (.19) (.09) (.46)
In excess of net investment
income...................... -- -- -- -- -- -- -- (.02) --
Total distributions......... (.96) (.62) (.51) (.46) (.36) (.87) (.55) (.45) (.87)
Net asset value, end of
period...................... $13.12 $11.17 $12.07 $11.41 $11.02 $13.13 $11.18 $12.08 $13.11
TOTAL RETURN+................ 26.5% (2.4%) 10.4% 7.9% 11.8% 25.6% (3.0%) 8.7% 25.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............. $41,849 $41,010 $35,032 $17,408 $334 $108,993 $100,052 $65,475 $300
Ratios to average net assets:
Expenses.................... .88% .89% .91% .91% .92%++ 1.62% 1.48% 1.41%++ 1.62%
Net investment income....... 4.05% 3.69% 3.61% 3.93% 4.38%++ 3.30% 3.12% 3.09%++ 3.31%
Portfolio turnover rate...... 37% 35% 19% 12% 19% 37% 35% 19% 37%
SEPTEMBER 2,
1994*
THROUGH
DECEMBER 31,
1994
PER SHARE DATA:
Net asset value, beginning of
period...................... $12.00
Income (loss) from investment
operations:
Net investment income....... .18
Net realized and unrealized
gain (loss) on
investments................. (.61)
Total from investment
operations................ (.43)
Less distributions to
shareholders from:
Net investment income....... (.21)
Net realized gain on
investments................. (.19)
In excess of net investment
income...................... --
Total distributions......... (.40)
Net asset value, end of
period...................... $11.17
TOTAL RETURN+................ (3.6%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............. $195
Ratios to average net assets:
Expenses.................... 1.64%++
Net investment income....... 3.23%++
Portfolio turnover rate...... 35%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
5
EVERGREEN BALANCED FUND -- CLASS Y SHARES
[Enlarge/Download Table]
CLASS Y SHARES
APRIL 1,
1991*
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992 1991
PER SHARE DATA:
Net asset value, beginning of period............................. $11.17 $12.07 $11.41 $11.02 $10.00
Income (loss) from investment operations:
Net investment income........................................... .54 .46 .45 .46 .36
Net realized and unrealized gain (loss) on investments.......... 2.40 (.71) .75 .42 1.03
Total from investment operations.............................. 2.94 (.25) 1.20 .88 1.39
Less distributions to shareholders from:
Net investment income........................................... (.53) (.46) (.45) (.45) (.36)
Net realized gain on investments................................ (.46) (.19) (.09) (.04) (.01)
Total distributions............................................ (.99) (.65) (.54) (.49) (.37)
Net asset value, end of period................................... $13.12 $11.17 $12.07 $11.41 $11.02
TOTAL RETURN+.................................................... 26.8% (2.2%) 10.7% 8.2% 15.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)....................... $818,137 $778,657 $760,147 $520,232 $247,472
Ratios to average net assets:
Expenses........................................................ .62% .64% .66% .66% .68%++
Net investment income........................................... 4.30% 3.93% 3.86% 4.20% 4.86%++
Portfolio turnover rate.......................................... 37% 35% 19% 12% 19%
* Commencement of operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
6
EVERGREEN GROWTH & INCOME FUND -- CLASS A, B AND C SHARES
[Enlarge/Download Table]
JANUARY 3, 1995* THROUGH
DECEMBER 31, 1995
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
PER SHARE DATA:
Net asset value, beginning of period....................................................... $14.48 $14.48 $14.48
Income from investment operations:
Net investment income.................................................................... .13 .05 .06
Net realized and unrealized gain on investments.......................................... 4.64 4.61 4.60
Total from investment operations....................................................... 4.77 4.66 4.66
Less distributions to shareholders from:
Net investment income.................................................................... (.14 ) (.07 ) (.08 )
Net realized gain on investments......................................................... (.48 ) (.48 ) (.48 )
Total distributions.................................................................... (.62 ) (.55 ) (.56 )
Net asset value, end of period............................................................. $18.63 $18.59 $18.58
TOTAL RETURN+.............................................................................. 33.0% 32.2% 32.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions).................................................... $19 $46 $2
Ratios to average net assets:
Expenses................................................................................. 1.55% ++# 2.24% ++# 2.15% ++#
Net investment income.................................................................... .99% ++# .30% ++# .35% ++#
Portfolio turnover rate.................................................................... 17% 17% 17%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income (loss) to average net assets, exclusive
of any applicable state expense limitations, would have been the following:
[Enlarge/Download Table]
JANUARY 3, 1995* THROUGH
DECEMBER 31, 1995
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
Expenses....................................................................................... 1.64% 2.26% 4.94%
Net investment income (loss)................................................................... .90% .28% (2.44% )
7
EVERGREEN GROWTH & INCOME FUND -- CLASS Y SHARES
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991 1990 1989 1988** 1987**
PER SHARE DATA:
Net asset value, beginning of period..... $14.52 $15.41 $14.18 $12.99 $10.72 $12.03 $10.62 $9.38 $10.05
Income (loss) from investment operations:
Net investment income.................. .18 .14 .14 .15 .19 .30 .52 .19 .20
Net realized and unrealized gain (loss)
on investments....................... 4.59 .12 1.91 1.65 2.58 (.84) 2.17 2.10 (.63)
Total from investment operations..... 4.77 .26 2.05 1.80 2.77 (.54) 2.69 2.29 (.43)
Less distributions to shareholders from:
Net investment income.................. (17) (.14) (.14) (.15) (.19) (.30) (.52) (.19) (.24)
Net realized gain on investments....... (.48) (1.01) (.68) (.46) (.31) (.47) (.76) (.86) --
Total distributions.................. (.65) (1.15) (.82) (.61) (.50) (.77) (1.28) (1.05) (.24)
Net asset value, end of period........... $18.64 $14.52 $15.41 $14.18 $12.99 $10.72 $12.03 $10.62 $9.38
TOTAL RETURN+............................ 32.9% 1.7% 14.4% 13.8% 25.8% (4.5%) 25.4% 24.6% (4.3%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in
millions).............................. $141 $73 $77 $64 $48 $36 $32 $24 $21
Ratios to average net assets:
Expenses............................... 1.27% 1.33% 1.26% 1.33% 1.41% 1.50% 1.54% 1.56% 1.76%
Net investment income.................. 1.11% .96% .99% 1.18% 1.55% 2.62% 4.13% 1.70% 1.90%
Portfolio turnover rate.................. 17% 29% 28% 30% 23% 41% 53% 41% 48%
OCTOBER 15,
1986*
THROUGH
DECEMBER 31,
1986**
PER SHARE DATA:
Net asset value, beginning of period..... $10.00
Income (loss) from investment operations:
Net investment income.................. .07
Net realized and unrealized gain (loss)
on investments....................... (.02)
Total from investment operations..... .05
Less distributions to shareholders from:
Net investment income.................. --
Net realized gain on investments....... --
Total distributions.................. --
Net asset value, end of period........... $10.05
TOTAL RETURN+............................ .5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in
millions).............................. $21
Ratios to average net assets:
Expenses............................... 1.73%++
Net investment income.................. 3.23%++
Portfolio turnover rate.................. 4%
* Commencement of operations.
** Net investment income is based on the average monthly shares outstanding for
the periods indicated.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
8
EVERGREEN VALUE FUND -- CLASS A SHARES
[Enlarge/Download Table]
NINE MONTHS
ENDED YEAR ENDED MARCH
YEAR ENDED DECEMBER 31, DECEMBER 31, 31,
1995 1994 1993 1992 1991 1990* 1990 1989
PER SHARE DATA:
Net asset value, beginning of
period......................... $16.62 $17.63 $17.11 $17.08 $14.61 $15.12 $14.45 $12.83
Income (loss) from investment
operations:
Net investment income.......... .55 .52 .47 .44 .46 .36 .54 .36
Net realized and unrealized
gain (loss) on investments... 4.69 (.20) 1.10 .89 3.17 (.44) 1.70 2.11
Total from investment
operations................. 5.24 .32 1.57 1.33 3.63 (.08) 2.24 2.47
Less distributions to
shareholders from:
Net investment income.......... (.51) (.51) (.47) (.43) (.43) (.36) (.57) (.38)
Net realized gain on
investments.................. (.90) (.82) (.58) (.87) (.73) (.02) (1.00) (.47)
In excess of net investment
income....................... -- -- -- -- -- (.05) -- --
Total distributions.......... (1.41) (1.33) (1.05) (1.30) (1.16) (.43) (1.57) (.85)
Net asset value, end of
period......................... $20.45 $16.62 $17.63 $17.11 $17.08 $14.61 $15.12 $14.45
TOTAL RETURN+................... 31.8% 1.9% 9.3% 8.0% 25.1% (.5%) 15.5% 19.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions).................. $292 $189 $190 $169 $136 $105 $96 $83
Ratios to average net assets:
Expenses....................... .90% .93% .99% 1.01%# .96%# 1.39%++ 1.55% 1.71%
Net investment income.......... 2.78% 2.96% 2.63% 2.37%# 2.78%# 3.28%++ 3.42% 2.72%
Portfolio turnover rate......... 53% 70% 46% 56% 69% 13% 11% 24%
1988 1987
PER SHARE DATA:
Net asset value, beginning of
period......................... $14.66 $12.35
Income (loss) from investment
operations:
Net investment income.......... .26 .15
Net realized and unrealized
gain (loss) on investments... (1.30) 2.38
Total from investment
operations................. (1.04) 2.53
Less distributions to
shareholders from:
Net investment income.......... (.26) (.13)
Net realized gain on
investments.................. (.53) (.09)
In excess of net investment
income....................... -- --
Total distributions.......... (.79) (.22)
Net asset value, end of
period......................... $12.83 $14.66
TOTAL RETURN+................... (7.1%) 20.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions).................. $22 $23
Ratios to average net assets:
Expenses....................... 1.74% 1.97%
Net investment income.......... 1.92% 1.41%
Portfolio turnover rate......... 24% 20%
* The Fund changed its fiscal year end from March 31 to December 31.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
[Enlarge/Download Table]
YEAR ENDED
DECEMBER 31,
1992 1991
Expenses............................................................................. 1.02% 1.05%
Net investment income................................................................ 2.36% 2.69%
9
EVERGREEN VALUE FUND -- CLASS B AND C SHARES
[Enlarge/Download Table]
CLASS B SHARES CLASS C SHARES
FEBRUARY 2, SEPTEMBER 2,
1993* 1994*
YEAR ENDED THROUGH YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1995 1994
PER SHARE DATA:
Net asset value, beginning of period................... $16.62 $17.63 $17.24 $16.61 $18.28
Income (loss) from investment operations:
Net investment income................................ .39 .42 .35 .39 .19
Net realized and unrealized gain (loss) on
investments........................................ 4.70 (.20) 1.01 4.70 (.81)
Total from investment operations................... 5.09 .22 1.36 5.09 (.62)
Less distributions to shareholders from:
Net investment income................................ (.36) (.41) (.35) (.36) (.19)
Net realized gain on investments..................... (.90) (.82) (.58) (.90) (.82)
In excess of net investment income................... -- -- (.04) -- (.04)
Total distributions................................ (1.26) (1.23) (.97) (1.26) (1.05)
Net asset value, end of period......................... $20.45 $16.62 $17.63 $20.44 $16.61
TOTAL RETURN+.......................................... 30.9% 1.3% 8.0% 30.9% (3.4%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).............. $141,072 $104,297 $ 59,953 $811 $485
Ratios to average net assets:
Expenses............................................. 1.65% 1.53% 1.48%++ 1.65% 1.68%++
Net investment income................................ 2.04% 2.36% 2.09%++ 2.03% 2.16%++
Portfolio turnover rate................................ 53% 70% 46% 53% 70%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charges are not
reflected.
++ Annualized.
10
EVERGREEN VALUE FUND -- CLASS Y SHARES
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JANUARY 3, 1991*
YEAR ENDED DECEMBER 31, THROUGH DECEMBER
1995 1994 1993 1992 31, 1991
PER SHARE DATA:
Net asset value, beginning of period.......................... $16.61 $17.63 $17.11 $17.08 $14.28
Income from investment operations:
Net investment income....................................... .57 .56 .52 .49 .47
Net realized and unrealized gain (loss) on investments...... 4.72 (.20) 1.12 .90 3.53
Total from investment operations.......................... 5.29 .36 1.64 1.39 4.00
Less distributions to shareholders from:
Net investment income....................................... (.55) (.56) (.52) (.49) (.47)
Net realized gain on investments............................ (.90) (.82) (.58) (.87) (.73)
In excess of net investment income.......................... -- -- (.02) -- --
Total distributions....................................... (1.45) (1.38) (1.12) (1.36) (1.20)
Net asset value, end of period................................ $20.45 $16.61 $17.63 $17.11 $17.08
TOTAL RETURN+................................................. 32.2% 2.1% 9.7% 8.3% 25.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)..................... $760,733 $507,028 $463,087 $326,154 $271,391
Ratios to average net assets:
Expenses.................................................... .65% .68% .65% .68%# .69%#++
Net investment income....................................... 3.02% 3.21% 2.98% 2.90%# 3.04%#++
Portfolio turnover rate....................................... 53% 70% 46% 56% 69%
* Commencement of operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
[Enlarge/Download Table]
JANUARY 3, 1991*
YEAR ENDED THROUGH
DECEMBER 31, 1992 DECEMBER 31, 1991
Expenses.................................................... .69% .77%
Net investment income....................................... 2.89% 2.96%
11
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS A, B AND C SHARES
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JANUARY 3, 1995* THROUGH
DECEMBER 31, 1995
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
PER SHARE DATA:
Net asset value, beginning of period........................................................... $10.65 $10.65 $10.65
Income from investment operations:
Net investment income........................................................................ .41 .35 .36
Net realized and unrealized gain on investments.............................................. 2.22 2.20 2.19
Total from investment operations........................................................... 2.63 2.55 2.55
Less distributions to shareholders from net investment income.................................. (.46) (.40) (.39)
Net asset value, end of period................................................................. $12.82 $12.80 $12.81
TOTAL RETURN+.................................................................................. 24.9% 24.1% 24.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...................................................... $1,335 $4,839 $110
Ratios to average net assets:
Expenses..................................................................................... 1.37%++# 2.12%++# 2.10%++#
Net investment income........................................................................ 3.73%++# 2.97%++# 2.96%++#
Portfolio turnover rate........................................................................ 49% 49% 49%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income (loss) to average net assets, exclusive
of any applicable state expense limitations, would have been the following:
[Enlarge/Download Table]
JANUARY 3, 1995* THROUGH
DECEMBER 31, 1995
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
Expenses....................................................................................... 10.96% 4.20% 103.52%
Net Investment income (loss)................................................................... (5.86%) .89% (98.46%)
12
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS Y SHARES
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YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991 1990 1989
PER SHARE DATA:
Net asset value, beginning of
period...................... $10.67 $11.60 $10.95 $10.52 $9.59 $10.41 $ 10.09
Income (loss) from investment
operations:
Net investment income....... .47 .60 .56 .66 .60 .60 .57
Net realized and unrealized
gain (loss) on
investments............... 2.16 (.93) .96 .55 1.15 (.66) .76
Total from investment
operations................ 2.63 (.33) 1.52 1.21 1.75 (.06) 1.33
Less distributions to
shareholders from:
Net investment income....... (.47) (.60) (.60) (.61) (.60) (.60) (.59)
Net realized gain on
investments............... -- -- (.24) (.17) (.22) (.16) (.42)
In excess of net realized
gains..................... -- -- (.03) -- -- -- --
Total distributions......... (.47) (.60) (.87) (.78) (.82) (.76) (1.01)
Net asset value, end of
period...................... $12.83 $10.67 $11.60 $10.95 $10.52 $9.59 $ 10.41
TOTAL RETURN+................. 25.1% (2.9%) 14.1% 11.8% 18.8% (.5%) 13.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............. $39,327 $37,176 $37,336 $23,781 $15,632 $12,351 $11,610
Ratios to average net assets:
Expenses.................... 1.26% 1.28% 1.36% 1.51%# 1.50%# 1.50%# 1.88%#
Net investment income....... 3.96% 5.40% 5.13% 6.23%# 5.91%# 6.04%# 5.49%#
Portfolio turnover rate....... 49% 136% 92% 151% 97% 33% 152%
MARCH 14, 1988*
THROUGH
DECEMBER 31, 1988**
PER SHARE DATA:
Net asset value, beginning of
period...................... $ 10.00
Income (loss) from investment
operations:
Net investment income....... .39
Net realized and unrealized
gain (loss) on
investments............... .18
Total from investment
operations................ .57
Less distributions to
shareholders from:
Net investment income....... (.36)
Net realized gain on
investments............... (.12)
In excess of net realized
gains..................... --
Total distributions......... (.48)
Net asset value, end of
period...................... $ 10.09
TOTAL RETURN+................. 5.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............. $9,449
Ratios to average net assets:
Expenses.................... 2.00%++
Net investment income....... 5.01%++
Portfolio turnover rate....... 52%
* Commencement of operations.
** Investment income, expenses and net investment income are based upon the
average monthly shares outstanding for the period indicated.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
[Enlarge/Download Table]
YEAR ENDED
DECEMBER 31,
1992 1991 1990 1989
Expenses...................................................... 1.59% 1.82% 1.95% 2.03%
Net investment income......................................... 6.15% 5.59% 5.59% 5.34%
13
EVERGREEN FOUNDATION FUND -- CLASS A, B AND C SHARES
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JANUARY 3, 1995* THROUGH
DECEMBER 31, 1995
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
PER SHARE DATA:
Net asset value, beginning of period....................................................... $12.24 $12.24 $12.24
Income from investment operations:
Net investment income.................................................................... .44 .36 .34
Net realized and unrealized gain on investments.......................................... 3.14 3.09 3.09
Total from investment operations....................................................... 3.58 3.45 3.43
Less distributions to shareholders from:
Net investment income.................................................................... (.47) (.39) (.37)
Net realized gain on investments......................................................... (.23) (.23) (.23)
Total distributions.................................................................... (.70) (.62) (.60)
Net asset value, end of period............................................................. $15.12 $15.07 $15.07
TOTAL RETURN+.............................................................................. 29.7% 28.7% 28.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................................................. $107 $296 $11
Ratios to average net assets:
Expenses................................................................................. 1.33%++# 2.07%++ 2.23%++#
Net investment income.................................................................... 3.73%++# 2.99%++ 2.83%++#
Portfolio turnover rate.................................................................... 28% 28% 28%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
[Enlarge/Download Table]
JANUARY 3, 1995*
THROUGH
DECEMBER 31, 1995
CLASS A CLASS C
SHARES SHARES
Expenses..................................................................... 1.34% 2.37%
Net investment income........................................................ 3.72% 3.69%
14
EVERGREEN FOUNDATION FUND -- CLASS Y SHARES
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JANUARY 2, 1990*
YEAR ENDED DECEMBER 31, THROUGH
1995 1994 1993 1992 1991 DECEMBER 31, 1990
PER SHARE DATA:
Net asset value, beginning of period........................ $12.27 $13.12 $11.98 $10.75 $8.95 $10.00
Income (loss) from investment operations:
Net investment income..................................... .51 .42 .31 .27 .33 1.23(a)
Net realized and unrealized gain (loss) on investments.... 3.07 (.57) 1.55 1.83 2.77 (.59)
Total from investment operations........................ 3.58 (.15) 1.86 2.10 3.10 .64
Less distributions to shareholders from:
Net investment income..................................... (.49) (.42) (.31) (.24) (.33) (1.17)
Net realized gain on investments.......................... (.23) (.28) (.41) (.63) (.97) (.52)
Total distributions..................................... (.72) (.70) (.72) (.87) (1.30) (1.69)
Net asset value, end of period.............................. $15.13 $12.27 $13.12 $11.98 $10.75 $8.95
TOTAL RETURN+............................................... 29.7% (1.1%) 15.7% 20.0% 36.4% 6.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)..................... $623 $332 $240 $64 $11 $2
Ratios to average net assets:
Expenses.................................................. 1.07% 1.14% 1.20% 1.40%# 1.20%# 0%#++
Net investment income..................................... 3.89% 3.51% 2.81% 2.93%# 2.86%# 15.07%#(a)++
Portfolio turnover rate..................................... 28% 33% 60% 127% 178% 131%
* Commencement of operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets, exclusive of any
applicable state expense limitations, would have been the following:
[Enlarge/Download Table]
YEAR ENDED JANUARY 2, 1990*
DECEMBER 31, THROUGH DECEMBER 31,
1992 1991 1990
Expenses................................................ 1.43% 2.58% 3.64%
Net investment income................................... 2.90% 1.48% 11.43%
(a) Includes receipt of a special dividend representing $.62 per share net
investment income and 7.59% of average net assets.
15
EVERGREEN TOTAL RETURN FUND -- CLASS A, B AND C SHARES
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CLASS A SHARES CLASS B SHARES CLASS C SHARES
JANUARY 3, JANUARY 3, JANUARY 3,
YEAR 1995* YEAR 1995* YEAR 1995*
ENDED THROUGH ENDED THROUGH ENDED THROUGH
JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31,
1996 1995 1996 1996 1996 1995
PER SHARE DATA:
Net asset value, beginning of period................. $ 17.28 $ 17.09 $ 17.28 $ 17.09 $ 17.27 $ 17.09
Income from investment operations:
Net investment income.............................. 1.01 .02 .91 .02 .90 .01
Net realized and unrealized gain on investments.... 2.94 .17 2.87 .17 2.89 .17
Total from investment operations................. 3.95 .19 3.78 .19 3.79 .18
Less distributions to shareholders from:
Net investment income.............................. (1.08) -- (.98) -- (.98) --
Net asset value, end of period....................... $ 20.15 $ 17.28 $ 20.08 $ 17.28 $ 20.08 $ 17.27
TOTAL RETURN+........................................ 23.4% 1.1% 22.4% 1.1% 22.4% 1.1%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............ $4,412 $119 $14,750 $599 $523 $24
Ratios to average net assets:
Expenses........................................... 1.36%# 1.45%++ 2.11%# 2.23%++ 2.11%# 2.22%++
Net investment income.............................. 5.39%# 4.09%++ 4.69%# 3.23%++ 4.67%# 2.68%++
Portfolio turnover rate.............................. 138% 151% 138% 151% 138% 151%
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of operating expenses and net investment income (loss) to average net assets,
exclusive of any applicable state expense limitations, would have been the
following:
[Enlarge/Download Table]
YEAR ENDED
JANUARY 31, 1996
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
Expenses............................................................ 2.50% 2.25% 13.03%
Net investment income (loss)........................................ 4.25% 4.55% (6.25%)
16
EVERGREEN TOTAL RETURN FUND -- CLASS Y SHARES
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TEN MONTHS
YEAR ENDED ENDED
JANUARY 31, JANUARY YEAR ENDED MARCH 31,
1996 31, 1995* 1994 1993 1992 1991 1990 1989 1988
PER SHARE DATA:
Net asset value, beginning
of period...................... $17.28 $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11 $20.37
Income (loss) from investment
operations:
Net investment income.......... 1.10 .87 1.08 1.11 1.08 1.02 1.07 1.12 1.06
Net realized and unrealized
gain (loss) on investments... 2.87 (.55) (1.41) 2.51 .70 (.08) .36 .79 (2.64)
Total from investment
operations................... 3.97 .32 (.33) 3.62 1.78 .94 1.43 1.91 (1.58)
Less distributions to
shareholders from:
Net investment income.......... (1.09) (1.08) (1.08) (1.08) (1.08) (1.08) (1.09) (1.08) (.80)
Net realized gains............. -- (.25) (1.20) (.46) -- -- -- (.02) (.88)
Total distributions............ (1.09) (1.33) (2.28) (1.54) (1.08) (1.08) (1.09) (1.10) (1.68)
Net asset value, end of period... $20.16 $17.28 $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11
TOTAL RETURN+.................... 23.5% 1.9% (2.1%) 20.2% 10.2% 5.8% 7.9% 1.3% (7.8%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions).................. $914 $942 $1,065 $1,142 $1,032 $1,151 $1,292 $1,312 $1,346
Ratios to average net assets:
Expenses....................... 1.19% 1.24%++ 1.18% 1.18% 1.21% 1.23% 1.18% 1.02%** 1.01%**
Net investment income.......... 5.70% 5.70%++ 5.29% 5.65% 5.73% 5.90% 5.64% 6.36%** 5.80%**
Portfolio turnover rate.......... 138% 151% 106% 164% 137% 137% 89% 86% 81%
1987
PER SHARE DATA:
Net asset value, beginning
of period...................... $19.72
Income (loss) from investment
operations:
Net investment income.......... 1.14
Net realized and unrealized
gain (loss) on investments... 1.76
Total from investment
operations................... 2.90
Less distributions to
shareholders from:
Net investment income.......... (1.14)
Net realized gains............. (1.11)
Total distributions............ (2.25)
Net asset value, end of period... $20.37
TOTAL RETURN+.................... 15.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions).................. $1,636
Ratios to average net assets:
Expenses....................... 1.02%**
Net investment income.......... 5.68%**
Portfolio turnover rate.......... 44%
* The Fund changed its fiscal year end from March 31 to January 31.
** Net of expense limitation in fiscal years 1987, 1988 and 1989.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
17
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective is fundamental and may not be changed
without shareholder approval.
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions" below. There can be no assurance that
any Fund's investment objective will be achieved.
EVERGREEN BALANCED FUND
The investment objective of the EVERGREEN BALANCED FUND is to achieve a
long-term total return through capital appreciation, dividends and interest
income. This objective is a fundamental policy and may not be changed without
shareholder approval. The Fund invests in common and preferred stocks for growth
and fixed income securities to provide a stable income flow.
The percentage of the Fund's assets invested in common and preferred
stocks will vary from time to time in accordance with changing economic and
market conditions. It is anticipated that over the long term the Fund's
portfolio will average 60% in common and preferred stocks and 40% in bonds.
However, normally the Fund's asset allocation will range between 40-75% in
common and preferred stocks, 25-50% fixed income securities (including some
convertible securities) and 0-25% cash equivalents. Moderate shifts between
types of assets are made in an attempt to maximize returns or reduce risk. As of
December 31, 1993, 1994 and 1995, approximately 63%, 55% and 60%, respectively,
of the Fund's portfolio consisted of equity securities.
The Fund invests in common, preferred and convertible preferred stocks
and bonds of U.S. companies with a minimum of $100 million in market
capitalization and which are listed on major stock exchanges or traded
over-the-counter. The criteria for such investment selection include a company's
financial strength (such as cash flow and low debt-to-equity ratio), earnings
growth and price in relation to current earnings, dividends and book value to
identify growth opportunities. The Fund may also invest in American Depositary
Receipts ("ADRs") of foreign companies which are traded on the New York or
American Stock Exchanges or the over-the-counter market.
The fixed income portion of the Fund's portfolio may be invested in
corporate bonds (including convertible bonds) which are rated A or higher by
Standard & Poor's Ratings Service, a division of McGraw-Hill Companies, Inc.
("S&P") or Moody's Investors Service, Inc. ("Moody's") or any other nationally
recognized statistical rating organization ("SRO"), or which, if unrated, are
considered to be of comparable quality by the Fund's investment adviser. For a
description of such ratings see the Statement of Additional Information. Bonds
are selected based upon the outlook for interest rates and their yield in
relation to other bonds of similar quality and maturity. The maturities of these
bonds may be medium (i.e., from five to ten years) to long-term (i.e., over ten
years), but in no event will they be longer than twenty years.
The Fund also invests in securities which are either issued or guaranteed
by the U.S. government, its agencies or instrumentalities. These securities
include direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and notes, bonds and discount notes of U.S. government agencies
or instrumentalities, such as the Farm Credit System, including the National
Bank for Cooperatives, Farm Credit Banks and Banks for Cooperatives, Farmers
Home Administration, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Government National Mortgage
Association, Student Loan Marketing Association, Tennessee Valley Authority,
Export-Import Bank of the United States, Commodity Credit Corporation, Federal
Financing Bank and National Credit Union Administration. Some of these
securities are supported by the full faith and credit of the U.S. government,
and others are supported only by the credit of the agency or instrumentality.
EVERGREEN GROWTH AND INCOME FUND
The investment objective of EVERGREEN GROWTH AND INCOME FUND (formerly
known as the Evergreen Value Timing Fund) is to achieve a return composed of
capital appreciation in the value of its shares and current income.
18
The Fund seeks to achieve its investment objective by investing in the
securities of companies which are undervalued in the marketplace relative to
those companies' assets, breakup value, earnings or potential earnings growth.
These companies are often found among those which have had a record of financial
success but are currently in disfavor in the marketplace for reasons the Fund's
investment adviser perceives as temporary or erroneous. Such investments when
successfully timed are expected to be the means for achieving the Fund's
investment objective. This inherently contrarian approach may require greater
reliance upon the analytical and research capabilities of the Fund's investment
adviser than an investment in certain other equity funds. Consequently, an
investment in the Fund may involve more risk than other equity funds. The Fund
should not be considered suitable for investors who are unable or unwilling to
assume the risks of loss inherent in such a program. Nor should the Fund be
considered a balanced or complete investment program.
The Fund will use the "value timing" approach as a process for purchasing
securities when events indicate that fundamental investment values are being
ignored in the marketplace. Fundamental investment value is based on one or more
of the following: assets -- tangible and intangible (examples of the latter
include brand names or licenses), capitalization of earnings, cash flow or
potential earnings growth. A discrepancy between market valuation and
fundamental value often arises due to the presence of unrecognized assets or
business opportunities, or as a result of incorrectly perceived or short-term
negative factors. Changes in regulations, basic economic or monetary shifts and
legal action (including the initiation of bankruptcy proceedings) are some of
the factors that create these capital appreciation opportunities. If the
securities in which the Fund invests never reach their perceived potential or
the valuation of such securities in the marketplace does not in fact reflect
significant undervaluation, there may be little or no appreciation or a
depreciation in the value of such securities.
The Fund will invest primarily in common stocks and securities
convertible into or exchangeable for common stock. It is anticipated that the
Fund's investments in these securities will contribute to the Fund's return
primarily through capital appreciation. In addition, the Fund will invest in
nonconvertible preferred stocks and debt securities. It is anticipated that the
Fund's investments in these securities will also produce capital appreciation
but the current income component of return will be a more significant factor in
their selection. However, the Fund will invest in nonconvertible preferred stock
and debt securities only if the anticipated capital appreciation plus income
from such investments is equivalent to that anticipated from investments in
equity or equity-related securities. The Fund may invest up to 5% of its total
assets in debt securities which are rated below investment grade, commonly known
as "junk bonds". Investments of this type are subject to greater risk of loss of
principal and interest.
EVERGREEN VALUE FUND
The investment objective of the EVERGREEN VALUE FUND is long-term capital
appreciation with current income as a secondary objective. Normally, at least
75% of the Fund's assets will be invested in equity securities of U.S. companies
with prospects for earnings growth and dividends. As of December 31, 1993, 1994
and 1995, approximately 95%, 97% and 89%, respectively, of the Fund's portfolio
consisted of equity securities.
The Fund's investments, in order of priority, consist of:
common and preferred stocks, bonds and convertible preferred stock
of U.S. companies with a minimum market capitalization of $100 million
which are listed on the New York or American Stock Exchanges or traded in
over-the-counter markets. The primary consideration is for those industries
and companies with the potential for capital appreciation; income is a
secondary consideration;
ADRs of foreign companies traded on the New York or American Stock
Exchanges or the over-the-counter market;
foreign securities (either foreign or U.S. securities traded in
foreign markets). The Fund may also invest in obligations denominated in
foreign currencies. In making these decisions, the Fund's investment
adviser will consider such factors as the condition and growth potential of
various economies and securities markets, currency and taxation
implications and other pertinent financial, social, national and political
factors. (See "Investment Practices and Restrictions -- Special Risk
Considerations");
convertible bonds rated no lower than BBB by S&P or Baa by Moody's
or, if not rated, determined to be of comparable quality by the Fund's
investment adviser;
money market instruments;
19
fixed rate notes and bonds and adjustable and variable rate notes
of companies whose common stock the Fund may acquire rated no lower than
BBB by S&P or Baa by Moody's or which, if not rated, determined to be of
comparable quality by the Fund's investment adviser (up to 5% of total
assets);
zero coupon bonds issued or guaranteed by the U.S. government, its
agencies or instrumentalities (up to 5% of total assets);
obligations, including certificates of deposit and bankers'
acceptances, of banks or savings and loan associations having at least $1
billion in deposits and insured by the Bank Insurance Fund or the Savings
Association Insurance Fund, including U.S. branches of foreign banks and
foreign branches of U.S. banks; and
prime commercial paper, including master demand notes rated no
lower than A-1 by S&P or Prime 1 by Moody's.
Bonds rated BBB by S&P or Baa by Moody's may have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to weaken such bonds' prospects for principal and interests payments than
higher rated bonds. However, like the higher rated bonds, these securities are
considered investment grade. For a description of such ratings see the Statement
of Additional Information.
EVERGREEN AMERICAN RETIREMENT FUND
The investment objectives of EVERGREEN AMERICAN RETIREMENT FUND in order
of priority are conservation of capital, reasonable income and capital growth.
The Fund offers a structured investment approach designed specifically for
retirees and persons contemplating retirement which may also be appropriate for
the qualified retirement plans of smaller companies.
The Fund will invest in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital enhancement. Ordinarily, the Fund
anticipates that approximately 50% of its portfolio will consist of equity
securities (including securities convertible into equity securities) and 50% of
fixed income securities. The Fund's investment adviser may vary the amount
invested in each type of security in response to changing market conditions to
take advantage of relative undervaluation in either the stock or bond markets.
The Fund will, however, not make an additional investment in equity securities
if more than 75% of its total assets at the time the investment is made would
include investments in equity securities. Generally, approximately half of the
equity portion of the Fund's portfolio will be invested in common stocks which
the Fund's investment adviser believes will yield current income and have
potential for long-term capital growth and half in bonds and preferred stocks
convertible into such common stock. As of December 31, 1993, 1994 and 1995,
approximately 64.8%, 74.2% and 65.5%, respectively, of the Fund's portfolio
consisted of equity securities.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring non-speculative issues expected to
fluctuate little in value, except with changes in prevailing interest rates. The
market value of the debt obligations in the Fund's portfolio can be expected to
vary inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short and medium to long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
value.
Normally, the Fund anticipates that approximately half of the fixed
income portion of the Fund's portfolio will be invested in marketable
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities which are supported by the full faith and credit of the United
States or by the right of the issuer to borrow from the U.S. Treasury. These
include issues of the Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established under
the authority of an act of Congress. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks,
20
Federal National Mortgage Association and Tennessee Valley Authority. The
balance will be invested in corporate obligations rated no lower than A by
Moody's or S&P.
EVERGREEN FOUNDATION FUND
The investment objectives of EVERGREEN FOUNDATION FUND, in order of
priority, are reasonable income, conservation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. Government debt obligations,
and short-term debt instruments, such as commercial paper. The Fund's common
stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.
The Fund may make investments in securities regardless of whether or not
such securities are traded on a national securities exchange. The value of
portfolio securities and their yields are expected to fluctuate over time
because of varying general economic and market conditions.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).
In selecting fixed income securities for the Fund's portfolio, emphasis
will be placed on issues expected to fluctuate little in value other than as a
result of changes in prevailing interest rates. The market value of the debt
obligations in the Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates. The Fund may at times emphasize the generation of
interest income by investing in high-yielding debt securities, with short,
medium or long-term maturities. While fixed income investments will generally be
made for the purpose of generating interest income, investments in medium to
long-term debt securities (i.e., those with maturities from five to ten years
and those with maturities over ten years, respectively) may be made with a view
to realizing capital appreciation when the Fund's investment adviser believes
changes in interest rates will lead to an increase in the value of such
securities. The fixed income portion of the Fund's portfolio may include:
1. Marketable obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities, including issues of the U.S. Treasury, such as
bills, certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of Congress. Some of
these securities are supported by the full faith and credit of the U.S.
Government, and others are supported only by the credit of the agency or
instrumentality. Agencies or instrumentalities whose securities are supported by
the full faith and credit of the United States include, but are not limited to,
the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration and Government National
Mortgage Association. Agencies or instrumentalities whose securities are
supported only by the credit of the agency or instrumentality include the
Interamerican Development Bank and the International Bank for Reconstruction and
Development. These obligations are supported by appropriated but unpaid
commitments of their member countries. There are no assurances that the
commitments will be fulfilled in the future.
2. Corporate obligations rated no lower than A by Moody's or S&P.
3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.
4. Commercial paper of high quality (rated no lower than A-2 by S&P or
Prime-2 by Moody's or, if not rated, issued by companies which have an
outstanding long-term debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's). For a description of such ratings see the Statement of Additional
Information.
Certain obligations may be entitled to the benefit of standby letters of
credit or similar commitments issued by banks and, in such instances, the Fund's
investment adviser will take into account the obligation of the bank in
assessing the quality of such security.
21
EVERGREEN TOTAL RETURN FUND
The investment objective of EVERGREEN TOTAL RETURN FUND is to achieve a
return consisting of current income and capital appreciation in the value of its
shares. The emphasis on current income and capital appreciation will be
relatively equal although, over time, changes in the outlook for market
conditions and the level of interest rates will cause the Fund to vary its
emphasis between these two elements in its search for the optimum return for its
shareholders. To the extent that the Fund is emphasizing current income, it may
purchase securities in anticipation of participating in dividends. This practice
may result in a higher rate of portfolio turnover and may affect the Fund's
overall return. The Fund seeks to achieve its investment objective through
investments in common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities. The Fund may invest
up to 20% of its total assets in the securities of foreign issuers either
directly or in the form of ADRs, European Depository Receipts ("EDRs") or other
securities convertible into securities of foreign issuers. The Fund may also
write covered call options.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders.
The Fund may make investments in securities (other than options)
regardless of whether or not such securities are traded on a national securities
exchange. The value of portfolio securities and their yields, as well as
opportunities to realize net gains from a covered call options writing program,
are expected to fluctuate over time because of varying general economic and
market conditions.
The Fund's portfolio will vary over time depending upon the economic
outlook and market conditions. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Ordinarily, the Fund anticipates that approximately 75% of its portfolio will
consist of equity securities and the other 25% of debt securities (including
convertible debt securities). As of March 31, 1994 and January 31, 1995 and
1996, approximately 96%, 91% and 91%, respectively, of the Fund's portfolio
consisted of equity securities. The balance of the Fund's portfolio consisted of
debt securities (including convertible debt securities). If, in the judgment of
the Fund's investment adviser, the appreciation potential for equity securities
exceeds the return available from debt securities or government securities,
investments in equity securities could exceed 75% of the Fund's portfolio. Most
equity investments, however, will be income producing. The quality standards for
debt securities include: Obligations of banks having total assets of at least
one billion dollars which are members of the FDIC; commercial paper rated no
lower than P-2 by Moody's or A-2 by S&P; and non-convertible debt securities
rated no lower than Baa by Moody's or BBB by Standard & Poor's. Securities rated
Baa or BBB may have speculative characteristics. See the discussion above with
respect to EVERGREEN VALUE FUND.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. It is anticipated (i) that the annual
portfolio turnover rate for the EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
and EVERGREEN GROWTH AND INCOME FUND will not exceed 100%; (ii) that the annual
portfolio turnover rate of the EVERGREEN AMERICAN RETIREMENT FUND and the
EVERGREEN FOUNDATION FUND will generally not exceed 100% for the equity portion
of their portfolio and 200% for the fixed income portion; and (iii) that the
annual portfolio turnover rate for the EVERGREEN TOTAL RETURN 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 portfolio turnover rate experienced by
a Fund directly affects brokerage commissions and other transaction costs which
the Fund must pay. A high rate of portfolio turnover will increase such costs.
It is contemplated that Lieber & Company, an affiliate of Evergreen Asset
Management Corp. ("Evergreen Asset") and a member of the New York and American
Stock Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for the EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND
INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION FUND on
those exchanges. The portfolio turnover rate for each Fund is set forth in the
tables contained in the section entitled "Financial Highlights". See the
Statement of Additional Information for further information regarding the
brokerage allocation practices of the Funds.
Borrowing. As a matter of fundamental policy, the Funds, except EVERGREEN
AMERICAN RETIREMENT FUND, may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency
22
purposes. EVERGREEN AMERICAN RETIREMENT FUND may borrow for purposes of
leverage. The proceeds from borrowings may be used to facilitate redemption
requests which might otherwise require the untimely disposition of portfolio
securities. The specific limits applicable to borrowing by each Fund are set
forth in the Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the net assets of the EVERGREEN
TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND, EVERGREEN AMERICAN
RETIREMENT FUND and EVERGREEN FOUNDATION FUND, and 5% of the value of the total
assets of EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND, and must be
collateralized by cash or U.S. government securities that are maintained at all
times in an amount equal to at least 100% of the current market value of the
securities loaned, including accrued interest. While such securities are on
loan, the borrower will pay a Fund any income accruing thereon, and the Fund may
invest the cash collateral in portfolio securities, thereby increasing its
return. Any gain or loss in the market price of the loaned securities which
occurs during the term of the loan would affect a Fund and its investors. A Fund
has the right to call a loan and obtain the securities loaned at any time on
notice of not more than five business days. A Fund may pay reasonable fees in
connection with such loans.
There is the risk that when lending portfolio securities, the securities
may not be available to a Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
Short Sales. The EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND,
EVERGREEN BALANCED FUND, EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN
FOUNDATION FUND may, as a defensive strategy, make short sales of securities. A
short sale occurs when a seller sells a security and makes delivery to the buyer
by borrowing the security. Short sales of a security are generally made in cases
where the seller expects the market value of the security to decline. To
complete a short sale, the seller must replace the security borrowed by
purchasing it at the market price at the time of replacement, or by delivering
securities from the seller's own position to the lender. In the event the market
value of a security sold short were to increase, the seller would realize a loss
to the extent that the cost of purchasing the security for delivery to the
lender were greater than the proceeds from the short sale. In the event a short
sale is completed by delivery of securities to the lender from the seller's own
position, the seller would forego any gain that would otherwise be realized on
such securities. The EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION
FUND may only make short sales "against the box" which means they must own the
securities sold short, or other securities convertible into, or which carry
rights to acquire, such securities.
Illiquid or Restricted Securities. EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION FUND and EVERGREEN TOTAL RETURN
FUND may invest up to 15% of their net assets, and EVERGREEN BALANCED FUND and
EVERGREEN VALUE FUND may invest up to 10% of their net assets, in illiquid
securities and other securities which are not readily marketable, including
non-negotiable time deposits, certain restricted securities not deemed by the
Trustees to be liquid and repurchase agreements with maturities longer than
seven days. Securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, which have been determined to be liquid, will not be
considered by the Funds' investment advisers to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 15% or 10%
limits. The inability of a Fund to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Fund's ability to
raise cash for redemptions or other purposes. The liquidity of securities
purchased by a Fund which are eligible for resale pursuant to Rule 144A will be
monitored by the Funds' investment advisers on an ongoing basis, subject to the
oversight of the Trustees. In the event that such a security is deemed to be no
longer liquid, a Fund's holdings will be reviewed to determine what action, if
any, is required to ensure that the retention of such security does not result
in the EVERGREEN GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND,
EVERGREEN FOUNDATION FUND and EVERGREEN TOTAL RETURN FUND having more than 15%,
or EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND having more than 10%, of
their net assets invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. EVERGREEN GROWTH AND
INCOME FUND, EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND and EVERGREEN TOTAL
RETURN FUND may enter into repurchase agreements with member banks of the
Federal Reserve System, including the Funds custodian or
23
primary dealers in U.S. Government securities. A repurchase agreement is an
arrangement pursuant to which a buyer purchases a security and simultaneously
agrees to resell it to the vendor at a price that results in an agreed-upon
market rate of return which is effective for the period of time (which is
normally one to seven days, but may be longer) the buyer's money is invested in
the security. The arrangement results in a fixed rate of return that is not
subject to market fluctuations during the holding period. A Fund requires
continued maintenance of collateral with its Custodian in an amount at least
equal to the repurchase price (including accrued interest). In the event a
vendor defaults on its repurchase obligation, a Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were less than the
repurchase price. If the vendor becomes the subject of bankruptcy proceedings, a
Fund might be delayed in selling the collateral. The Funds' investment advisers
will review and continually monitor the creditworthiness of each institution
with which a Fund enters into a repurchase agreement to evaluate these risks.
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND may borrow money by
entering into a "reverse repurchase agreement" by which it agrees to sell
portfolio securities to financial institutions such as banks and broker-dealers,
and to repurchase them at a mutually agreed upon date and price, for temporary
or emergency purposes. At the time a Fund enters into a reverse repurchase
agreement, it will place in a segregated custodial account cash, U.S. government
securities or liquid high grade debt obligations having a value at least equal
to the repurchase price (including accrued interest) and will subsequently
monitor the account to ensure that such equivalent value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by the Fund may decline below the repurchase price of those securities.
Neither Fund will enter into reverse repurchase agreements exceeding 5% of the
value of its total assets.
When-Issued and Delayed Delivery Transactions. EVERGREEN BALANCED FUND and
EVERGREEN VALUE FUND may purchase securities on a when-issued or delayed
delivery basis. These transactions are arrangements in which a Fund purchases
securities with payment and delivery scheduled for a future time. The seller's
failure to complete these transactions may cause a Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, a Fund may pay more or
less than the market value of the securities on the settlement date. The Funds
may dispose of a commitment prior to settlement if the Funds investment adviser
deems it appropriate to do so. In addition, the Funds may enter into
transactions to sell their purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Funds may realize short-term profits or losses
upon the sale of such commitments.
Fixed Income Securities -- Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Options and Futures. Each of EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND
INCOME FUND and EVERGREEN AMERICAN RETIREMENT FUND may write covered call
options on certain portfolio securities in an attempt to earn income and realize
a higher return on its portfolio. A call option may not be written by the Funds
if, afterwards, securities comprising more than 25% of the market value of the
equity securities of EVERGREEN GROWTH AND INCOME FUND and EVERGREEN TOTAL RETURN
FUND, or 15% of the market value of the equity securities of EVERGREEN AMERICAN
RETIREMENT FUND would be subject to call options. A Fund realizes income from
the premium paid to it in exchange for writing the call option. Once it has
written a call option on a portfolio security and until the expiration of such
option, a Fund forgoes the opportunity to profit from increases in the market
price of such security in excess of the exercise price of the call option.
Should the price of the security on which a call has been written decline, a
Fund retains the risk of loss, which would be offset to the extent the Fund has
received premium income. A Fund will only write "covered" call options traded on
U.S. national securities exchanges. An option will be deemed covered when a Fund
either (i) owns the security (or securities convertible into such security) on
which the option has been written in an amount sufficient to satisfy the
obligations arising under the option; or (ii) a Fund's custodian maintains cash
or high-grade liquid debt securities belonging to the Fund in an amount not less
that the amount needed to satisfy the Fund's obligations with respect to options
written on securities it does not own. A "closing purchase transaction" may be
entered into with respect to a call option written by a Fund for the purpose of
closing its position.
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND may engage in options
and futures transactions. Options and futures transactions are intended to
enable a Fund to manage market, interest rate or exchange rate risk. The Funds
do not use these transactions for speculation or leverage.
24
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND may attempt to hedge all
or a portion of their portfolios through the purchase of both put and call
options on their portfolio securities and listed put options on financial
futures contracts for portfolio securities. The Funds may also write covered
call options on their portfolio securities to attempt to increase their current
income. The Funds will maintain their positions in securities, option rights and
segregated cash subject to puts and calls until the options are exercised,
closed or have expired. An option position may be closed out only on an exchange
which provides a secondary market for an option of the same series. The Funds
may purchase listed put options on financial futures contracts. These options
will be used only to protect portfolio securities against decreases in value
resulting from market factors such as an anticipated increase in interest rates.
All the Funds may write (i.e., sell) covered call options and EVERGREEN
BALANCED FUND and EVERGREEN VALUE FUND may write covered put options. By writing
a call option, a Fund becomes obligated during the term of the option to deliver
the securities underlying the option upon payment of the exercise price. By
writing a put option, a Fund becomes obligated during the term of the option to
purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds may also write straddles (combinations of covered
puts and calls on the same underlying security).
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND may only write "covered"
options. This means that so long as a Fund is obligated as the writer of a call
option, it will own the underlying securities subject to the option or, in the
case of call options on U.S. Treasury bills, the Fund might own substantially
similar U.S. Treasury bills. A Fund will be considered "covered" with respect to
a put option it writes if, so long as it is obligated as the writer of the put
option, it deposits and maintains with its custodian in a segregated account
liquid assets having a value equal to or greater than the exercise price of the
option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND may also, as stated
previously, purchase futures contracts and options thereon. A futures contract
is a firm commitment by two parties: the seller, who agrees to make delivery of
the specific type of instrument called for in the contract ("going short"), and
the buyer, who agrees to take delivery of the instrument ("going long") at a
certain time in the future. Financial futures contracts call for the delivery of
particular debt instruments issued or guaranteed by the U.S. Treasury or by
specific agencies or instrumentalities of the U.S. government. If a Fund would
enter into financial futures contracts directly to hedge its holdings of fixed
income securities, it would enter into contracts to deliver securities at an
undetermined price (i.e., "go short") to protect itself against the possibility
that the prices of its fixed income securities may decline during the Fund's
anticipated holding period. A Fund would "go long" (agree to purchase securities
in the future at a predetermined price) to hedge against a decline in market
interest rates.
The Funds may also enter into currency and other financial futures
contracts and write options on such contracts. The Funds intend to enter into
such contracts and related options for hedging purposes. The Funds will enter
into futures on securities, currencies or index-based futures contracts in order
to hedge against changes in interest or exchange rates or securities prices. A
futures contract on securities or currencies is an agreement to buy or sell
securities or currencies during a designated month at whatever price exists at
that time. A futures contact on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. The Funds do not make payment or
deliver securities upon entering into a futures contract. Instead, they put down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which remains in effect until the contract is terminated.
The Funds may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the contract
will tend to rise when the value of the underlying securities or currencies
declines and to fall when the value of such securities or currencies increases.
Thus, the Funds sell futures contracts in order to offset a possible decline in
the profit on their securities or currencies. If a futures contract is purchased
by a Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value of such
securities or currencies declines.
25
The Funds may enter into closing purchase and sale transactions in order
to terminate a futures contract and may buy or sell put and call options for the
purpose of closing out their options positions. The Funds ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Funds will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If the
Funds are not able to enter into an offsetting transaction, the Funds will
continue to be required to maintain the margin deposits on the contract and to
complete the contract according to its terms, in which case the Funds would
continue to bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange or
interest rate risks, these investment devices can be highly volatile, and the
Funds use of them can result in poorer performance (i.e., the Funds return may
be reduced). The Funds attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contract and
options on financial futures contract as hedging devices, there is a risk that
the prices of the securities subject to the financial futures contracts and
options on financial futures contracts may not correlate perfectly with the
prices of the securities in the Funds' portfolios. This may cause the financial
futures contract and any related options to react to market changes differently
than the portfolio securities. In addition, the Funds investment advisers could
be incorrect in its expectations and forecasts about the direction or extent of
market factors, such as interest rates, securities price movements and other
economic factors. Even if the Funds investment advisers correctly predicts
interest rate movements, a hedge could be unsuccessful if changes in the value
of a Fund's futures position did not correspond to changes in the value of its
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Funds investment advisers will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Funds ability to establish and close out financial futures contracts and options
on financial futures contract positions depends on this secondary market. If a
Fund is unable to close out its position due to disruptions in the market or
lack of liquidity, the Fund may lose money on the futures contract or option,
and the losses to the Fund could be significant.
SPECIAL RISK CONSIDERATIONS
Investment in Foreign Securities. EVERGREEN TOTAL RETURN FUND, EVERGREEN
BALANCED FUND and EVERGREEN VALUE FUND may invest in foreign securities.
Investments in foreign securities require consideration of certain factors not
normally associated with investments in securities of U.S. issuers. For example,
a change in the value of any foreign currency relative to the U.S. dollar will
result in a corresponding change in the U.S. dollar value of securities
denominated in that currency. Accordingly, a change in the value of any foreign
currency relative to the U.S. dollar will result in a corresponding change in
the U.S. dollar value of the assets of the Fund denominated or traded in that
currency. If the value of a particular foreign currency falls relative to the
U.S. dollar, the U.S. dollar value of the assets of a Fund denominated in such
currency will also fall. The performance of a Fund will be measured in U.S.
dollars.
Securities markets of foreign countries generally are not subject to the
same degree of regulation as the U.S. markets and may be more volatile and less
liquid. Lack of liquidity may affect a Fund's ability to purchase or sell large
blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, a Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by a Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, a Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
26
Additionally, accounting procedures and government supervision may be
less stringent than those applicable to U.S. companies. It may also be more
difficult to enforce contractual obligations abroad than would be the case in
the United States because of differences in the legal systems. Foreign
securities may be subject to foreign taxes, which may reduce yield, and may be
less marketable than comparable U.S. securities. All these factors are
considered by each Fund's investment adviser before making any of these types of
investments.
ADRs and EDRs and other securities convertible into securities of foreign
issuers may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. ADRs are receipts typically issued by an
American bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe by banks or
depositories which evidence a similar ownership arrangement. Generally ADRs, in
registered form, are designed for use in United States securities markets and
EDRs, in bearer form, are designed for use in European securities markets.
Investments Related to Real Estate. EVERGREEN TOTAL RETURN FUND, EVERGREEN
FOUNDATION FUND and EVERGREEN BALANCED FUND may invest up to 15% of their net
assets in investment related to real estate, including real estate investment
trusts ("REITS"). Risks associated with investment in securities of companies in
the real estate industry include: declines in the value of real estate, risks
related to general and local economic conditions, overbuilding and increased
competition, increases in property taxes and operating expenses, changes in
zoning laws, casualty or condemnation losses, variations in rental income,
changes in neighborhood values, the appeal of properties to tenants and
increases in interest rates. In addition, equity real estate investment trusts
may be affected by changes in the value of the underlying property owned by the
trusts, while mortgage real estate investment trusts may be affected by the
quality of credit extended. Equity and mortgage real estate investment trusts
are dependent upon management skills, may not be diversified and are subject to
the risks of financing projects. Such trusts are also subject to heavy cash flow
dependency, defaults by borrowers, self liquidation and the possibility of
failing to qualify for tax-free pass-through of income under the Internal
Revenue Code of 1986, as amended (the "Code") and to maintain exemption from the
Investment Company Act of 1940, as amended (the "1940 Act"). In the event an
issuer of debt securities collateralized by real estate defaulted, it is
conceivable that a Fund could end up holding the underlying real estate.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). Evergreen Asset has been
retained by EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND,
EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION FUND as investment
adviser. Evergreen Asset succeeded on June 30, 1994 to the advisory business of
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. The Capital
Management Group of FUNB ("CMG") serves as investment adviser to EVERGREEN
BALANCED FUND and EVERGREEN VALUE FUND.
First Union is headquartered in Charlotte, North Carolina, and had $132
billion in consolidated assets as of February 29, 1996. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States. CMG manages or otherwise oversees the
investment of over $45 billion in assets belonging to a wide range of clients,
including all the series of Evergreen Investment Trust (formerly
27
known as First Union Funds) the two series of The Evergreen Lexicon Fund
(formerly The FFB Lexicon Fund) and the two series of Evergreen Tax Free Trust
(formerly the FFB Funds Trust). First Union Brokerage Services, Inc., a
wholly-owned subsidiary of FUNB, is a registered broker-dealer that is
principally engaged in providing retail brokerage services consistent with its
federal banking authorizations. First Union Capital Markets Corp., a wholly-
owned subsidiary of First Union, is a registered broker-dealer principally
engaged in providing, consistent with its federal banking authorizations,
private placement, securities dealing, and underwriting services.
As investment adviser to EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH
AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION
FUND, Evergreen Asset manages each Fund's investments, provides various
administrative services and supervises each Fund's daily business affairs,
subject to the authority of the Trustees. Evergreen Asset is entitled to receive
from each of EVERGREEN TOTAL RETURN FUND and EVERGREEN GROWTH AND INCOME FUND a
fee equal to 1% of average daily net assets on an annual basis on the first $750
million in assets, .9 of 1% of average daily net assets on an annual basis on
the next $250 million in assets, and .8 of 1% of average daily net assets on an
annual basis on assets over $1 billion. Evergreen Asset is entitled to receive
from EVERGREEN FOUNDATION FUND a fee equal to .875 of 1% of average daily net
assets on an annual basis on the first $750 million in assets, .75 of 1% of
average daily net assets on an annual basis on the next $250 million in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion, and from EVERGREEN AMERICAN RETIREMENT FUND a fee equal to .75 of 1% of
average daily net assets on an annual basis on the first $1 billion in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion. The fees paid by EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND
INCOME FUND and EVERGREEN FOUNDATION FUND are higher than the rate paid by most
other investment companies.
CMG manages investments and supervises the daily business affairs of
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND and, as compensation therefor,
is entitled to receive an annual fee equal to .50 of 1% of average daily net
assets of each Fund.
The total annualized operating expenses of each Fund for the fiscal year
ended December 31, 1995 (January 31, 1996 in the case of EVERGREEN TOTAL RETURN
FUND) expressed as a percentage of average net assets on an annual basis are set
forth in the section entitled "Financial Highlights".
Evergreen Asset serves as administrator to EVERGREEN BALANCED FUND and
EVERGREEN VALUE FUND and is entitled to receive a fee based on the average daily
net assets of these Funds at a rate based on the total assets of the mutual
funds administered by Evergreen Asset for which CMG or Evergreen Asset also
serve as investment adviser, calculated in accordance with the following
schedule: .050% of the first $7 billion; .035% on the next $3 billion; .030% on
the next $5 billion; .020% on the next $10 billion; .015% on the next $5
billion; and .010% on assets in excess of $30 billion. Furman Selz LLC, an
affiliate of Evergreen Funds Distributor, Inc., distributor for the Evergreen
group of mutual funds, serves as sub-administrator to EVERGREEN BALANCED FUND
and EVERGREEN VALUE FUND and is entitled to receive a fee from each Fund
calculated on the average daily net assets of each Fund at a rate based on the
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset also serve as investment adviser, calculated in accordance
with the following schedule: .0100% of the first $7 billion; .0075% on the next
$3 billion; .0050% on the next $15 billion; and .0040% on assets in excess of
$25 billion. The total assets of the mutual funds administered by Evergreen
Asset for which CMG or Evergreen Asset serve as investment adviser were
approximately $14.4 billion as of February 29, 1996.
The portfolio manager for EVERGREEN TOTAL RETURN FUND is Nola Maddox
Falcone, C.F.A., who is President and Co-Chief Executive Officer of Evergreen
Asset. Ms. Falcone has served as the principal manager of the Fund since 1985.
The portfolio manager for EVERGREEN FOUNDATION FUND is Stephen A. Lieber, who is
Chairman and Co-Chief Executive Officer of Evergreen Asset. Mr. Lieber has
served as such Fund's principal manager since its inception. The portfolio
manager for EVERGREEN GROWTH AND INCOME FUND is Edmund H. Nicklin, Jr. C.F.A.
Mr. Nicklin has served as the Fund's principal manager since its inception. The
portfolio manager for EVERGREEN AMERICAN RETIREMENT FUND is Irene D. O'Neill,
C.F.A. Ms. O'Neill has served as the Fund's principal manager since its
inception. Mrs. Falcone, Mr. Lieber, Mr. Nicklin and Mrs. O'Neill have been
associated with Evergreen Asset and its predecessor since 1974, 1969, 1982 and
1981, respectively.
The portfolio manager for EVERGREEN BALANCED FUND since its inception in
1991 is R. Dean Hawes, who is a Vice President of FUNB and the Director of
Employee Benefit Portfolio Management. Mr. Hawes joined FUNB in 1981. EVERGREEN
VALUE FUND is currently being managed by experienced members of the CMG staff.
CMG has been managing trust assets for over fifty years.
28
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provide that Lieber & Company's research department and staff will
furnish Evergreen Asset with information, investment recommendations, advice and
assistance, and will be generally available for consultation on the portfolios
of EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION FUND. Lieber & Company will be
reimbursed by Evergreen Asset in connection with the rendering of services on
the basis of the direct and indirect costs of performing such services. There is
no additional charge to EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME
FUND, EVERGREEN AMERICAN RETIREMENT FUND and EVERGREEN FOUNDATION FUND for the
services provided by Lieber & Company. The address of Lieber & Company is 2500
Westchester Avenue, Purchase, New York 10577. Lieber & Company is an indirect,
wholly-owned, subsidiary of First Union.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
Eligible Investors may purchase Fund shares at net asset value by mail or
wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) persons who at or prior to December 31, 1994, owned shares
in a mutual fund advised by Evergreen Asset, (ii) certain institutional
investors and (iii) investment advisory clients of CMG, Evergreen Asset or their
affiliates. The minimum initial investment is $1,000, which may be waived in
certain situations. There is no minimum for subsequent investments. Investors
may make subsequent investments by establishing a Systematic Investment Plan or
a Telephone Investment Plan.
Purchases by Mail or Wire. Each investor must complete the Share Purchase
Application and mail it together with a check made payable to the Fund whose
shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose the
return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State Street
at 800-423-2615 for an account number and (ii) instructing your bank, which may
charge a fee, to wire federal funds to State Street, as follows: State Street
Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and Shareholder
Services. The wire must include references to the Fund in which an investment is
being made, account registration, and the account number. A completed
Application must also be sent to State Street indicating that the shares have
been purchased by wire, giving the date the wire was sent and referencing the
account number. Subsequent wire investments may be made by existing shareholders
by following the instructions outlined above. It is not necessary, however, for
existing shareholders to call for another account number.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees of each Trust under which each Fund operates
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.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or the Fund's investment
adviser for any loss. In addition, such investors
29
may be prohibited or restricted from making further purchases in any of the
Evergreen mutual funds. The Funds will not accept third party checks other than
those payable directly to a shareholder whose account has been in existence at
least thirty days.
The Share Purchase Application may not be used to invest in any of the
prototype retirement plans for which the Funds are an available investment. For
information about the requirements to make such investments, including copies of
the necessary application forms, please call the telephone number set forth on
the cover page of this Prospectus. A Fund cannot accept investments specifying a
certain price or date and reserves the right to reject any specific purchase
order, including orders in connection with exchanges from the other Evergreen
mutual funds. Although not currently anticipated, each Fund reserves the right
to suspend the offer of shares for a period of time.
Shares of each Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Investors may
also purchase shares through a broker/dealer, which may charge a fee for the
service.
HOW TO REDEEM SHARES
You may "redeem", i.e. sell, your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to ten days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 8:00 a.m. and 5:30
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the Exchange or State Street's offices are closed). The Exchange is closed
on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Redemption requests made after
4:00 p.m. (Eastern time) will be processed using the net asset value determined
on the next business day. Such redemption requests must include the
shareholder's account name, as registered with a Fund, and the account number.
During periods of drastic economic or market changes, shareholders may
experience difficulty in effecting telephone redemptions. Shareholders who are
unable to reach a Fund or State Street by telephone should follow the procedures
outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If a Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be
30
genuine. Also, each Fund reserves the right to refuse a telephone redemption
request, if it is believed advisable to do so. Financial intermediaries may
charge a fee for handling telephonic requests. The telephone redemption option
may be suspended or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal income tax
purposes. Under unusual circumstances, a Fund may suspend redemptions or
postpone payment for up to seven days or longer, as permitted by Federal
securities law. The Funds reserve the right to close an account that through
redemption has remained below $1,000 for thirty days. Shareholders will receive
sixty days' written notice to increase the account value before the account is
closed. The Funds have elected to be governed by Rule 18f-1 under the 1940 Act,
pursuant to which each Fund is obligated to redeem shares solely in cash, up to
the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds by telephone or mail as
described below. An exchange which represents an initial investment in another
Evergreen Fund must amount to at least $1,000. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary,
Evergreen Funds Distributor, Inc. ("EFD"), the distributor of the Funds' shares,
or the toll-free number on the front page of this Prospectus. Some services are
described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation or termination of the Systematic Investment Plan has not reached a
minimum balance of $1,000 ($250 for retirement accounts) within twenty-four
months of the initial investment. You can open a Systematic Investment Plan in
the EVERGREEN GROWTH AND INCOME FUND, EVERGREEN FOUNDATION FUND, EVERGREEN
BALANCED FUND and EVERGREEN VALUE FUND for a minimum of only $50 per month with
no initial investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
31
Shares purchased under the Funds' Systematic Investment Plan or Telephone
Investment Plan may not be redeemed for ten days from the date of investment.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Funds
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Funds at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income) under the following prototype retirement plans: (i)
Individual Retirement Accounts ("IRAs") and Rollover IRAs; (ii) Simplified
Employee Pension (SEP) for sole proprietors, partnerships and corporations; and
(iii) Profit-Sharing and Money Purchase Pension Plans for corporations and their
employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable income, if any, quarterly and any net realized
capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Code. Dividends
and distributions generally are taxable in the year in which they are paid,
except any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in December of the previous year. Income
dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund making the distribution at the net asset value per
share at the close of business on the record date, unless the shareholder has
made a written request for payment in cash.
32
Each Fund has qualified and intends to continue to qualify to be treated
as a regulated investment company under the Code. While so qualified, it is
expected that each Fund will not be required to pay any Federal income tax on
that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income tax and any state or local taxes on the dividends and distributions they
receive from a Fund whether such dividends and distributions are made in cash or
in additional shares. Questions on how any distributions will be taxed to the
investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to net
long-term capital gains realized by individuals is 28%. The rate applicable to
corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce the
yield on its investments. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The EVERGREEN TOTAL RETURN FUND is a Massachusetts business trust
organized in 1986, and was originally organized as Maryland corporation in 1978.
EVERGREEN GROWTH AND INCOME FUND is a Massachusetts business trust organized in
1986. The EVERGREEN AMERICAN RETIREMENT FUND is a separate series of The
Evergreen American Retirement Trust, a Massachusetts business trust organized in
1987. EVERGREEN FOUNDATION FUND is a separate series of the Evergreen Foundation
Trust, a Massachusetts business trust organized in 1989. EVERGREEN BALANCED FUND
and EVERGREEN VALUE FUND are separate investment series of Evergreen Investment
Trust (formerly First Union Funds), a Massachusetts business trust organized in
1984. The Funds do not intend to hold annual shareholder meetings; shareholder
meetings will be held only when required by applicable law. Shareholders have
available certain procedures for the removal of Trustees.
A shareholder in each Class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional Classes of shares for any existing or future series. If an
additional series or Class were established in a Fund, each share of the series
or Class would normally be entitled to one vote for all purposes.
33
Generally, shares of each series and Class would vote together as a single Class
on matters, such as the election of Trustees, that affect each series and Class
in substantially the same manner. Class A, B, C and Y shares have identical
voting, dividend, liquidation and other rights, except that each Class bears, to
the extent applicable, its own distribution, shareholder service and transfer
agency expenses as well as any other expenses applicable only to a specific
Class. Each Class of shares votes separately with respect to rule 12b-1
distribution plans and other matters for which separate Class voting is
appropriate under applicable law. Shares are entitled to dividends as determined
by the Trustees and, in liquidation of a Fund, are entitled to receive the net
assets of the Fund.
Custodian, Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
each Fund's custodian, registrar, transfer agent and dividend-disbursing agent.
State Street is compensated for its services as transfer agent by a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, an affiliate of Furman Selz LLC, located 230 Park
Avenue, New York, New York 10169, is the principal underwriter of the Funds.
Furman Selz LLC, also acts as sub-administrator to EVERGREEN BALANCED FUND and
EVERGREEN VALUE FUND and provides certain sub-administrative services to
Evergreen Asset in connection with its role as investment adviser to EVERGREEN
GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION
FUND and EVERGREEN TOTAL RETURN FUND, including providing personnel to serve as
officers of the Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are the only class of shares offered by this Prospectus
and are only available to (i) persons who at or prior to December 31, 1994,
owned shares in a mutual fund advised by Evergreen Asset, (ii) certain
institutional investors and (iii) investment advisory clients of CMG, Evergreen
Asset or their affiliates. The dividends payable with respect to Class A, Class
B and Class C shares will be less than those payable with respect to Class Y
shares due to the distribution and shareholder servicing related expenses borne
by Class A, Class B and Class C shares and the fact that such expenses are not
borne by Class Y shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders. Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission ("SEC"), the average annual compounded rate
of return over the period that would equate an assumed initial amount invested
to the value of the investment at the end of the period. For purposes of
computing total return, dividends and capital gains distributions paid on shares
of a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases of a Fund's shares are assumed to have been
paid. Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in the Fund's financial statements. To calculate yield, the Fund takes
the interest income it earned from its portfolio of investments (as defined by
the SEC formula) for a 30-day period (net of expenses), divides it by the
average number of shares entitled to receive dividends, and expresses the result
as an annualized percentage rate based on the Fund's share price at the end of
the 30-day period. This yield does not reflect gains or losses from selling
securities.
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting;
34
a questionnaire designed to help create a personal financial profile; and an
action plan offering investment alternatives. The information provided to
investors may also include discussions of other Evergreen mutual funds, products
and services, which may include: retirement investing; brokerage products and
services; the effects of periodic investment plans and dollar cost averaging;
saving for college; and charitable giving. In addition, the information provided
to investors may quote financial or business publications and periodicals,
including model portfolios or allocations, as they relate to fund management,
investment philosophy, and investment techniques. The materials may also
reprint, and use as advertising and sales literature, articles from EVERGREEN
EVENTS, a quarterly magazine provided free of charge to Evergreen mutual fund
shareholders.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the 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.
35
INVESTMENT ADVISERS
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND,
EVERGREEN FOUNDATION FUND, EVERGREEN TOTAL RETURN FUND
Capital Management Group of First Union National Bank of North Carolina, 210
South College Street, Charlotte, North Carolina, 28228
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
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 ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FOUNDATION FUND
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116-5072
EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10169
42431 536123REV01
********************************************************************************
STATEMENT OF ADDITIONAL INFORMATION
April 1,1996
THE EVERGREEN GROWTH AND INCOME FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-807-2940
Evergreen Balanced Fund (formerly First Union Balanced Portfolio) ("Balanced")
Evergreen Growth and Income Fund ("Growth and Income")
The Evergreen Total Return Fund ("Total Return")
The Evergreen American Retirement Fund ("American Retirement")
Evergreen Small Cap Equity Income Fund ("Small Cap")
Evergreen Foundation Fund ("Foundation")
Evergreen Tax Strategic Foundation Fund ("Tax Strategic")
Evergreen Utility Fund (formerly First Union Utility Portfolio) ("Utility")
Evergreen Value Fund (formerly First Union Value Portfolio) ("Value")
This Statement of Additional Information pertains to all classes of shares of
the Funds listed above. It is not a prospectus and should be read in conjunction
with the Prospectus dated April 1, 1996 for the Fund in which you are making or
contemplating an investment. The Evergreen Growth and Income Funds are offered
through four separate prospectuses: one offering Class A, Class B and Class C
shares, and a separate prospectus offering Class Y shares of Balanced, Growth
and Income, Total Return, American Retirement, Foundation and Value; and one
offering Class A, Class B and Class C shares and a separate prospectus offering
Class Y shares of Small Cap, Tax Strategic and Utility. Copies of each
Prospectus may be obtained without charge by calling the number listed above.
TABLE OF CONTENTS
Investment Objectives and Policies................................2
Investment Restrictions...........................................7
Non-Fundamental Operating Policies................................15
Certain Risk Considerations.......................................16
Management........................................................17
Investment Advisers...............................................29
Distribution Plans................................................34
Allocation of Brokerage...........................................38
Additional Tax Information........................................40
Net Asset Value...................................................43
Purchase of Shares................................................44
Performance Information...........................................58
Financial Statements..............................................63
Appendix A - Description of Bond, Municipal Note and Commercial Paper
Ratings 63
1
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds - Investment Objectives
and Policies" in each Fund's Prospectus)
The investment objective of each Fund and a description of the securities in
which each Fund may invest is set forth under "Description of the Funds
"Investment Objectives and Policies" in the relevant Prospectus. The investment
objectives are fundamental and cannot be changed without the approval of
shareholders. The following expands upon the discussion in the Prospectus
regarding certain investments of each Fund.
U.S. Government Securities
The types of U.S. government securities in which the Funds may invest
generally include direct obligations of the U.S. Treasury such as U. S. Treasury
bills, notes and bonds and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:
(i) the full faith and credit of the U.S. Treasury;
(ii) the issuer's right to borrow from the U.S. Treasury;
(iii) the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
(iv) the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities that may not always receive
financial support from the U.S. government are:
(i) Farm Credit System, including the National Bank for Cooperatives,
Farm Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(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
2
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for sale under the
Rule. The Funds which invest in Rule 144A securities believe that the Staff of
the SEC has left the question of determining the liquidity of all restricted
securities (eligible for resale under the Rule) for determination by the
Trustees. The Trustees consider the following criteria in determining the
liquidity of certain restricted securities:
(i) the frequency of trades and quotes for the security;
(ii) the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
(iii) dealer undertakings to make a market in the security; and
(iv) the nature of the security and the nature of the marketplace trades.
Restricted securities would generally be acquired either from institutional
investors who originally acquired the securities in private placements or
directly from the issuers of the securities in private placements. Restricted
securities and securities that are not readily marketable may sell at a discount
from the price they would bring if freely marketable.
When-Issued and Delayed Delivery Securities
Balanced, Tax Strategic, Utility and Value may purchase securities on a
when-issued or delayed delivery basis. These transactions are made to secure
what is considered to be an advantageous price or yield for a Fund. No fees or
other expenses, other than normal transaction costs, are incurred. However,
liquid assets of a Fund sufficient to make payment for the securities to be
purchased are segregated on the Fund's records at the trade date. These assets
are marked to market daily and are maintained until the transaction has been
settled. Balanced, Utility and Value do not intend to engage in when- issued and
delayed delivery transactions to an extent that would cause the segregation of
more than 20% of the total value of their assets and Tax Strategic's commitment
to purchase when-issued securities will not exceed 25% of the Fund's total
assets.
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.
3
Reverse Repurchase Agreements
The Funds other than American Retirement, Foundation, Total Return and
Growth and Income 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.
Options and Futures Transactions
Options which Balanced, Utility and Value trade must be listed on national
securities exchanges.
.........Purchasing Put and Call Options on Financial Futures Contracts
Balanced, Utility and Value may purchase put and call options on financial
futures contracts (in the case of Utility and Value limited to options on
financial futures contracts for U.S. government securities). Unlike entering
directly into a futures contract, which requires the purchaser to buy a
financial instrument on a set date at an undetermined price, the purchase of a
put option on a futures contract entitles (but does not obligate) its purchaser
to decide on or before a future date whether to assume a short position at the
specified price.
The Fund may purchase put and call options on futures to protect portfolio
securities against decreases in value resulting from an anticipated increase in
market interest rates. Generally, if the hedged portfolio securities decrease in
value during the term of an option, the related futures contracts will also
decrease in value and the put option will increase in value. In such an event, a
Fund will normally close out its option by selling an identical put option. If
the hedge is successful, the proceeds received by the Fund upon the sale of the
put option plus the realized decrease in value of the hedged securities.
Alternately, a Fund may exercise its put option to close out the position.
To do so, it would enter into a futures contract of the type underlying the
option. If the Fund neither closes out nor exercises an option, the option will
expire on the date provided in the option contract, and only the premium paid
for the contract will be lost.
4
.........Purchasing Options
Balanced, Utility and Value may purchase both put and call options on their
portfolio securities. These options will be used as a hedge to attempt to
protect securities which a Fund holds or will be purchasing against decreases or
increases in value. A Fund may purchase call and put options for the purpose of
offsetting previously written call and put options of the same series. If the
Fund is unable to effect a closing purchase transaction with respect to covered
options it has written, the Fund will not be able to sell the underlying
securities or dispose of assets held in a segregated account until the options
expire or are exercised.
Balanced, Utility and Value intend to purchase put and call options on
currency and other financial futures contracts for hedging purposes. A put
option purchased by a Fund would give it the right to assume a position as the
seller of a futures contract. A call option purchased by the Fund would give it
the right to assume a position as the purchaser of a futures contract. The
purchase of an option on a futures contract requires the Fund to pay a premium.
In exchange for the premium, the Fund becomes entitled to exercise the benefits,
if any, provided by the futures contract, but is not required to take any action
under the contract. If the option cannot be exercised profitably before it
expires, the Fund's loss will be limited to the amount of the premium and any
transaction costs.
Utility and Value currently do not intend to invest more than 5% of their
net assets in options transactions.
........."Margin" in Futures Transactions
Unlike the purchase or sale of a security, a Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, a Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with its custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contract initial margin does not involve the
borrowing of funds by a Fund to finance the transactions. Initial margin is in
the nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value, a Fund
will mark-to-market its open futures positions. The Fund is also required to
deposit and maintain margin when it writes call options on futures contracts.
Balanced will not maintain open positions in futures contracts it has sold
or call options it has written on futures contracts if, in the aggregate, the
value of the open positions (marked to market) exceeds the current market value
of its securities portfolio plus or minus the unrealized gain or loss on those
5
open positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at any
time, the Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
.........Total Return and Growth and Income may write covered call options to a
limited extent on their portfolio securities ("covered options") in an attempt
to earn additional income. The Fund will write only covered call option
contracts and will receive premium income from the writing of such contracts.
Total Return and Growth and Income may purchase call options to close out a
previously written call option. In order to do so, the Fund will make a "closing
purchase transaction" -- the purchase of a call option on the same security with
the same exercise price and expiration date as the call option which it has
previously written. A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. If an option is exercised, a Fund
realizes a long-term or short-term gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received.
Junk Bonds
.........Consistent with its strategy of investing in "undervalued" securities,
Growth and Income may invest in lower medium and low-quality bonds also known as
"junk bonds" and may also purchase bonds in default if, in the opinion of the
Fund's investment adviser, there is significant potential for capital
appreciation. Growth and Income, however, will not invest more than 5% of its
total assets in debt securities which are rated below investment grade. These
bonds are regarded as speculative with respect to the issuer's continuing
ability to meet principal and interest payments. High yield bonds may be more
susceptible to real or perceived adverse economic and competitive industry
conditions than investment grade bonds. A projection of an economic downturn, or
higher interest rates, for example, could cause a decline in high yield bond
prices because such events could lessen the ability of highly leveraged
companies to make principal and interest payments on their debt securities. In
addition, the secondary trading market for high yield bonds may be less liquid
than the market for higher grade bonds, which can adversely affect the ability
to dispose of such securities.
Variable and Floating Rate Securities
.........Foundation 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.
6
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
.........Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
investment adviser without shareholder approval, subject to review and approval
by the Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.
1........Concentration of Assets in Any One Issuer
.........Neither Growth and Income nor Total Return may invest more than 5% of
its net assets, at the time of the investment in question, in the securities of
any one issuer other than the U.S. government and its agencies or
instrumentalities.
.........American Retirement may not invest more than 5% of its total assets, at
the time of the investment in question, in the securities of any one issuer
other than the U.S. government and its agencies or instrumentalities.
........None of Balanced, Foundation, Small Cap, Utility or Value may invest
more than 5% of its total assets, at the time of the investment in question, in
the securities of any one issuer other than the U.S. government and its agencies
or instrumentalities, except that up to 25% of the value of a Fund's total
assets may be invested without regard to such 5% limitation.
.........Tax Strategic may not invest more than 5% of its total assets, at the
time of the investment in question, in the securities of any one issuer other
than the U.S. government and its agencies or instrumentalities, except that up
to 25% of the value of each Fund's total assets may be invested without regard
to such 5% limitation. For this purpose each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues industrial development bonds on behalf of a
private entity, will be regarded as a separate issuer for determining the
diversification of each Fund's portfolio.
2........Ten Percent Limitation on Securities of Any One Issuer
.........None of American Retirement, Foundation, Small Cap, Growth and Income
or Total Return may purchase more than 10% of any class of securities of any one
issuer other than the U.S. government and its agencies or instrumentalities.
.........Neither Value nor Utility may purchase more than 10% of the outstanding
voting securities of any one issuer.
.........Tax Strategic* may not purchase more than 10% of the voting securities
of any one issuer other than the U.S. government and its agencies or
instrumentalities.
7
3........Investment for Purposes of Control or Management
.........None of American Retirement, Foundation, Growth and Income, Small Cap*,
Tax Strategic*, Total Return, Utility* or Value may invest in companies for the
purpose of exercising control or management.
4........Purchase of Securities on Margin
.........None of American Retirement, Balanced, Foundation, Growth and Income,
Small Cap*, Tax Strategic*, Total Return, Utility or Value may purchase
securities on margin, except that each Fund may obtain such short-term credits
as may be necessary for the clearance of transactions. A deposit or payment by a
Fund of initial or variation margin in connection with financial futures
contracts or related options transactions is not considered the purchase of a
security on margin.
5........Unseasoned Issuers
.........Neither American Retirement nor Foundation may invest in the securities
of unseasoned issuers that have been in continuous operation for less than three
years, including operating periods of their predecessors.
.........None of Total Return, Value* or Utility* may invest more than 5% of its
total assets in securities of unseasoned issuers that have been in continuous
operation for less than three years, including operating periods of their
predecessors.
.........None of Growth and Income, Small Cap* and Tax Strategic* may invest
more than 15% of its total assets (10% of total net assets in the case of Growth
and Income) in securities of unseasoned issuers that have been in continuous
operation for less than three years, including operating periods of their
predecessors.
6........Underwriting
.........American Retirement, Foundation, Growth and Income, Small Cap,* Tax
Strategic*, Total Return, Balanced, Utility and Value will not underwrite any
issue of securities except as they may be deemed an underwriter under the
Securities Act of 1933 in connection with the sale of securities in accordance
with their investment objectives, policies and limitations.
7........Interests in Oil, Gas or Other Mineral Exploration or Development
Programs.
......... None of American Retirement, Foundation, Growth and Income, Small Cap,
Tax Strategic or Total Return may purchase, sell or invest in interests in oil,
gas or other mineral exploration or development programs.
.........Neither Balanced* nor Utility* will purchase interests in oil, gas or
other mineral exploration or development programs or leases, although each Fund
may purchase the securities of other issuers which invest in or sponsor such
programs.
8
.........Value will not purchase interests in oil, gas or other mineral
exploration or development programs or leases, although it may purchase the
publicly traded securities of companies engaged in such activities.
8........Concentration in Any One Industry
.........Neither Growth and Income nor Total Return may concentrate its
investments in any one industry, except that each Fund may invest up to 25% of
its total net assets in any one industry.
.........None of American Retirement, Foundation, Small Cap and Tax Strategic
may invest 25% or more of its total assets in the securities of issuers
conducting their principal business activities in any one industry; provided,
that this limitation shall not apply (i) with respect to each Fund, to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, or (ii) with respect to Tax Strategic, to municipal
securities. For purposes of this restriction, utility companies, gas, electric,
water and telephone companies will be considered separate industries.
.........Balanced and Value will not invest 25% or more of the value of their
total assets in any one industry except Balanced may invest more than 25% and
Value may invest 25% or more of its total assets in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
.........Utility will not invest more than 25% of its total assets (valued at
the time of investment) in securities of companies engaged principally in any
one industry other than the utilities industry, except that this restriction
does not apply to cash or cash items and securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities.
9........Warrants
.........None of American Retirement, Growth and Income, Small Cap,* or Total
Return may invest more than 5% of its net assets in warrants, and, of this
amount, no more than 2% of each Fund's net assets may be invested in warrants
that are listed on neither the New York nor the American Stock Exchange.
.........Neither Foundation nor Tax Strategic* may invest more than 5% of its
net assets in warrants, and of this amount, no more than 2% of each Fund's net
assets may be invested in warrants that are listed on neither the New York nor
the American Stock Exchanges.
.........Utility* and Value* will not invest more than 5% of their net assets in
warrants, including those acquired in units or attached to other securities. To
comply with certain state restrictions, Utility and Value will limit their
investment in such warrants not listed on the New York Stock Exchange or the
American Stock Exchange to 2% of their net assets. (If state restrictions
change, this latter restriction may be changed without notice to shareholders).
For purposes of this restriction, warrants acquired by the Funds in units or
attached to securities may be deemed to be without value.
9
10.......Ownership by Trustees/Officers
.........None of American Retirement, Balanced*, Foundation, Growth and Income,
Small Cap*, Tax Strategic*, Total Return, Utility* or Value* may purchase or
retain the securities of any issuer if (i) one or more officers or Trustees of a
Fund or its investment adviser individually owns or would own, directly or
beneficially, more than 1/2 of 1% of the securities of such issuer, and (ii) in
the aggregate, such persons own or would own, directly or beneficially, more
than 5% of such securities.
11.......Short Sales
.........Neither American Retirement nor Foundation may make short sales of
securities unless, at the time of each such sale and thereafter while a short
position exists, each Fund owns the securities sold or securities convertible
into or carrying rights to acquire such securities.
.........None of Growth and Income, Tax Strategic* and Total Return may make
short sales of securities unless, at the time of each such sale and thereafter
while a short position exists, each Fund owns an equal amount of securities of
the same issue or owns securities which, without payment by the Fund of any
consideration, are convertible into, or are exchangeable for, an equal amount of
securities of the same issue.
.........Small Cap,* may not make short sales of securities unless, at the time
of each such sale and thereafter while a short position exists, each Fund owns
an equal amount of securities of the same issue or owns securities which,
without payment by the Fund of any consideration, are convertible into, or are
exchangeable for, an equal amount of securities of the same issue (and provided
that transactions in futures contracts and options are not deemed to constitute
selling securities short).
.........Balanced will not make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or of securities which, without payment of any further
consideration are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short. The use of short
sales will allow the Fund to retain certain bonds in its portfolio longer than
it would without such sales. To the extent that the Fund receives the current
income produced by such bonds for a longer period than it might otherwise, the
Fund's investment objective is furthered.
.........Utility and Value will not sell any securities short.
12.......Lending of Funds and Securities
.........Neither Small Cap nor Tax Strategic may lend its funds to other
persons, except through the purchase of a portion of an issue of debt securities
publicly distributed or the entering into of repurchase agreements.
.........None of American Retirement, Foundation, Growth and Income and Total
Return may lend its funds to other persons, except through the purchase of a
portion of an issue of debt securities publicly distributed.
10
.........None of Foundation, Small Cap or Tax Strategic, may lend its portfolio
securities, unless the borrower is a broker, dealer or financial institution
that pledges and maintains collateral with the Fund consisting of cash or
securities issued or guaranteed by the U.S. government having a value at all
times not less than 100% of the current market value of the loaned securities,
including accrued interest, provided that the aggregate amount of such loans
shall not exceed 30% of the Fund's total assets.
.........Neither American Retirement or Growth and Income may lend its portfolio
securities, unless the borrower is a broker, dealer or financial institution
that pledges and maintains collateral with the Fund consisting of cash or
securities issued or guaranteed by the U.S. government having a value at all
times not less than 100% of the value of the loaned securities (100% of the
current market value for American Retirement), provided that the aggregate
amount of such loans shall not exceed 30% of the Fund's net assets.
.........Total Return may not lend its portfolio securities, unless the borrower
is a broker, dealer or financial institution that pledges and maintains
collateral with the Fund consisting of cash, letters of credit or securities
issued or guaranteed by the U.S. government having a value at all times not less
than 100% of the current market value of the loaned securities (100% of the
value of the loaned securities for Total Return), including accrued interest,
provided that the aggregate amount of such loans shall not exceed 30% of the
Fund's net assets.
.........Balanced will not lend any of its assets except portfolio securities in
accordance with its investment objective, policies and limitations.
.........Utility will not lend any of its assets, except portfolio securities up
to 15% of the value of its total assets. This does not prevent the Fund from
purchasing or holding corporate or government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer, repurchase
agreements, or other transactions which are permitted by the Fund's investment
objectives and policies or the Declaration of Trust governing the Fund.
.........Value will not lend any of its assets except that it may purchase or
hold corporate or government bonds, debentures, notes, certificates of
indebtedness or other debt securities of an issuer, repurchase agreements or
other transactions which are permitted by the Fund's investment objectives and
policies or the Declaration of Trust by which the Fund is governed or lend
portfolio securities valued at not more than 5% of its total assets to
broker-dealers.
13.......Commodities
.........Tax Strategic may not purchase, sell or invest in commodities,
commodity contracts or financial futures contracts.
.........Small Cap may not purchase, sell or invest in physical commodities
unless acquired as a result of ownership of securities or other instruments (but
this shall not prevent the Fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities).
11
.........None of American Retirement, Foundation, Growth and Income, Total
Return may purchase, sell or invest in commodities or commodity contracts.
.........None of Balanced, Utility or Value will purchase or sell commodities or
commodity contracts; however, each Fund may enter into futures contracts on
financial instruments or currency and sell or buy options on such contracts.
14.......Real Estate
.........Small Cap may not purchase or invest in real estate or interests in
real estate (but this shall not prevent the Fund from investing in marketable
securities issued by companies such as real estate investment trusts which deal
in real estate or interests therein).
.............None of American Retirement, Foundation, Growth and Income, Tax
Strategic or Total Return may purchase, sell or invest in real estate or
interests in real estate, except that (i) each Fund may purchase, sell or invest
in marketable securities of companies holding real estate or interests in real
estate, including real estate investment trusts, and (ii) Tax Strategic may
purchase, sell or invest in municipal securities or other debt securities
secured by real estate or interests therein.
.........None of Balanced, Utility or Value will buy or sell real estate
although each Fund may invest in securities of companies whose business involves
the purchase or sale of real estate or in securities which are secured by real
estate or interests in real estate. Neither Utility nor Value will invest in
limited partnership interests in real estate.
15.......Borrowing, Senior Securities, Repurchase Agreements and Reverse
Repurchase Agreements
.........None of American Retirement, Foundation or Total Return may borrow
money except from banks as a temporary measure to facilitate redemption requests
which might otherwise require the untimely disposition of portfolio investments
and for extraordinary or emergency purposes (and, with respect to American
Retirement only, for leverage), provided that the aggregate amount of such
borrowings shall not exceed 5% of the value of the Fund's total net assets (5%
of total assets for American Retirement and Foundation) at the time of any such
borrowing, or mortgage, pledge or hypothecate its assets, except in an amount
sufficient to secure any such borrowing. Neither American Retirement nor
Foundation may issue senior securities, except as permitted by the Investment
Company Act of 1940. Neither Foundation nor American Retirement may enter into
repurchase agreements or reverse repurchase agreements.
.........Neither Small Cap nor Tax Strategic, may borrow money, issue senior
securities or enter into reverse repurchase agreements, except for temporary or
emergency purposes, and not for leveraging, and then in amounts not in excess of
10% of the value of each Fund's total assets at the time of such borrowing; or
mortgage, pledge or hypothecate any assets except in connection with any such
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of each Fund's total assets at the time of such
borrowing, provided that each of Small Cap, Tax Strategic, will not purchase any
securities at any time when borrowings, including reverse repurchase agreements,
exceed 5% of the value of its total assets. No Fund will enter into reverse
repurchase agreements exceeding 5% of the value of its total assets.
12
........Growth and Income may not borrow money except from banks as a temporary
measure for extraordinary or emergency purposes, provided that the aggregate
amount of such borrowings shall not exceed 5% of the value of the Fund's total
assets at the time of such borrowing; or mortgage, pledge or hypothecate its
assets, except in an amount not exceeding 15% of its assets taken at cost to
secure such borrowing. Growth and Income may not issue senior securities, as
defined in the Investment Company Act of 1940, except that this restriction
shall not be deemed to prohibit the Fund from (i) making any permitted
borrowings, mortgages or pledges, (ii) lending its portfolio securities, or
(iii) entering into permitted repurchase transactions.
.........Balanced and Utility will not issue senior securities except that each
Fund may borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets, including the amounts borrowed
and except to the extent a Fund may enter into futures contracts. The Funds will
not borrow money or engage in reverse repurchase agreements for investment
leverage, but rather as a temporary, extraordinary or emergency measure to
facilitate management of their portfolios by enabling them to, for example, meet
redemption requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. Balanced will not purchase any securities while
any borrowings are outstanding. Utility will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding. Neither
Balanced, nor Utility will mortgage, pledge or hypothecate any assets except to
secure permitted borrowings. In these cases, Balanced and Utility may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of borrowing. Margin
deposits for the purchase and sale of financial futures contracts and related
options and segregation or collateral arrangements made in connection with
options activities are not deemed to be a pledge.
.........Value will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary measure
for extraordinary or emergency purposes and then only in amounts not in excess
of 10% of the value of its total assets; provided that while borrowings exceed
5% of the Fund's total assets, any such borrowings will be repaid before
additional investments are made. The Fund will not purchase any securities while
borrowings in excess of 5% of the value of its total assets are outstanding. The
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage purposes. Value will not mortgage, pledge or hypothecate any
assets except to secure permitted borrowings. In these cases, Value may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 10% of the value of total assets at the time of borrowing. Margin
deposits for the purchase and sale of financial futures contracts and related
options and segregation or collateral arrangements made in connection with
options activities are not deemed to be a pledge.
16.......Joint Trading
.........None of American Retirement, Foundation, Growth and Income, Small
Cap,* Tax Strategic,* or Total Return 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).
13
17.......Options
.........Foundation and Tax Strategic* may not write, purchase or sell put or
call options, or combinations thereof.
.........Neither Growth and Income nor Total Return may write, purchase or sell
put or call options, or combinations thereof, except that each Fund is
authorized to write covered call options on portfolio securities and to purchase
call options in closing purchase transactions, provided that (i) such options
are listed on a national securities exchange, (ii) the aggregate market value of
the underlying securities does not exceed 25% of the Fund's net assets, taken at
current market value on the date of any such writing, and (iii) the Fund retains
the underlying securities for so long as call options written against them make
the shares subject to transfer upon the exercise of any options.
.........American Retirement may not write, purchase or sell put or call
options, or combinations thereof, except that the Fund is authorized (i) to
write call options traded on a national securities exchange against no more than
15% of the value of the equity securities (including securities convertible into
equity securities) held in its portfolio, provided that the Fund owns the
optioned securities or securities convertible into or carrying rights to acquire
the optioned securities and (ii) to purchase call options in closing purchase
transactions.
.........Utility* will not purchase put options on securities unless the
securities are held in the Fund's portfolio and not more than 5% of the Fund's
total assets would be invested in premiums on open put options. Utility* will
not write call options on securities unless securities are held in the Fund's
portfolio or unless the Fund is entitled to them in deliverable form without
further payment or after segregating cash in the amount of any further payment.
18.......Investment in Equity Securities
.........American Retirement may not invest more than 75% of the value of its
total assets in equity securities (including securities convertible into equity
securities).
19.......Investing in Securities of Other Investment Companies
.........Balanced*, Utility and Value will purchase securities of investment
companies only in open-market transactions involving customary broker's
commissions. However, these limitations are not applicable if the securities are
acquired in a merger, consolidation or acquisition of assets. It should be noted
that investment companies incur certain expenses such as management fees and
therefore any investment by a Fund in shares of another investment company
would be subject to such duplicate expenses.
.........Each other Fund may purchase the securities of other investment
companies, except to the extent such purchases are not permitted by applicable
law.
20.......Restricted Securities
.........Balanced and Value will not invest more than 10% of their net assets in
securities subject to restrictions on resale under the Securities Act of 1933
14
(except for, in the case of Balanced, certain restricted securities which meet
criteria for liquidity established by the Trustees).
.........Utility* will not invest more than 10% of the value of its net assets
in securities subject to restrictions on resale under the Securities Act of
1933, except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees. To comply with certain state
restrictions, the Fund will limit these transactions to 5% of its total assets.
(If state restrictions change this latter restriction may be revised without
shareholder approval or notification).
NON FUNDAMENTAL OPERATING POLICIES
.........Certain Funds have adopted additional non-fundamental operating
policies. Operating policies may be changed by the Board of Trustees without a
shareholder vote.
1........Futures and Options Transactions
.........Small Cap* will not: (i) sell futures contracts, purchase put options
or write call options if, as a result, more than 30% of the Fund's total assets
would be hedged with futures and options under normal conditions; (ii) purchase
futures contracts or write put options if, as a result, the Fund's total
obligations upon settlement or exercise of purchased futures contracts and
written put options would exceed 30% of its total assets; or (iii) purchase call
options if, as a result, the current value of option premiums for options
purchased by the Fund would exceed 5% of the Fund's total assets. These
limitations do not apply to options attached to, or acquired or traded together
with their underlying securities, and do not apply to securities that
incorporate features similar to options.
2........Illiquid Securities.
.........None of American Retirement, Foundation, Growth and Income, Small Cap,
Tax Strategic or Total Return may invest more than 15% of its net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements which have a maturity of longer than seven days,
but excluding securities eligible for resale under Rule 144A of the Securities
Act of 1933, as amended, which the Trustees have determined to be liquid.
.........Balanced* and Utility* will not invest more than 10% (in the case of
Balanced) or 15% (in the case of Utility) of its net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven days after notice and certain securities determined by the Trustees
not to be liquid and, in the case of Utility, in non-negotiable time deposits.
3........Other. In order to comply with certain state blue sky limitations:
-----
...........Each of American Retirement, Foundation, Growth and Income, Small
Cap, Tax Strategic and Total Return interprets fundamental investment
restriction 7 to prohibit investments in oil, gas and mineral leases.
15
...........Each of American Retirement, Foundation, Growth and Income, Small
Cap, Tax Strategic and Total Return interprets fundamental investment
restriction 14 to prohibit investment in real estate limited partnerships which
are not readily marketable.
...........Foundation interprets fundamental investment restriction 11 to permit
short sales only where the Fund owns the securities sold or securities
convertible into or carrying rights to acquire such securities without payment
of any additional consideration therefor.
Except with respect to borrowing money, if a percentage limitation
is adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result in a
violation of such restriction.
CERTAIN RISK CONSIDERATIONS
There can be no assurance that a Fund will achieve its investment
objective and an investment in the Fund involves certain risks which are
described under "Description of the Funds - Investment Objectives and Policies"
in each Fund's Prospectus.
In addition, the ability of Tax Strategic to achieve its investment
objective is dependent on the continuing ability of the issuers of Municipal
Securities in which the Fund invests -- and of banks issuing letters of credit
backing such securities -- to meet their obligations with respect to the payment
of interest and principal when due. The ratings of Moody's Investors Service,
Inc., Standard & Poor's Ratings Service, a division of McGraw Hill Companies,
Inc.and other nationally recognized rating organizations represent their
opinions as to the quality of Municipal Securities which they undertake to rate.
Ratings are not absolute standards of quality; consequently, Municipal
Securities with the same maturity, coupon, and rating may have different yields.
There are variations in Municipal Securities, both within a particular
classification and between classifications, resulting from numerous factors.
Unlike other types of investments, Municipal Securities have
traditionally not been subject to regulation by, or registration with, the
Securities and Exchange Commission, although there have been proposals which
would provide for regulation in the future.
The federal bankruptcy statutes relating to the debts of political
subdivisions and authorities of states of the United States provide that, in
certain circumstances, such subdivisions or authorities may be authorized to
initiate bankruptcy proceedings without prior notice to or consent of creditors,
which proceedings could result in material and adverse changes in the rights of
holders of their obligations. In addition, there have been lawsuits challenging
the issuance of pollution control revenue bonds or the validity of their
issuance under state or federal law which could ultimately affect the validity
of those Municipal Securities or the tax-free nature of the interest thereon.
16
MANAGEMENT
The Trustees and executive officers of the Trusts, their ages, addresses
and principal occupations during the past five years are set forth below:
Laurence B. Ashkin (68), 180 East Pearson Street, Chicago, IL-Trustee. Real
estate developer and construction consultant since 1980; President of Centrum
Equities since 1987 and Centrum Properties, Inc. since 1980.
Foster Bam (69), Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.
James S. Howell (71), 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.
Gerald M. McDonnell (56), 821 Regency Drive, Charlotte, NC-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
Thomas L. McVerry (57), 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*(40), 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. (48), 205 Regency Executive Park, Charlotte, NC-
Trustee. Medical Director, U.S. Healthcare of the Charlotte, NC Carolinas since
1996; President, Primary Physician Care from 1990 to 1996.
Michael S. Scofield (53), 212 S. Tryon Street Suite 980, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since prior to 1989.
John J. Pileggi (36), 230 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Senior Managing Director, Furman Selz LLC since 1992, Managing
Director from 1984 to 1992.
Joan V. Fiore (39), 230 Park Avenue, Suite 910, New York, NY-Secretary. Managing
Director and Counsel, Furman Selz LLC since 1991; Staff Attorney, Securities and
Exchange Commission from 1986 to 1991.
The officers listed above hold the same positions with a total of thirteen
investment companies offering a total of thirty-eight investment funds within
the Evergreen mutual fund complex. Messrs. Howell, Salton and Scofield are
Trustees of the investment companies. Messrs. McDonnell, McVerry and Pettit are
Trustees of twelve of the investment companies (excluded is Evergreen
Variable Trust). Messrs. Ashkin and Bam are Trustees of eleven of the investment
companies (excluded are Evergreen Variable Trust and Evergreen Investment Trust,
formerly, First Union Funds).
--------
* Mr.Pettit may be deemed to be an "interested person" within the meaning
of the Investment Company Act of 1940, as amended (the "1940 Act").
17
The officers of the Trusts are all officers and/or employees of Furman Selz
LLC. Furman Selz LLC is an affiliate 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 Trusts pay each Trustee who is not an "affiliated person"
an annual retainer and a fee per meeting attended, plus expenses (and $500 for
each telephone conference meeting) as follows:
Name of Trust/Fund Annual Retainer Meeting Fee
Total Return 5,500 300
Growth and Income 500 100
The Evergreen American Retirement Trust 1,000
American Retirement 100
Small Cap 100
Evergreen Foundation Trust 500
Foundation 100
Tax Strategic 100
Evergreen Investment Trust 9,000** 1,500**
Balanced
Utility
Value
--------------------
** Evergreen Investment Trust pays an annual retainer to each Trustee and a
per-meeting fee that are allocated among its fourteen series. Additionally, each
member of the Audit Committee receives $200 for attendance at each meeting of
the of the Audit Committee and an additional fee is paid to the Chairman of the
Board of $2,000.
Set forth below for each of the Trustees is the aggregate compensation
(and expenses) paid to such Trustees by each Trust for the fiscal year ended
December 31, 1995 (fiscal year ended January 31, 1996 for Total Return).
18
Total
Aggregate Compensation From Each Trust Compensation
From Trusts &
Evergreen Evergreen Evergreen Evergreen Evergreen Fund
Name of Total Growth Retirement Foundation Investment Complex
Trustee Return and Income Trust Trust Trust** paid to
Fund Fund Trustees
------ ------ -------- ---------- ---------- ---------- -------
Laurence Ashkin 6,800 1,000 2,000 1,500 27,900
Foster Bam 7,100 1,100 2,200 1,700 30,100
James S. Howell 7,100 1,100 2,200 1,700 23,052 56,000
Robert J.
Jeffries 7,100 1,100 2,200 1,700 30,100
Gerald M.
McDonnell 7,100 1,100 2,200 1,700 19,144 51,500
Thomas L.
McVerry 7,100 1,100 2,200 1,700 20,576 53,200
William Walt
Pettit 7,100 1,100 2,200 1,700 20,419 53,000
Russell A.
Salton, III, M.D. 7,100 1,100 2,200 1,700 17,996 50,200
Michael S.
Scofield 6,800 1,100 2,000 1,500 17,965 47,800
* Formerly known as First Union Funds.
The number and percent of outstanding shares of each Fund owned by
officers and Trustees as a group on January 31, 1996 is as follows:
No. of Shares Owned
By Officers and Ownership by Officers and
Trustees Trustees as a % of
Name of Fund as a Group Shares Outstanding
Balanced 4,261 -0%-
Total Return 12,245 .03%
Growth and Income 124,375 .62%
American Retirement 63,055 1.64%
Small Cap -0- -0-
Foundation 210,343 .27%
Tax Strategic -0- -0-
Utility -0- -0-
Value 6,175 -.01%-
Set forth below is information with respect to each person, who, to
each Fund's knowledge, owned beneficially or of record more than 5% of a class
19
of each Fund's total outstanding shares and their aggregate ownership of the
Fund's total outstanding shares as of January 31, 1996
Name of % of
Name and Address Fund/Class No. of Shares Class/Fund
----------------- ---------- ------------- ---------------
State Street Bank & Trust Co Balanced/C 809 5.86%/.0%
Cust for the IRA of
Kathleen McEvoy
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Balanced/C 718 5.19%/0%
Vivian G. Hardin IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Balanced/C 966 6.99%/.01%
Daniel J. Plummer
Janet R. Plummer
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Balanced/C 1,942 14.05%/0%
Leroy Selby, Jr.
Leroy Selby, III
C/O First Union National Bank
301 S. Tron Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Balanced/C 1,826 13.21%/0%
Mary Martha McBee Summerour C/F
Rebecca Jean Summerour
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Balanced/C 898 6.50%/0%
Annabelle D. Thompson
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank* Balanced/Y 49,791,633 81.05%/68.32%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
20
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Balanced/Y 11,633,627 18.94%/15.96%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/A 13,303 6.07%/.03%
Steven Brad Zlatkiss
C/O First Union National Bank
301 S. Tryon Street
Charlotee, NC 28288-0001
Fubs & Co. Febo Total Return/C 1,331 5.11%/0%
Perlean Wade Boozer and
Velina Wade
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/C 2,611 10.03%/0%
Roberto Paiz and
Magalis Paiz and
Asteria De La Fuente
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/C 1,955 7.51%/0%
Barbara B. Bachmann
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/C 3,802 14.60%/0%
Nancy C. Logreco And
George E. Logreco
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/C 1,579 6.06%/0%
William A.Martin IRA R/O
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Growth and Income/C 29,045 26.24%/.14%
21
Clara Caudill
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Fidelity Bank Growth and Income/Y 4,688,120 29.46%/23.40%
Attn Christine James
Broad & Walnut Street
2 1/2With Bldg
Philadelphia, PA 19109
First Fidelity Bank Growth and Income/Y 3,109,279 19.54%/15.51%
Broad & Walnut Street
2 1/2With Bldg
Philadelphia, PA 19109
First Union National Bank/EB/INT Growth and Income/Y 1,024,525 6.44%/5.11%
Cash Account
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT Growth and Income/Y 1,956,232 12.29%/9.76%
Cash Account
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 28202-1911
First Union Natl Bank-VA C/F American Retirement/A 10,542 5.78%/.27%
Robert C Ewers IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo American Retirement/A 15,699 8.61%/.41%
Joe Hughes Jr. and
Debra A Hughes
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo American Retirement/A 10,033 5.50%/.26%
Lothar Sindram
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- American Retirement/C 769 5.21%/.02%
VA C/F
James L. Wilkinson Rollover IRA
C/O First Union National Bank
22
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo American Retirement/C 4,358 29.54%/.11%
Melvin H. Sease and
Clara K. Sease
C/O First Union National Bank
301 S. Tryon St.
Charlotte, NC 28288-0001
First Union National Bank-Fl American Retirement/C 778 5.27%/.02%
Earline McKinnie-IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo American Retirement/C 1,207 8.18%/.03%
Odus Williams and
Christine Williams
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo American Retirement/C 1,243 8.43%/.03%
Helen D. Just
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- American Retirement/C 2,450 16.61%/.06%
VA C/F
William A Martin IRA R/O
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo American Retirement/C 1,565 10.61%/.04%
Odette I Struys
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001
Charles Schwab & Co. Inc.** American Retirement/Y 156,762 5.17%/4.09%
Cash Account
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
Charles Schwab & Co. Inc.** American Retirement/Y 618,596 20.40%/16.13%
Reinvest Account
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
Stephen A. Lieber American Retirement/Y 171,346 5.65%/4.47%
23
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
State Street Bank & Trust Co. Small Cap/A 1,028 5.28%/.21%
Cust For the IRA of
Lynn B. Crookston
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Small Cap/A 6,549 33.68%/1.33%
Elizabeth M. Screven
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/A 1,105 5.68%/.22%
FL C/F
Aura Dominguez
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Small Cap/A 1,385 7.12%/.28%
Carlene Toron
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Lewco Securities Corp. Small Cap/A 1,384 7.11%/.28%
FBO A/C # W24-400190-5-04
34 Exchange Place 4th Floor
Jersey City, NJ 07302-3901
First Union National Bank- Small Cap/B 2,428 9.90%/.46%
NC C/F
Harold T. Brooks IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Small Cap/B 6,872 28.02%/1.40%
GA C/F
Lawrence Pelowski
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/B 1,547 6.31%/.31%
FL C/F
James P. Turner IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
24
First Union National Bank- Small Cap/B 1,459 5.95%/.30%
FL C/F
Robert H. Carr IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/B 1,394 5.68%/.28%
NC C/F
Eric W. Johnson IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/C 110 5.39%/.02%
FL C/F, Inc.
Michael A. Sorg IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/C 110 5.39%/.02%
FL C/F, Inc.
Matthew R. Sorg IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/C 1,365 66.77%/.28%
VA C/F, Inc.
Bruce S. Barker IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/C 437 21.37%/.09%
VA C/F
Brenton S. Farmer IRA
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001
Nola Maddox Falcone Small Cap/Y 56,754 12.73%/11.54%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Stephen A. Lieber Small Cap/Y 113,510 25.46%/23.08%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Charles Schwab & Co. Inc. Small Cap/Y 29,785 6.68%/6.06%
Reinvest Account
101 Montgomery Street
25
Mutual Fund Dept.
San Francisco, CA 94104-4122
First Union National Bank/EB Small Cap/Y 65,128 14.61%/13.24%
Cash Account
Attn: Trust Operations Fund
401 S. Tryon Street
3rd Floor CMG 11
Charlotte, NC 28202-1911
First Union National Bank/EB Small Cap/Y 24,508 5.50%/ 4.98%
Reinvest Account
Attn: Trust Operations Fund
401 S. Tryon Street
3rd Floor CMG 11
Charlotte, NC 28202-1911
Charles Schwab & Co. Inc. Foundation/A 960,412 11.60%/1.25%
101 Montgomery St.
San Francisco, CA 49104-4122
Charles Schwab & Co. Inc. Foundation/Y 5,155,427 11.44%/6.73%
101 Montgomery Street
San Francisco, CA 94104-4122
First Union National Bank/EB Foundation/Y 12,455,187 27.64%/16.26%
Reinvest Account
Attn: Trust Operations Fund
401 S. Tryon Street
3rd Floor CMG 11
Charlotte, NC 28202-1911
Mac & Co. Foundation/Y 6,406,497 14.22%/8.36%
A/C 195-6432
C/O Mellon Bank NA
Mutual Funds
P.O. Box 320
Pittsburgh, PA 15230-0320
Fubs & Co. Febo Tax Strategic /C 4,971 11.32%/.23%
Harry A. Edwards Jr.
Linda R. Edwards
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Strategic /C 8,896 20.26%/.41%
Wade H. Moser, Jr. M.D.
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Strategic /C 14,663 33.39%/.68%
Brenda Dykgraaf
C/O First Union National Bank
26
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Strategic /C 5,077 11.56%/.23%
Paul E. Hook and
Mary G. Hook
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Strategic /C 2,619 5.96%/.12%
William Kent and
Janet R. Kent
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Nola Maddox Falcone Tax Strategic /Y 100,357 8.93%/4.64%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Constance E. Lieber Tax Strategic /Y 58,774 5.23%/2.72%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Stephen A. Lieber** Tax Strategic/Y 509,312 45.34%/23.71%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Fubs & Co. Febo Utility/C 5,909 25.42%/.04%
Elsie B. Strom
Lewis F. Strom
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Utility/C 3,212 13.82%/.02%
Laura Alyce Hulbert
Ronald F. Hulbert
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Utility/C 1,178 5.07%/.0%
Evelyn L. Smith
Creg Smith
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Utility/C 1,543 6.64%/.01%
Ruth D. Hayes and
27
D. W. Hayes
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank* Utility/Y 599,595 81.93%/ 4.24%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank* Utility/Y 122,268 16.17%/.86%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Value/C 1,874 5.03%/0%
Kimberly Lynn Hadley
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Value/C 3,538 9.49%/0%
Alex G. Suero
Maria E. Espinosa
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC
28288-0001
Fubs & Co. Febo Value/C 1,921 5.15%/0%
William H. Smith
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Value/C 2,014 5.40%/0%
Cecil Elders
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank* Value/Y 29,394,176 71.12%/46.93%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Value/Y 8,404,542 20.34%/13.42%
Trust Accounts
Attn: Ginny Batten
28
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Fidelity Bank Value/Y 2,561,782 6.25%/4.12%
Attn: Joanne Monteiro
123 S. Broad St.
Philadelphia, PA 19109-1029
---------------------------------
*First Union National Bank of North Carolina and its affiliates act in
various capacities for numerous accounts. As a result of its ownership of 98.01%
and 60.35% of Balanced and Value respectively, on January 31, 1996, First Union
National Bank of North Carolina may be deemed to "control" each Fund as that
term is defined in the 1940 Act.
INVESTMENT ADVISER
(See also "Management of the Fund" in each Fund's Prospectus)
The investment adviser of Total Return, Growth and Income, American
Retirement, Small Cap, Foundation and Tax Strategic is Evergreen Asset
Management Corp., a New York corporation, with offices at 2500 Westchester
Avenue, Purchase, New York or ("Evergreen Asset" or the "Adviser."). Evergreen
Asset is owned by First Union National Bank of North Carolina ("FUNB" or the
"Adviser") which, in turn, is a subsidiary of First Union Corporation ("First
Union"), a bank holding company headquartered in Charlotte, North Carolina. The
investment adviser of Balanced, Utility and Value is FUNB which provides
investment advisory services through its Capital Management Group. The 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 & 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. Contemporaneously with
the succession of EAMC to the business of Evergreen Asset and its assumption of
the name "Evergreen Asset Management Corp.", Total Return, Growth and Income,
American Retirement, Small Cap, Foundation and Tax Strategic entered into a new
investment advisory agreement with Evergreen Asset Management Corp. and into a
distribution agreement with Evergreen Funds Distributor, Inc. (the
"Distributor"), an affiliate of Furman Selz LLC. At that time, Evergreen Asset
Management Corp. 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.
29
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 new
advisory and sub-advisory agreements were approved by the shareholders of Total
Return, Growth and Income, American Retirement, Small Cap, Foundation and Tax
Strategic at their meeting held on June 23, 1994, and became effective on June
30, 1994.
Under its Investment Advisory Agreement with each Fund, each Adviser
has agreed to furnish reports, statistical and research services and
recommendations with respect to each Fund's portfolio of investments. In
addition, each Adviser provides office facilities to the Funds and performs a
variety of administrative services. Each Fund pays the cost of all of its other
expenses and liabilities, including expenses and liabilities incurred in
connection with maintaining their registration under the Securities Act of 1933,
as amended, and the 1940 Act, printing prospectuses (for existing shareholders)
as they are updated, state qualifications, 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. The advisory fees paid by each Fund for the
three most recent fiscal periods reflected in its registration statement are set
forth below:
BALANCED Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
Advisory Fee $4,870,748 $4,621,512 $3,425,786
========== ========== ==========
TOTAL RETURN Year Ended Year Ended Year Ended
1/31/96 1/31/95 3/31/94
Advisory Fee $9,343,195 $8,542,289 $11,613,964
========== =========== ===========
Expense
Reinbursement $ 53,576
FOUNDATION Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
Advisory Fee $5,387,186 $2,551,768 $1,290,748
========== ========== ========
Expense
Reimbursement $ 11,064
SMALL CAP Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
30
Advisory Fee $45,397 $29,075 $ 4,929
--------- -------- --------
Waiver ($45,397) ($29,075) ($4,929)
Net Advisory Fee $ 0 $ 0 $ 0
========= ========= =========
Expense
Reimbursement $164,854 $63,704 $16,800
--------- ------- -------
UTILITY Year Ended Year Ended
12/31/95 12/31/94
Advisory Fee $456,021 $153,458
--------- ----------
Waiver ($299,028) ($152,038)
Net Advisory Fee $156,993 $ 1,420
========= =========
Expense
Reinbursement $ 51,984 $106,957
-------- ---------
GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
Advisory Fee $1,332,685 $684,891 $722,166
======== ======== ========
Expense
Reinbursement $ 38,106
--------
AMERICAN Year Ended Year Ended Year Ended
RETIREMENT 12/31/95 12/31/94 12/31/93
Advisory Fee $297,242 $292,628 $226,080
======== ======== ========
Expense
Reimbursement $ 76,464
--------
TAX STRATEGIC Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
Advisory Fee $140,386 $ 65,915 $ 4,989
-------- ------- --------
Waiver ($96,975) ($65,915) ($4,989)
Net Advisory Fee $ 43,411 $ 0 0
========== ========= =========
Expense
Reimbursement $ 85,543 $ 3,777 $12,700
--------- --------- ---------
VALUE Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
Advisory Fee $5,120,579 $3,850,673 $3,016,457
Total Return changed its fiscal year end from March 31 to January 31
during the first period covered by the foregoing table. Accordingly, the
investment advisory fees reported in the foregoing table reflect for Total
Return, the
31
period from April 1, 1994 to January 31, 1995. In addition, Small Cap, Tax
Strategic and Utility commenced operations on October 1, 1993, November 2, 1993
and January 4, 1994, respectively, and, therefore, the first year's figures set
forth in the table above reflect for Small Cap and Tax Strategic investment
advisory fees paid for the period from commencement of operations through
December 31, 1995 and, with respect to Utility, December 31, 1995.
Expense Limitations
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. 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.
Evergreen Asset has voluntarily agreed to reimburse Small Cap to the extent
that any of the Fund's aggregate operating expenses (including the Adviser's fee
but excluding interest, taxes, brokerage commissions, Rule 12b-1 distribution
fees and shareholder servicing fees and extraordinary expenses) exceed 1.50% of
its average net assets until such time as said Fund's net assets reach $15
million.
The Investment Advisory Agreements are terminable, without the payment
of any penalty, on sixty days' written notice, by a vote of the holders of a
majority of each Fund's outstanding shares, or by a vote of a majority of each
Trust's Trustees or by the respective Adviser. The Investment Advisory
Agreements will automatically terminate in the event of their assignment. Each
Investment Advisory Agreement provides in substance that the Adviser shall not
be liable for any action or failure to act in accordance with its duties
thereunder in the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser or of reckless disregard of its obligations
thereunder. The Investment Advisory Agreements with respect to Total Return,
Growth and Income, American Retirement, Small Cap, Foundation and Tax Strategic
were approved by each Fund's shareholders on June 23, 1994, became effective on
June 30, 1994, and will continue in effect until June 30, 1996, 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. With respect to Balanced, Utility and Value, the Investment
Advisory Agreement dated February 28, 1985 and amended from time to time
thereafter was last approved by the Trustees of Evergreen Investment Trust
(formerly, First Union Funds) on April 20, 1995 and it will continue from year
to year with respect to each Fund provided that such continuance is approved
annually by a vote of a majority of the Trustees of Evergreen Investment Trust
including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
32
outstanding voting securities 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 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. Each Fund may from time to time engage in such
transactions but only in accordance with these procedures and if they are
equitable to each participant and consistent with each participant's investment
objectives.
Prior to July 7, 1995, Federated Administrative Services, a subsidiary
of Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. The Trust paid a fee for such services at the following annual rate: .15%
on the first $250 million average daily net assets of the Trust; .125% on the
next $250 million; .10% on the next $250 million and .075% on assets in excess
of $250 million. For the period ended July 7, 1995, and the fiscal years
ended December 31, 1994 and 1993 Balanced incurred $392,991, $779,584 and
$597,752, respectively, in administrative service costs. For the period ended
July 7, 1995, and the period from January 4, 1994 (commencement of operations)
to December 31, 1994, Utility incurred $10,384 and $16,382, respectively, in
administrative service costs, all of which were voluntarily waived. For the
period ended July 7,1995, and for the fiscal years ended December 31, 1994 and
1993, Value incurred $374,216, $649,487, and $526,836, respectively, in
administrative service costs.
33
Commencing July 8, 1995, Evergreen Asset has been providing
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. For the period from July 8, 1995
through December 31, 1995, Balanced, Utility and Value incurred $283,139,
$39,330 and $323,050, resepectively, in administration costs. For the period
July 8, 1995 through December 31, 1995 Utility incurred $35,512 in
administrative service costs, all of which was voluntarily waived. Furman Selz
LLC, an affiliate of the Distributor, serves as sub-administrator to Balanced,
Utility and Value and is entitled to receive a fee from each Fund calculated on
the average daily net assets of each Fund at a rate based on the total assets of
the mutual funds administered by Evergreen Asset for which FUNB or Evergreen
Asset also serve as investment adviser, calculated in accordance with the
following schedule: .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 serves as investment adviser were approximately
$14.4 billion as of February 29, 1996.
DISTRIBUTION PLANS
Reference is made to "Management of the Funds - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A, B and C shares and are charged as class expenses,
as accrued. The distribution fees attributable to the Class B shares and Class C
shares are designed to permit an investor to purchase such shares through
broker-dealers without the assessment of a front-end sales charge, and, in the
case of Class C shares, without the assessment of a contingent deferred sales
charge after the first year following purchase, while at the same time
permitting the Distributor to compensate broker-dealers in connection with the
sale of such shares. In this regard the purpose and function of the combined
contingent deferred sales charge and distribution services fee on the Class B
shares and the Class C shares, are the same as those of the front-end sales
charge and distribution fee with respect to the Class A shares in that in each
case the sales charge and/or distribution fee provide for the financing of the
distribution of the Fund's shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A, Class B and Class C shares (each a
"Plan" and collectively, the "Plans"), the Treasurer of each Fund reports the
amounts expended under the Plan and the purposes for which such expenditures
were made to the Trustees of each Trust for their review on a quarterly basis.
Also, each Plan provides that the selection and nomination of Trustees who are
not "interested persons" of each Trust (as defined in the 1940 Act) are
committed to the discretion of such disinterested Trustees then in office.
Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the SEC make payments for distribution
services to the Distributor; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.
34
Growth and Income, Total Return, American Retirement, Small Cap,
Foundation and Tax Strategic commenced offering Class A, B or C shares on
January 3, 1995. Each Plan with respect to such Funds became effective on
December 30, 1994 and was initially approved by the sole shareholder of each
Class of shares of each Fund with respect to which a Plan was adopted on that
date and by the unanimous vote of the Trustees of each Trust, including the
disinterested Trustees voting separately, at a meeting called for that purpose
and held on December 13, 1994. The Distribution Agreements between each Fund and
the Distributor pursuant to which distribution fees are paid under the Plans by
each Fund with respect to its Class A, Class B and Class C shares were also
approved at the December 13, 1994 meeting by the unanimous vote of the Trustees,
including the disinterested Trustees voting separately. Each Plan and
Distribution Agreement will continue in effect for successive twelve-month
periods provided, however, that such continuance is specifically approved at
least annually by the Trustees of each Trust or by vote of the holders of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
that Class, and, in either case, by a majority of the Trustees of the Trust who
are not parties to the Agreement or interested persons, as defined in the 1940
Act, of any such party (other than as Trustees of the Trust) and who have no
direct or indirect financial interest in the operation of the Plan or any
agreement related thereto.
Prior to July 8, 1995, Federated Securities Corp., a subsidiary of
Federated Investors, served as the distributor for Balanced, Utility and Value
as well as other portfolios of Evergreen Investment Trust. The Distribution
Agreements between each Fund and the Distributor pursuant to which distribution
fees are paid under the Plans by each Fund with respect to its Class A, Class B
and Class C shares were approved on April 20, 1995 by the unanimous vote of the
Trustees including the disinterested Trustees voting separately.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B and Class C
shares. The Plans are designed to (i) stimulate brokers to provide distribution
and administrative support services to each Fund and holders of Class A, Class B
and Class C shares and (ii) stimulate administrators to render administrative
support services to the Fund and holders of Class A, Class B and Class C shares.
The administrative services are provided by a representative who has knowledge
of the shareholder's particular circumstances and goals, and include, but are
not limited to providing office space, equipment, telephone facilities, and
various personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A, Class B and Class C shares; assisting clients in changing dividend options,
account designations, and addresses; and providing such other services as the
Fund reasonably requests for its Class A, Class B and Class C shares.
In addition to the Plans, Balanced, Utility and Value have each adopted
a Shareholder Services Plan whereby shareholder servicing agents may receive
fees from the Fund for providing services which include, but are not limited to,
distributing prospectuses and other information, providing shareholder
assistance, and communicating or facilitating purchases and redemptions of Class
B and Class C shares of the Fund.
35
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of a Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the disinterested Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. With respect to Balanced,
Utility, and Value, amendments to the Shareholder Services Plan require a
majority vote of the disinterested Trustees but do not require a shareholders
vote. Any Plan, Shareholder Services Plan or Distribution Agreement may be
terminated (a) by a Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting separately by
Class or by a majority vote of the Trustees who are not "interested persons" as
defined in the 1940 Act, or (b) by the Distributor. To terminate any
Distribution Agreement, any party must give the other parties 60 days' written
notice; to terminate a Plan only, the Fund need give no notice to the
Distributor. Any Distribution Agreement will terminate automatically in the
event of its assignment.
Fees Paid Pursuant to Distribution Plans
Balanced incurred the following distribution services fees: For the fiscal years
ended December 31, 1994 and 1995, $102,621 and $102,400, respectively, on behalf
of Class A shares, and $670,202 and $784,084, respectively, on behalf of Class B
shares; for the period from September 2, 1994 (commencement of operations) to
December 31, 1994, and the fiscal year ended December 31, 1995, $310 and $1,811,
respectively, on behalf of Class C shares.
Value incurred the following distribution services fees: For the fiscal years
ended December 31, 1994 and 1995, $473,347 and $603,896, respectively, on behalf
of Class A shares, and $621,330 and $916,221, respectively, on behalf of Class B
shares; for the period from September 2, 1994 (commencement of operations) to
December 31, 1994, and the fiscal year ended December 31, 1995, $716 and $4,798,
respectively, on behalf of Class C shares.
Utility incurred the following distribution services fees: For the fiscal years
ended December 31, 1994 and 1995, $9,658 and $133,582, respectively, on behalf
of Class A shares, and $169,007 and $234,357, respectively, on behalf of Class B
shares; for the period from September 2, 1994 (commencement of operations) to
December 31, 1994, and the fiscal year ended December 31, 1995, $232 and $1,271,
respectively, on behalf of Class C shares.
Total Return incurred the following fees for the fiscal period from January 3,
1995 (commencement of class operations) through January 31, 1995: Distribution
services fees
36
of $7, $126 and $7 on behalf of its Class A, Class B and Class C shares,
respectively, and shareholder services fees on behalf of Class B and C shares of
$42 and $3, respectively, and for the fiscal year ended January 31, 1996:
Distribution services fees of $4,915, $46,636 and $1,516 on behalf of its Class
A, Class B and Class C shares, respectively, and shareholder services fees on
behalf of Class B and C shares of $15,546 and $505, respectively.
Growth and Income incurred the following fees for the fiscal period from January
3,1995 (commencement of class operations) through December 31, 1995:
Distribution services fees of $22,055, $159,114 and $6,902 on behalf of its
Class A, Class B and Class C shares, respectively, and shareholder services fees
on behalf of Class B and C shares of $53,139 and $2,301, respectively.
American Retirement incurred the following fees for the fiscal period from
January 3,1995 (commencement of class operations) through December 31, 1995:
Distribution services fees of $659, $9,137 and $187 on behalf of its Class A,
Class B and Class C shares, respectively, and shareholder services fees on
behalf of Class B and C shares of $3,045 and $62, respectively.
Small Cap incurred the following fees for the fiscal period from January 3,1995
(commencement of class operations) through December 31, 1995: Distribution
services fees of $340, $1,298 and $111 on behalf of its Class A, Class B and
Class C shares, respectively, and shareholder services fees on behalf of Class B
and C shares of $433 and $37, respectively.
Foundation incurred the following fees for the fiscal period from January 3,1995
(commencement of class operations) through December 31, 1995: Distribution
services fees of $116,677, $972,541 and $37,823 on behalf of its Class A, Class
B and Class C shares, respectively, and shareholder services fees on behalf of
Class B and C shares of $324,180 and $12,608, respectively.
Tax Strategic incurred the following fees for the fiscal period from January
3,1995 (commencement of class operations) through December 31, 1995:
Distribution services fees of $2,582, $21,725 and $1,292 on behalf of its Class
A, Class B and Class C shares, respectively, and shareholder services fees on
behalf of Class B and C shares of $7,242 and $431, respectively.
Fees Paid Pursuant to Shareholder Services Plans - Balanced, Utility and Value
For the fiscal years ended December 31, 1994 and 1995, Balanced incurred
shareholder services fees of $83,641 and $261,361, respectively, on behalf of
Class B shares, and $103 and $604, respectively, on behalf of Class C shares.
For the fiscal years ended December 31, 1994 and 1995, Utility incurred
shareholder services fees of $24,141 and $78,119, respectively, on behalf of
Class B shares, and $77 and $424, respectively, on behalf of Class C shares.
For the fiscal years ended December 31, 1994 and 1995, Value incurred
shareholder services fees of $83,225 and $305,407, respectively, on behalf of
Class B shares, and $239 and $1,599, respectively, on behalf of Class C shares.
37
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
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
38
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 SEC Lieber may be compensated for
effecting transactions in portfolio securities for a Fund on a national
securities exchange provided the conditions of the rules are met. Each Fund
advised by Evergreen Asset has entered into an agreement with Lieber authorizing
Lieber to retain compensation for brokerage services. In accordance with such
agreement, it is contemplated that Lieber, a member of the New York and American
Stock Exchanges, will, to the extent practicable, provide brokerage services to
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 Growth and Income, Total Return, American
Retirement, Small Cap, Foundation, and Tax Strategic will accrue to FUNB and to
its ultimate parent, First Union. The Investment Advisory Agreements do not
provide for a reduction of the Adviser's fee with respect to any Fund by the
amount of any profits earned by Lieber from brokerage commissions generated by
portfolio transactions of the Fund.
The following chart shows: (1) the brokerage commissions paid by each
Fund advised by Evergreen Asset during their last three fiscal years; (2) the
amount and percentage thereof paid to Lieber; and (3) the percentage of the
total dollar amount of all portfolio transactions with respect to which
commissions have been paid which were effected by Lieber:
TOTAL RETURN Period Ended Year Ended Year Ended
1/31/96 1/31/95 3/31/94
Total Brokerage $3,255,068 $3,755,606 $3,234,684
Commissions
Dollar Amount and % $2,982,640 $3,465,900 $3,199,114
paid to Lieber 92% 92% 99%
% of Transactions
Effected by Lieber 90% 97% 99%
FOUNDATION Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
Total Brokerage $393,121 $ 282,250 $291,295
Commissions
Dollar Amount and % $380,226 $ 276,985 $ 284,864
paid to Lieber 97% 98% 97%
% of Transactions
Effected by Lieber 98% 98% 96%
39
SMALL CAP Year Ended Period Ended Period Ended
12/31/95 12/31/94 12/31/93
Total Brokerage $5,968 $ 3,998 $2,091
Commissions $4,863 $ 3,618 $1,729
Dollar Amount and %
paid to Lieber 81% 90% 83%
% of Transactions
Effected by Lieber 77% 90% 73%
GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
Total Brokerage $210,923 $80,871 $76,427
Commissions
Dollar Amount and % $160,659 $71,721 $66,670
paid to Lieber 76% 89% 87%
% of Transactions
Effected by Lieber 74% 88% 84%
AMERICAN RETIREMENT Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
Total Brokerage $57,216 $203,922 $ 99,435
Commissions
Dollar Amount and % $53,276 $202,838 $96,950
paid to Lieber 93% 99% 98%
% of Transactions
Effected by Lieber 82% 99% 98%
TAX STRATEGIC Year Ended Period Ended Period Ended
12/31/95 12/31/94 12/31/93
Total Brokerage $37,374 $24,872 $3,260
Commissions $35,954 $24,072
Dollar Amount and % $3,210
paid to Lieber 96% 97% 98%
% of Transactions
Effected by Lieber 94% 98% 98%
Total Return changed its fiscal year end from March 31 to January 31
during the first period covered by the foregoing table. Accordingly, the
commissions reported in the foregoing table reflect for Total Return the period
from April 1, 1994 to January 31, 1995. In addition, Small Cap and Tax Strategic
commenced operations on October 1, 1993 and November 2, 1993, respectively, and,
therefore, the first year's figures set forth in the table above reflect
commissions paid for the period from commencement of operations through December
31, 1993.
Balanced, Value and Utility did not pay any commissions to Lieber. For
the fiscal years ended December 31, 1995, 1994 and 1993, Balanced paid $615,041,
$450,569 and $389,044, respectively, in commissions on brokerage transactions.
For the period ended December 31, 1995 and for the period from January 4, 1994
(commencement of operations) to December 31, 1994, Utility paid $272,806 and
$66,294, respectively, in commissions on brokerage transactions. For the fiscal
40
years ended December 31, 1995, 1994 and 1993, Value paid $1,644,077, $1,437,338
and $894,400, respectively, in commissions on brokerage transactions.
ADDITIONAL TAX INFORMATION
(See also "Other Information - Dividends,
Distributions and Taxes" in each Fund's Prospectus)
Each Fund has qualified and intends to continue to qualify for and elect
the tax treatment applicable to regulated investment companies ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
(Such qualification does not involve supervision of management or investment
practices or policies by the Internal Revenue Service.) In order to qualify as a
regulated investment company, a Fund must, among other things, (a) derive at
least 90% of its gross income from dividends, interest, payments with respect to
proceeds from securities loans, gains from the sale or other disposition of
securities or foreign currencies and other income (including gains from options,
futures or forward contracts) derived with respect to its business of investing
in such securities; (b) derive less than 30% of its gross income from the sale
or other disposition of securities, options, futures or forward contracts (other
than those on foreign currencies), or foreign currencies (or options, futures or
forward contracts thereon) that are not directly related to the RIC's principal
business of investing in securities (or options and futures with respect
thereto) held for less than three months; and (c) diversify its holdings so
that, at the end of each quarter of its taxable year, (i) at least 50% of the
market value of the Fund's total assets is represented by cash, U.S. government
securities and other securities limited in respect of any one issuer, to an
amount not greater than 5% of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment companies).
By so qualifying, a Fund is not subject to Federal income tax if it timely
distributes its investment company taxable income and any net realized capital
gains. A 4% nondeductible excise tax will be imposed on a Fund to the extent it
does not meet certain distribution requirements by the end of each calendar
year. Each Fund anticipates meeting such distribution requirements.
Dividends paid by a Fund from investment company taxable income
generally will be taxed to the shareholders as ordinary income. Investment
company taxable income includes net investment income and net realized
short-term gains (if any). Any dividends received by a Fund from domestic
corporations will constitute a portion of the Fund's gross investment income. It
is anticipated that this portion of the dividends paid by a Fund (other than
distributions of securities profits) will qualify for the 70% dividends-received
deduction for corporations. Shareholders will be informed of the amounts of
dividends which so qualify.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders (who are not exempt from
tax) as long-term capital gain, regardless of the length of time the shares of a
Fund have been held by such shareholders. Short-term capital gains distributions
are taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
41
the shareholder received a long-term capital gain distribution with respect to
such shares.
Distributions of investment company taxable income and any net
short-term capital gains will be taxable as ordinary income as described above
to shareholders (who are not exempt from tax), whether made in shares or in
cash. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share so
received equal to the net asset value of a share of a Fund on the reinvestment
date.
Distributions by each Fund result in a reduction in the net asset value of
the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then receive
what is in effect a return of capital upon the distribution which will
nevertheless be taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending on its basis in the shares. Such gains or loss
will be treated as a capital gain or loss if the shares are capital assets in
the investor's hands and will be a long-term capital gain or loss if the shares
have been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% Federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisers about the applicability of the backup withholding provisions.
The foregoing discussion relates solely to U.S. Federal income tax law
as applicable to U.S. persons(i.e.,U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
42
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to Federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations for Tax Strategic
With respect to Tax Strategic, to the extent that the Fund distributes
exempt interest dividends to a shareholder, interest on indebtedness incurred or
continued by such shareholder to purchase or carry shares of the Fund is not
deductible. Furthermore, entities or persons who are "substantial users" (or
related persons) of facilities financed by "private activity" bonds (some of
which were formerly referred to as "industrial development" bonds) should
consult their tax advisers before purchasing shares of the Fund. "Substantial
user" is defined generally as including a "non-exempt person" who regularly uses
in its trade or business a part of a facility financed from the proceeds of
industrial development bonds.
The percentage of the total dividends paid by the Fund with respect to
any taxable year that qualifies as exempt interest dividends will be the same
for all shareholders of the Fund receiving dividends with respect to such year.
If a shareholder receives an exempt interest dividend with respect to any share
and such share has been held for six months or less, any loss on the sale or
exchange of such share will be disallowed to the extent of the exempt interest
dividend amount.
NET ASSET VALUE
The following information supplements that set forth in each Fund's
Prospectus under the subheading "How to Buy Shares - How the Funds Value Their
Shares" in the Section entitled "Purchase and Redemption of Shares".
The public offering price of shares of a Fund is its net asset value,
plus, in the case of Class A shares, a sales charge which will vary depending on
the purchase alternative chosen by the investor, as more fully described in the
Prospectus. See "Purchase of Shares - Class A Shares - Front-End Sales Charge
Alternative. " On each Fund business day on which a purchase or redemption order
is received by a Fund and trading in the types of securities in which a Fund
invests might materially affect the value of Fund shares, the per share net
asset value of each such Fund is computed in accordance with the Declaration of
Trust and By-Laws governing each Fund as of the next close of regular trading on
the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern time)
by dividing the value of the Fund's total assets, less its 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
43
a recognized pricing service when such prices are believed to reflect the fair
value of the security. Over-the-counter securities not included in the NASDAQ
National List for which market quotations are readily available are valued at a
price quoted by one or more brokers. If accurate quotations are not available,
securities will be valued at fair value determined in good faith by the Board of
Trustees.
The respective per share net asset values of the Class A, Class B,
Class C and Class Y shares are expected to be substantially the same. Under
certain circumstances, however, the per share net asset values of the Class B
and Class C shares may be lower than the per share net asset value of the Class
A shares (and, in turn, that of Class A shares may be lower than Class Y shares)
as a result of the greater daily expense accruals, relative to Class A and Class
Y shares, of Class B and Class C shares relating to distribution services fees
(and, with respect to Balanced, Utility and Value, shareholder service fee) and,
to the extent applicable, transfer agency fees and the fact that Class Y shares
bear no additional distribution, shareholder service or transfer agency related
fees. While it is expected that, in the event each Class of shares of a Fund
realizes net investment income or does not realize a net operating loss for a
period, the per share net asset values of the four Classes will tend to converge
immediately after the payment of dividends, which dividends will differ by
approximately the amount of the expense accrual differential among the Classes,
there is no assurance that this will be the case. In the event one or more
Classes of a Fund experiences a net operating loss for any fiscal period, the
net asset value per share of such Class or Classes will remain lower than that
of Classes that incurred lower expenses for the period.
To the extent that any Fund invests in non-U.S. dollar denominated
securities, the value of all assets and liabilities will be translated into
United States dollars at the mean between the buying and selling rates of the
currency in which such a security is denominated against United States dollars
last quoted by any major bank. If such quotations are not available, the rate of
exchange will be determined in accordance with policies established by the Fund.
The Trustees will monitor, on an ongoing basis, a Fund's method of valuation.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all business days in New York.
Furthermore, trading takes place in various foreign markets on days
which are not business days in New York and on which the Fund's net asset value
is not calculated. Such calculation does not take place contemporaneously with
the determination of the prices of the majority of the portfolio securities used
in such calculation. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of the Exchange
will not be reflected in a Fund's calculation of net asset value unless the
Trustees deem that the particular event would materially affect net asset value,
in which case an adjustment will be made. Securities transactions 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.
44
PURCHASE OF SHARES
The following information supplements that set forth in each Fund's
Prospectus under the heading "Purchase and Redemption of Shares - How To Buy
Shares."
General
Shares of each Fund will be offered on a continuous basis at a price
equal to their net asset value plus an initial sales charge at the time of
purchase (the "front-end sales charge alternative"), with a contingent deferred
sales charge (the deferred sales charge alternative"), or without any front-end
sales charge, but with a contingent deferred sales charge imposed only during
the first year after purchase (the "level-load alternative"), as described
below. Class Y shares which, as described below, are not offered to the general
public, are offered without any front-end or contingent sales charges. Shares of
each Fund are offered on a continuous basis through (i) investment dealers that
are members of the National Association of Securities Dealers, Inc. and have
entered into selected dealer agreements with the Distributor ("selected
dealers"), (ii) depository institutions and other financial intermediaries or
their affiliates, that have entered into selected agent agreements with the
Distributor ("selected agents"), or (iii) the Distributor. The minimum for
initial investment is $1,000; there is no minimum for subsequent investments.
The subscriber may use the Share Purchase Application available from the
Distributor for his or her initial investment. Sales personnel of selected
dealers and agents distributing a Fund's shares may receive differing
compensation for selling Class A, Class B or Class C shares.
Investors may purchase shares of a Fund in the United States either
through selected dealers or agents or directly through the Distributor. A Fund
reserves the right to suspend the sale of its shares to the public in response
to conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to the net asset value next
determined (plus for Class A shares, the applicable sales charges), as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day (plus for Class A shares the sales charges). In the case of orders for
purchase of shares placed through selected dealers or agents, the applicable
public offering price will be the net asset value as so determined, but only if
the selected dealer or agent receives the order prior to the close of regular
trading on the Exchange and transmits it to the Distributor prior to its close
of business that same day (normally 5:00 p.m. Eastern time). The selected dealer
or agent is responsible for transmitting such orders by 5:00 p.m. If the
selected dealer or agent fails to do so, the investor's right to that day's
closing price must be settled between the investor and the selected dealer or
agent. If the selected dealer or agent receives the order after the close of
regular trading on the Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the Exchange on the next day it
is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Share Purchase Application. Payment for
45
shares purchased by telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("ACH"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York time on a Fund
business day, the order to purchase shares is automatically placed the same Fund
business day for non-money market funds, and two days following the day the
order is received for money market funds, and the applicable public offering
price will be the public offering price determined as of the close of business
on such business day. Full and fractional shares are credited to a subscriber's
account in the amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to a Fund, stock certificates
representing shares of a Fund are not issued. This facilitates later redemption
and relieves the shareholder of the responsibility for and inconvenience of lost
or stolen certificates.
Alternative Purchase Arrangements
Each Fund issues four classes of shares: (i) Class A shares, which are
sold to investors choosing the front-end sales charge alternative; (ii) Class B
shares, which are sold to investors choosing the deferred sales charge
alternative; (iii) Class C shares, which are sold to investors choosing the
level-load sales charge alternative; and (iv) Class Y shares, which are offered
only to (a) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (b) certain investment advisory clients
of the Advisers and their affiliates, and (c) institutional investors. The four
Classes of shares each represent an interest in the same portfolio of
investments of the Fund, have the same rights and are identical in all respects,
except that (I) only Class A, Class B and Class C shares are subject to a Rule
12b-1 distribution fee, (II) Class B and Class C shares of Balanced, Utility and
Value are subject to a shareholder service fee, (III) Class A shares bear the
expense of the front-end sales charge and Class B and Class C shares bear the
expense of the deferred sales charge, (IV) Class B shares and Class C shares
each bear the expense of a higher Rule 12b-1 distribution services fee and
shareholder service fee than Class A shares and, in the case of Class B shares,
higher transfer agency costs, (V) with the exception of Class Y shares, each
Class of each Fund has exclusive voting rights with respect to provisions of the
Rule 12b-1 Plan pursuant to which its distribution services (and, to the extent
applicable, shareholder service) fee is paid which relates to a specific Class
and other matters for which separate Class voting is appropriate under
applicable law, provided that, if the Fund submits to a simultaneous vote of
Class A, Class B and Class C shareholders an amendment to the Rule 12b-1 Plan
that would materially increase the amount to be paid thereunder with respect to
the Class A shares, the Class A shareholders and the Class B and Class C
shareholders will vote separately by Class, and (VI) only the Class B shares are
subject to a conversion feature. Each Class has different exchange privileges
and certain different shareholder service options available.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life of
their investment in the Fund, the accumulated distribution services (and, to the
extent applicable, shareholder service) fee and contingent deferred sales
charges on Class B shares prior to conversion, or the accumulated distribution
services (and, to the extent applicable, shareholder service) fee on Class C
46
shares, would be less than the front-end sales charge and accumulated
distribution services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher return of Class A
shares. Class B and Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at the lowest applicable sales
charge. For this reason, the Distributor will reject any order (except orders
for Class B shares from certain retirement plans) for more than $2,500,000 for
Class B shares or $500,000 for Class C shares.
Class A shares are subject to a lower distribution services fee and no
shareholder service fee and, accordingly, pay correspondingly higher dividends
per share than Class B shares or Class C shares. However, because front-end
sales charges are deducted at the time of purchase, investors purchasing Class A
shares would not have all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced front-end sales
charges who expect to maintain their investment for an extended period of time
might consider purchasing Class A shares because the accumulated continuing
distribution (and, to the extent applicable, shareholder service) charges on
Class B shares or Class C shares may exceed the front-end sales charge on Class
A shares during the life of the investment. Again, however, such investors must
weigh this consideration against the fact that, because of such front-end sales
charges, not all their funds will be invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class B shares or Class C shares in order to have all
their funds invested initially, although remaining subject to higher continuing
distribution services (and, to the extent applicable, shareholder service) fees
and, in the case of Class B shares, being subject to a contingent deferred sales
charge for a seven-year period. For example, based on current fees and expenses,
an investor subject to the 4.75% front-end sales charge would have to hold his
or her investment approximately seven years for the Class B and Class C
distribution services (and, to the extent applicable, shareholders service)
fees, to exceed the front-end sales charge plus the accumulated distribution
services fee of Class A shares. In this example, an investor intending to
maintain his or her investment for a longer period might consider purchasing
Class A shares. This example does not take into account the time value of money,
which further reduces the impact of the Class B and Class C distribution
services (and, to the extent applicable, shareholder service) fees on the
investment, fluctuations in net asset value or the effect of different
performance assumptions.
Those investors who prefer to have all of their funds invested
initially but may not wish to retain Fund shares for the seven year period
during which Class B shares are subject to a contingent deferred sales charge
may find it more advantageous to purchase Class C shares.
With respect to each Fund, the Trustees have determined that currently
no conflict of interest exists between or among the Class A, Class B, Class C
and Class Y shares. On an ongoing basis, the Trustees, pursuant to their
fiduciary duties under the 1940 Act and state laws, will seek to ensure that no
such conflict arises.
47
Front-end Sales Charge Alternative--Class A Shares
The public offering price of Class A shares for purchasers choosing the
front-end sales charge alternative is the net asset value plus a sales charge as
set forth in the Prospectus for each Fund.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are not subject to any sales charges.
The Fund receives the entire net asset value of its Class A shares sold to
investors. The Distributor's commission is the sales charge set forth in the
Prospectus for each Fund, less any applicable discount or commission "reallowed"
to selected dealers and agents. The Distributor will reallow discounts to
selected dealers and agents in the amounts indicated in the table in the
Prospectus. In this regard, the Distributor may elect to reallow the entire
sales charge to selected dealers and agents for all sales with respect to which
orders are placed with the Distributor.
Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares of a Fund aggregating less than $100,000 subject to the schedule
of sales charges set forth in the Prospectus at a price based upon the net asset
value of Class A shares of each Fund at the end of each Fund's latest fiscal
year.
Net Per Share Offering
Asset Sales Price
Value Charge Date Per Share
Balanced $13.12 $.65 12/31/95 $13.77
Growth and
Income $18.63 $.93 12/31/95 $19.56
Total Return $20.15 $1.00 1/31/96 $21.15
American
Retirement $12.82 $.64 12/31/95 $13.46
Small Cap $11.57 $.58 12/31/95 $12.15
Foundation $15.12 $.75 12/31/95 $15.87
Tax Strategic $12.20 $.61 12/31/95 $12.81
Utility $ 10.80 $.54 12/31/95 $11.34
Value $ 20.45 $1.02 12/31/95 $21.47
Prior to January 3, 1995, shares of the Funds other than Balanced,
Utility and Value were offered exclusively on a no-load basis and, accordingly,
no underwriting commissions were paid in respect of sales of shares of the Funds
48
or retained by the Distributor. In addition, since Class B and Class C shares
were not offered prior to January 3, 1995, contingent deferred sales charges
have been paid to the distributor with respect to Class B or Class C shares only
since January 3, 1995.
With respect to Balanced, Utility and Value, the following commissions
were paid to and amounts were retained by Federated Securities Corp. through
July 7, 1995, which until such date was the principal underwriter of portfolios
of Evergreen Investment Trust. For the period from July 8 through December 31,
1995, commissions were paid to and amounts were retained by the current
Distributor as noted below:
Period from Period From Year Ended Year Ended
BALANCED 7/8/95 to 1/1/95 to 12/31/94 12/31/93
12/31/95 7/7/95
Commissions Received $15,844 $11,841 $605,000 $283,000
Commissions Retained $ 1,731 $ 1,303 $ 12,000 42,000
VALUE
Commissions Received $58,797 $56,058 $1,003,000 $392,000
Commissions Retained $ 6,615 $ 6,001 $ 36,000 59,000
UTILITY Period from
1/4/94 to 12/31/94
Commissions Received $15,692 $20,958 $243,999
Commissions Retained $ 1,727 $ 2,228 $ 10,000
With respect to Total Return, Growth and Income, American Retirement,
Small Cap, Foundation and Tax Strategic, the following commissions were paid to
and amounts were retained by the Distributor for the periods indicated:
Year Ended Period from 1/3/95
TOTAL RETURN 1/31/96 to 1/31/95
Commissions Received $98,890 $4,585
Commissions Retained $10,733 ---
Year Ended
GROWTH AND INCOME 12/31/95
Commissions Received $326,249
Commissions Retained $ 37,300
AMERICAN RETIREMENT
Commissions Received $42,447
Commissions Retained $ 7,397
SMALL CAP
Commissions Received $ 778
Commissions Retained $ 284
49
FOUNDATION
Commissions Received $1,604,275
Commissions Retained $ 178,885
TAX STRATEGIC
Commissions Received $28,976
Commissions Retained $ 3,266
Investors choosing the front-end sales charge alternative may under
certain circumstances be entitled to pay reduced sales charges. The
circumstances under which such investors may pay reduced sales charges are
described below.
Combined Purchase Privilege. Certain persons may qualify for the sales
charge reductions by combining purchases of shares of one or more Evergreen
mutual funds other than the money market funds into a single "purchase", if the
resulting "purchase" totals at least $100,000. The term "purchase" refers to:
(i) a single purchase by an individual, or to concurrent purchases, which in the
aggregate are at least equal to the prescribed amounts, by an individual, his or
her spouse and their children under the age of 21 years purchasing shares for
his, her or their own account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single fiduciary
account although more than one beneficiary is involved; or (iii) a single
purchase for the employee benefit plans of a single employer. The term
"purchase" also includes purchases by any "company", as the term is defined in
the 1940 Act, but does not include purchases by any such company which has not
been in existence for at least six months or which has no purpose other than the
purchase of shares of a Fund or shares of other registered investment companies
at a discount. The term "purchase" does not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
credit card holders of a company, policy holders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
A "purchase" may also include shares, purchased at the same time through a
single selected dealer or agent, of any Evergreen mutual fund. Currently, the
Evergreen mutual funds include:
Evergreen Trust
Evergreen Fund
Evergreen Aggressive Growth Fund
The Evergreen Equity Trust:
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Global Leaders Fund
The Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
The Evergreen Total Return Fund
The Evergreen American Retirement Trust:
The Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
The Evergreen Foundation Trust:
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
The Evergreen Municipal Trust:
50
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Florida High Income Municipal Bond Fund
Evergreen Tax Exempt Money Market Fund
The Evergreen Money Market Fund
Evergreen Investment Trust
Evergreen Emerging Markets Growth Fund*
Evergreen International Equity Fund*
Evergreen Balanced Fund*
Evergreen Value Fund*
Evergreen Utility Fund*
Evergreen Short Intermediate Bond Fund*
Evergreen U.S. Government Fund*
Evergreen Florida Municipal Bond Fund*
Evergreen Georgia Municipal Bond Fund*
Evergreen North Carolina Municipal Bond Fund*
Evergreen South Carolina Municipal Bond Fund*
Evergreen Virginia Municipal Bond Fund*
Evergreen High Grade Tax Free Fund*
Evergreen Treasury Money Market Fund*
The Evergreen Lexicon Fund:
Evergreen Intermediate Term Government Securities Fund**
Evergreen Intermediate Term Bond Fund**
Evergreen Tax Free Trust:
Evergreen Pennsylvania Tax Free Money Market Fund***
Evergreen New Jersey Tax Free Income Fund***
Evergreen Variable Trust:
Evergreen VA Fund
Evergreen VA Growth & Income Fund
Evergreen VA Foundation Fund
* Prior to July 7, 1995, each Fund was named "First Union" instead of
"Evergreen."
**Prior to January 19, 1996, each Fund was a series of The FFB Lexicon Fund
***Prior to January 19, 1996, each Fund was a series of FFB Funds Trust
Prospectuses for the Evergreen mutual funds may be obtained without
charge by contacting the Distributor or the Advisers at the address or telephone
number shown on the front cover of this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of a Fund may qualify for a Cumulative
Quantity Discount. The applicable sales charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on the
previous day) of (a) all Class A, Class B and Class C shares
of the Fund held by the investor and (b) all such shares of
any other Evergreen mutual fund held by the investor; and
51
(iii) the net asset value of all shares described in paragraph
(ii) owned by another shareholder eligible to combine his or
her purchase with that of the investor into a single
"purchase" (see above).
For example, if an investor owned Class A, B or C shares of an
Evergreen mutual fund worth $200,000 at their then current net asset value and,
subsequently, purchased Class A shares of a Fund worth an additional $100,000,
the sales charge for the $100,000 purchase would be at the 2.50% rate applicable
to a single $300,000 purchase of shares of the Fund, rather than the 3.75% rate.
To qualify for the Combined Purchase Privilege or to obtain the
Cumulative Quantity Discount on a purchase through a selected dealer or agent,
the investor or selected dealer or agent must provide the Distributor with
sufficient information to verify that each purchase qualifies for the privilege
or discount.
Statement of Intention. Class A investors may also obtain the reduced
sales charges shown in the Prospectus by means of a written Statement of
Intention, which expresses the investor's intention to invest not less than
$100,000 within a period of 13 months in Class A shares (or Class A, Class B
and/or Class C shares) of the Fund or any other Evergreen mutual fund. Each
purchase of shares under a Statement of Intention will be made at the public
offering price or prices applicable at the time of such purchase to a single
transaction of the dollar amount indicated in the Statement of Intention. At the
investor's option, a Statement of Intention may include purchases of Class A, B
or C shares of the Fund or any other Evergreen mutual fund made not more than 90
days prior to the date that the investor signs a Statement of Intention;
however, the 13-month period during which the Statement of Intention is in
effect will begin on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the Evergreen mutual funds under a single Statement
of Intention. For example, if at the time an investor signs a Statement of
Intention to invest at least $100,000 in Class A shares of the Fund, the
investor and the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to invest a total of
$60,000 during the following 13 months in shares of the Fund or any other
Evergreen mutual fund, to qualify for the 3.75% sales charge on the total amount
being invested (the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Statement of Intention is 5% of such amount. Shares purchased with the first 5%
of such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not purchased, and
such escrowed shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow. When the full
amount indicated has been purchased, the escrow will be released. To the extent
that an investor purchases more than the dollar amount indicated on the
Statement of Intention and qualifies for a further reduced sales charge, the
sales charge will be adjusted for the entire amount purchased at the end of the
13-month period. The difference in sales charge will be used to purchase
52
additional shares of the Fund subject to the rate of sales charge applicable to
the actual amount of the aggregate purchases.
Investors wishing to enter into a Statement of Intention in conjunction
with their initial investment in Class A shares of the Fund should complete the
appropriate portion of the Subscription Application found in the Prospectus
while current Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting a Fund at the address or telephone number
shown on the cover of this Statement of Additional Information.
Investments Through Employee Benefit and Savings Plans. Certain
qualified and non-qualified benefit and savings plans may make shares of the
Evergreen mutual funds available to their participants. Investments made by such
employee benefit plans may be exempt from any applicable front-end sales charges
if they meet the criteria set forth in the Prospectus under "Class A
Shares-Front End Sales Charge Alternative". The Advisers may provide
compensation to organizations providing administrative and recordkeeping
services to plans which make shares of the Evergreen mutual funds available to
their participants.
Reinstatement Privilege. A Class A shareholder who has caused any or
all of his or her shares of the Fund to be redeemed or repurchased may reinvest
all or any portion of the redemption or repurchase proceeds in Class A shares of
the Fund at net asset value without any sales charge, provided that such
reinvestment is made within 30 calendar days after the redemption or repurchase
date. Shares are sold to a reinvesting shareholder at the net asset value next
determined as described above. A reinstatement pursuant to this privilege will
not cancel the redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal income tax purposes except that no
loss will be recognized to the extent that the proceeds are reinvested in shares
of the Fund. The reinstatement privilege may be used by the shareholder only
once, irrespective of the number of shares redeemed or repurchased, except that
the privilege may be used without limit in connection with transactions whose
sole purpose is to transfer a shareholder's interest in the Fund to his or her
individual retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written request sent to
the Fund at the address shown on the cover of this Statement of Additional
Information.
Sales at Net Asset Value. In addition to the categories of investors
set forth in the Prospectus, each Fund may sell its Class A shares at net asset
value, i.e., without any sales charge, to: (i) certain investment advisory
clients of the Advisers or their affiliates; (ii) officers and present or former
Trustees of the Trusts; present or former trustees of other investment companies
managed by the Advisers; officers, directors and present or retired full-time
employees of the Advisers, the Distributor, and their affiliates; officers,
directors and present and full-time employees of selected dealers or agents; or
the spouse, sibling, direct ancestor or direct descendant (collectively
"relatives") of any such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person or relative; or the
estate of any such person or relative, if such shares are purchased for
investment purposes (such shares may not be resold except to the Fund); (iii)
certain employee benefit plans for employees of the Advisers, the Distributor
and their affiliates; (iv) persons participating in a fee-based program,
sponsored and maintained by a registered broker-dealer and approved by the
Distributor, pursuant to which such
53
persons pay an asset-based fee to such broker-dealer, or its affiliate or agent,
for service in the nature of investment advisory or administrative services.
These provisions are intended to provide additional job-related incentives to
persons who serve the Funds or work for companies associated with the Funds and
selected dealers and agents of the Funds. Since these persons are in a position
to have a basic understanding of the nature of an investment company as well as
a general familiarity with the Fund, sales to these persons, as compared to
sales in the normal channels of distribution, require substantially less sales
effort. Similarly, these provisions extend the privilege of purchasing shares at
net asset value to certain classes of institutional investors who, because of
their investment sophistication, can be expected to require significantly less
than normal sales effort on the part of the Funds and the Distributor.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class
B shares at the public offering price equal to the net asset value per share of
the Class B shares on the date of purchase without the imposition of a sales
charge at the time of purchase. The Class B shares are sold without a front-end
sales charge so that the full amount of the investor's purchase payment is
invested in the Fund initially.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used by the Distributor to defray the expenses of the
Distributor related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the payment of
compensation to selected dealers and agents for selling Class B shares. The
combination of the contingent deferred sales charge and the distribution
services fee (and, with respect to Balanced, Utility and Value, the shareholder
service fee) enables the Fund to sell the Class B shares without a sales charge
being deducted at the time of purchase. The higher distribution services fee
(and, with respect to Balanced, Utility and Value, the shareholder service fee)
incurred by Class B shares will cause such shares to have a higher expense ratio
and to pay lower dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed
within seven years of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.
In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed, that the redemption is first of any Class A
shares or Class C shares in the shareholder's Fund account, second of Class B
shares held for over eight years or Class B shares acquired pursuant to
reinvestment of dividends or distributions and third of Class B shares held
longest during the eight-year period.
54
To illustrate, assume that an investor purchased 100 Class B shares at
$10 per share (at a cost of $1,000) and in the second year after purchase, the
net asset value per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares upon dividend reinvestment. If at such
time the investor makes his or her first redemption of 50 Class B shares, 10
Class B shares will not be subject to charge because of dividend reinvestment.
With respect to the remaining 40 Class B shares, the charge is applied only to
the original cost of $10 per share and not to the increase in net asset value of
$2 per share. Therefore, of the $600 of the shares redeemed $400 of the
redemption proceeds (40 shares x $10 original purchase price) will be charged at
a rate of 4.0% (the applicable rate in the second year after purchase for a
contingent deferred sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares
(i) following the death or disability, as defined in the Code, of a shareholder,
or (ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
Conversion Feature. At the end of the period ending seven years after
the end of the calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A shares and will
no longer be subject to a higher distribution services fee (and, with respect to
Balanced, Utility and Value, the shareholder service fee) imposed on Class B
shares. Such conversion will be on the basis of the relative net asset values of
the two classes, without the imposition of any sales load, fee or other charge.
The purpose of the conversion feature is to reduce the distribution services fee
paid by holders of Class B shares that have been outstanding long enough for the
Distributor to have been compensated for the expenses associated with the sale
of such shares.
For purposes of conversion to Class A, Class B shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution services fee (and, with respect to
Balanced, Utility and Value, shareholder service fee) and transfer agency costs
with respect to Class B shares does not result in the dividends or distributions
payable with respect to other Classes of a Fund's shares being deemed
"preferential dividends" under the Code, and (ii) the conversion of Class B
shares to Class A shares does not constitute a taxable event under Federal
income tax law. The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time such conversion
is to occur. In that event, no further conversions of Class B shares would
occur, and shares might continue to be subject to the higher distribution
services fee (and, with respect to Balanced, Utility and Value, the shareholder
service fee) for an indefinite period which may extend beyond the period ending
eight years after the end of the calendar month in which the shareholder's
purchase order was accepted.
55
Level-Load Alternative--Class C Shares
Investors choosing the level load sales charge alternative purchase
Class C shares at the public offering price equal to the net asset value per
share of the Class C shares on the date of purchase without the imposition of a
front-end sales charge. However, you will pay a 1.0% contingent deferred sales
charge if you redeem shares during the first year after purchase. No charge is
imposed in connection with redemptions made more than one year from the date of
purchase. Class C shares are sold without a front-end sales charge so that the
Fund will receive the full amount of the investor's purchase payment and after
the first year without a contingent deferred sales charge so that the investor
will receive as proceeds upon redemption the entire net asset value of his or
her Class C shares. The Class C distribution services fee (and, with respect to
Balanced, Utility and Value, shareholder service fee) enables the Fund to sell
Class C of shares without either a front-end or contingent deferred sales
charge. However, unlike Class B shares, Class C shares do not convert to any
other Class shares of the Fund. Class C shares incur higher distribution
services fees (and, with respect to Balanced, Utility and Value, shareholder
service fees) than Class A shares, and will thus have a higher expense ratio and
pay correspondingly lower dividends than Class A shares.
Class Y Shares
Class Y shares are not offered to the general public and are available
only to (i) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain investment advisory clients
of the Advisers and their affiliates, and (iii) institutional investors. Class Y
shares do not bear any Rule 12b-1 distribution expenses and are not subject to
any front-end or contingent deferred sales charges.
GENERAL INFORMATION ABOUT THE FUNDS (See also "Other
Information - General Information"
in each Fund's Prospectus)
Capitalization and Organization
Each of the Evergreen Growth and Income Fund and Evergreen Total Return
Fund is a Massachusetts business trust. The Evergreen American Retirement Fund
and Evergreen Small Cap Equity Income Fund are each separate series of The
Evergreen American Retirement Trust, a Massachusetts business trust. The
Evergreen Foundation Fund and Evergreen Tax Strategic Foundation Fund are each
separate series of the Evergreen Foundation Trust, a Massachusetts business
trust. The Evergreen Balanced Fund, Evergreen Utility Fund and Evergreen Value
Fund, which prior to July 7, 1995 were known as the First Union Balanced
Portfolio, First Union Utility Portfolio and First Union Value Portfolio,
respectively, are each separate series of Evergreen Investment Trust, a
Massachusetts business trust. On July 7, 1995, First Union Funds changed its
name to Evergreen Investment Trust. On December 14, 1992, The Salem Funds
changed its name to First Union Funds. The above-named Trusts are individually
referred to in this Statement of Additional Information as the "Trust" and
collectively as the "Trusts." Each Trust is governed by a board of trustees.
Unless otherwise stated, references to the "Board of Trustees" or "Trustees" in
this Statement of Additional Information refer to the Trustees of all the
56
Trusts.
Total Return and Growth and Income may issue an unlimited number of
shares of beneficial interest with a $0.001 par value. American Retirement,
Small Cap, Foundation and Tax Strategic may issue an unlimited number of shares
of beneficial interest with a $0.0001 par value. Balanced, Value and Utility may
issue an unlimited number of shares of beneficial interest with a $.0001 par
value. All shares of these Funds have equal rights and privileges. Each share is
entitled to one vote, to participate equally in dividends and distributions
declared by the Funds and on liquidation to their proportionate share of the
assets remaining after satisfaction of outstanding liabilities. Shares of these
Funds are fully paid, nonassessable and fully transferable when issued and have
no pre-emptive, conversion or exchange rights. Fractional shares have
proportionally the same rights, including voting rights, as are provided for a
full share.
Under each Trust's Declaration of Trust, each Trustee will continue in
office until the termination of the Trust or his or her earlier death,
incapacity, resignation or removal. Shareholders can remove a Trustee upon a
vote of two-thirds of the outstanding shares of beneficial interest of the
Trust. Vacancies will be filled by a majority of the remaining Trustees, subject
to the 1940 Act. As a result, normally no annual or regular meetings of
shareholders will be held, unless otherwise required by the Declaration of Trust
of each Trust or the 1940 Act.
Shares have noncumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so and in such event the holders of
the remaining shares so voting will not be able to elect any Trustees.
The Trustees of each Trust are authorized to reclassify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
more Funds. Any issuance of shares of another series or class would be governed
by the 1940 Act and the law of the Commonwealth of Massachusetts. If shares of
another series of a Trust were issued in connection with the creation of
additional investment portfolios, each share of the newly created portfolio
would normally be entitled to one vote for all purposes. Generally, shares of
all portfolios would vote as a single series on matters, such as the election of
Trustees, that affected all portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.
In addition any Fund may, in the future, create additional classes of
shares which represent an interest in the same investment portfolio. Except for
the different distribution related and other specific costs borne by such
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
57
shares of a series of a Fund may not be modified except by the vote of a
majority of the outstanding shares of such series.
An order has been received from the SEC permitting the issuance and
sale of multiple classes of shares representing interests in each Fund. In the
event a Fund were to issue additional Classes of shares other than those
described herein, no further relief from the SEC would be required.
Distributor
Evergreen Funds Distributor, Inc. (the "Distributor"), 230 Park Avenue,
New York, New York 10169, serves as each Fund's principal underwriter, and as
such may solicit orders from the public to purchase shares of any Fund. The
Distributor is not obligated to sell any specific amount of shares and will
purchase shares for resale only against orders for shares. Under the
Distribution Agreement between the Fund and the Distributor, the Fund has agreed
to indemnify the Distributor, in the absence of its willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
against certain civil liabilities, including liabilities under the Securities
Act of 1933, as amended.
Counsel
Sullivan & Worcester LLP, Washington, D.C., serves as counsel to the
Funds.
Independent Auditors
Ernst & Young LLP has been selected to be the independent auditors of
Total Return, Growth and Income, American Retirement and Small Cap.
Price Waterhouse LLP has been selected to be the independent auditors
of Foundation and Tax Strategic.
KPMG Peat Marwick LLP has been selected to be the independent auditors
of Balanced, Utility and Value.
PERFORMANCE INFORMATION
Total Return
From time to time a Fund may advertise its "total return." Computed
separately for each class, the Fund's "total return" is its average annual
compounded total return for recent one, five, and ten-year periods (or the
period since the Fund's inception). The Fund's total return for such a period is
computed by finding, through the use of a formula prescribed by the SEC the
average annual compounded rate of return over the period that would equate an
assumed initial amount invested to the value of such investment at the end of
the period. For purposes of computing total return, income dividends and capital
gains distributions paid on shares of the Fund are assumed to have been
reinvested when paid and the maximum sales charge applicable to purchases of
Fund shares is assumed to have been paid. The Fund will include performance data
for Class A, Class B, Class C and Class Y shares in any advertisement or
information including performance data of the Fund.
With respect to Total Return, Growth and Income, American Retirement,
58
Small Cap, Foundation and Tax Strategic, the shares of each Fund outstanding
prior to January 3, 1995 have been reclassified as Class Y shares. The average
annual compounded total return for each Class of shares offered by the Funds for
the most recently completed one, five and ten year fiscal periods is set forth
in the table below.
TOTAL RETURN 1 Year 5 Years 10 Years
Ended Ended Ended
1/31/96 1/31/96 1/31/96
Class A 17.53% 10.98% 8.80%
Class B 17.39% 11.63% 9.24%
Class C 21.43% 11.88% 9.24%
Class Y 23.54% 12.10% 9.35%
From
GROWTH AND 1 Year 5 Years 10/15/86
INCOME Ended Ended (inception)
12/31/95 12/31/95 to 12/31/95
Class A 26.37% 16.07% 12.75%
Class B 26.83% 16.84% 13.27%
Class C 30.84% 17.06% 13.27%
Class Y 32.94% 17.25% 13.37%
From
AMERICAN 1 Year 5 Years 3/14/88
RETIREMENT Ended Ended (inception)
12/31/95 12/31/95 to 12/31/95
Class A 18.95% 11.85% 9.91%
Class B 19.09% 12.55% 10.51%
Class C 23.00% 12.79% 10.50%
Class Y 25.96% 12.98% 10.62%
From
SMALL CAP 1 Year 10/1/93
Ended (inception)
12/31/95 to 12/31/95
Class A 22.62% 10.26%
Class B 22.86% 11.27%
Class C 26.81% 12.41%
Class Y 29.12% 12.91%
FOUNDATION 1 Year 5 Years From 1/2/90
Ended Ended (inception)
12/31/95 12/31/95 to 12/31/95
Class A 23.26% 18.20% 16.18%
Class B 23.37% 18.97% 16.89%
Class C 27.18% 19.13% 16.94%
Class Y 29.69% 19.41% 17,17%
59
TAX STRATEGIC 1 Year From 11/02/93
Ended (inception) to
12/31/95 12/31/94
Class A 20.86% 12.67%
Class B 21.10% 13.72%
Class C 25.14% 14.92%
Class Y 27.40% 15.41%
BALANCED 1 Year
Ended From inception*
12/31/95 to 12/31/95
Class A 20.48% 10.20%
Class B 20.55% 9.19%
Class C 24.48% 15.38%
Class Y 26.81% 11.93%
UTILITY 1 Year From inception**
Ended to 12/31/95
12/31/95
Class A 24.52% 8.45%
Class B 24.92% 8.58%
Class C 28.84% 19.63%
Class Y 31.27% 14.95%
VALUE 1 Year 5 Years
Ended Ended From inception***
12/31/95 12/31/95 to 12/31/95
Class A 25.55% 13.55% 12.85%
Class B 25.86% -- 12.60%
Class C 29.88% -- 19.25%
Class Y 32.20% 15.00% 14.98%
* Inception date: Class A - June 6, 1991; Class B - January 25, 1993; Class C
- -September 2, 1994; Class Y - April 1, 1991.
** Inception date: Class A - January 4, 1994; Class B - January 4, 1994; Class C
- - September 2, 1994; Class Y - February 28, 1994.
*** Inception date: Class A - April 12, 1985; Class B - January 25, 1993; Class
C - September 2, 1994; Class Y - December 31, 1990.
The performance numbers for Total Return, Growth and Income, American
Retirement, Small Cap, Foundation and Tax Strategic for the Class A, Class B and
Class C shares are hypothetical numbers based on the performance for Class Y
shares as adjusted for any applicable front-end sales charge or contingent
deferred sales charge through January 3, 1995 (commencement of class operations)
and the actual performance of each class subsequent to January 3, 1995. The
performance data
60
calculated prior to January 3, 1995, does not reflect any Rule 12b-1 fees. If
such fees were reflected the returns would be lower.
A Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in a Fund's portfolio and its expenses. Total return information is
useful in reviewing a Fund's performance but such information may not provide a
basis for comparison with bank deposits or other investments which pay a fixed
yield for a stated period of time. An investor's principal invested in a Fund is
not fixed and will fluctuate in response to prevailing market conditions.
YIELD CALCULATIONS
From time to time, a Fund may quote its yield in advertisements or in
reports or other communications to shareholders. Yield quotations are expressed
in annualized terms and may be quoted on a compounded basis. Yields are computed
by dividing the Fund's interest income (as defined in the SEC yield formula) for
a given 30-day or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. The formula for calculating yield is as follows:
YIELD = 2[(a-b+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.
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
61
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
The yield of each Fund for the thirty-day period ended December 31,
1995 (January 31, 1996 with respect to Total Return) for each Class of shares
offered by the Funds is set forth in the table below:
Total Return Tax Strategic
Class A 3.42% Class A 2.48%
Class B 2.88% Class B 1.84%
Class C 2.87% Class C 1.85%
Class Y 3.61% Class Y 2.85%
Growth and Income Balanced
Class A .24% Class A 3.46%
Class B -.36% Class B 2.86%
Class C -.17% Class C 2.86%
Class Y .54% Class Y 3.88%
American Retirement Utility
Class A 2.92% Class A 4.30%
Class B 2.33% Class B 3.75%
Class C 2.32% Class C 3.75%
Class Y 3.18% Class Y 4.76%
Small Cap Value
Class A 2.76% Class A 2.48%
Class B 2.13% Class B 1.87%
Class C 2.13% Class C 1.84%
Class Y 3.15% Class Y 2.86%
Foundation
Class A 3.35%
Class B 2.79%
Class C 2.79%
Class Y 3.76%
Non-Standardized Performance
In addition to the performance information described above, a Fund may
provide total return information for designated periods, such as for the most
recent six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.
GENERAL
From time to time, a Fund may quote its performance in advertising and
other types of literature as compared to the performance of the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average,
Russell 2000 Index, or any other commonly quoted index of common stock prices.
The Standard &
62
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average and the
Russell 2000 Index are unmanaged indices of selected common stock prices. A
Fund's performance may also be compared to those of other mutual funds having
similar objectives. This comparative performance would be expressed as a ranking
prepared by Lipper Analytical Services, Inc. or similar independent services
monitoring mutual fund performance. A Fund's performance will be calculated by
assuming, to the extent applicable, reinvestment of all capital gains
distributions and income dividends paid. Any such comparisons may 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 SEC under the Securities Act of 1933.
Copies of the Registration Statement may be obtained at a reasonable charge from
the SEC or may be examined, without charge, at the offices of the SEC in
Washington, D.C.
FINANCIAL STATEMENTS
Each Fund's financial statements appearing in their most current fiscal
year Annual Report to shareholders and the report thereon of the independent
auditors appearing therein, namely Ernst & Young LLP (in the case of Total
Return, Growth and Income, American Retirement and Small Cap), Price Waterhouse
LLP (in the case of Foundation and Tax Strategic) or KPMG Peat Marwick LLP (in
the case of Balanced, Utility and Value) are incorporated by reference in this
Statement of Additional Information. The Annual Reports to Shareholders for each
Fund, which contain the referenced statements, are available upon request and
without charge.
APPENDIX "A"
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Service. A Standard & Poor's corporate or
municipal bond rating is a current assessment of the credit worthiness of an
obligor with respect to a specific obligation. This assessment of credit
worthiness may take into consideration obligers such as guarantors, insurers or
lessees. The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform any audit in connection
with the ratings and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes in,
unavailability of such information, or for other circumstances.
63
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or their arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA - This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay interest and
repay any principal.
AA - Debt rated AA also qualifies as high quality debt obligations.
Capacity to pay interest and repay principal is very strong and in the majority
of instances they differ from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB - rating.
B - Debt rated B has greater vulnerability to default but currently has
64
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently indefinable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC - The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
C1 - The rating C1 is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. It is used when interest
payments or principal payments are not made on a due date even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace periods; it will also be used upon a
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-) - To provide more detailed indications of credit
quality, the ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
NR - indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy. Debt
obligations of issuers outside the United States and its territories are rated
on the same basis as domestic corporate and municipal issues. The ratings
measure the credit worthiness of the obligor but do not take into account
currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings)
are generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states may impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies,
insurance companies and fiduciaries generally.
Moody's Investors Service, Inc. A brief description of the applicable
rating symbols Moody's Investors Service, Inc. and their meanings follows:
65
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Some bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
NOTE: Bonds within the above categories which possess the strongest investment
attributes are designated by the symbol "1" following the rating.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and
issue so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
66
Duff & Phelps, Inc.: AAA-- highest credit quality, with negligible
risk factors; AA -- high credit quality, with strong protection factors and
modest risk, which may vary very slightly from time to time because of economic
conditions; A--average credit quality with adequate protection factors, but with
greater and more variable risk factors in periods of economic stress. The
indicators "+" and "-" to the AA and A categories indicate the relative position
of a credit within those rating categories.
Fitch Investors Service Inc.: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with very strong ability to pay interest and repay
principal; A --high credit quality, considered strong as regards principal and
interest protection, but may be more vulnerable to adverse changes in economic
conditions and circumstances. The indicators "+" and "-" to the AA, A and BBB
categories indicate the relative position of credit within those rating
categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
A Standard & Poor's note rating reflects the liquidity concerns and
market access risks unique to notes. Notes due in three years or less will
likely receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
o Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
o Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.) Note rating symbols
are as follows:
o SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
o SP-2 Satisfactory capacity to pay principal and interest.
o SP-3 Speculative capacity to pay principal and interest.
Moody's Short-Term Loan Ratings - Moody's ratings for state and
municipal short-term obligations will be designated Moody's Investment Grade
(MIG). This distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the borrower
are uppermost in importance in short-term borrowing, while various factors of
major importance in bond risk are of lesser importance over the short run.
Rating symbols and their meanings follow:
o MIG 1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
o MIG 2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
o MIG 3 - This designation denotes favorable quality. All security elements
are accounted for but this is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
o MIG 4 - This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries the
smallest degree of investment risk. The modifiers 1, 2, and 3 are used to denote
relative strength within this highest classification.
Standard & Poor's Ratings Service: "A" is the highest commercial paper
rating category utilized by Standard & Poor's Ratings Group which uses the
numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.
Duff & Phelps, Inc.: Duff 1 is the highest commercial paper rating
category utilized by Duff & Phelps which uses + or - to denote relative strength
within this classification. Duff 2 represents good certainty of timely payment,
with minimal risk factors. Duff 3 represents satisfactory protection factors,
with risk factors larger and subject to more variation.
Fitch Investors Service Inc.: F-1+ -- denotes exceptionally strong
credit quality given to issues regarded as having strongest degree of assurance
for timely payment; F-1 -- very strong, with only slightly less degree of
assurance for timely payment than F-1+; F-2 -- good credit quality, carrying a
satisfactory degree of assurance for timely payment.
68
******************************************************************************
THE EVERGREEN TOTAL RETURN FUND
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
Included in Part A of this Registration Statement:
Financial Highlights for the fiscal years ended March 31, 1986
through March 31, 1994, the ten months ended January 31, 1995,
the fiscal year ended January 31, 1996 (audited) and the six
months ended July 31,1996 (unaudited)(Class Y Shares)
Financial Highlights for the period January 3, 1995 (commencement of
distribution) through January 31, 1995 and the fiscal year
ended January 31, 1996 (audited) and July 31, 1996(unaudited).
(Classes A, B and C Shares)
Included in Part B of this Registration Statement:*
Statement of Investments as of January 31, 1996 (audited) and July
31, 1996 (unaudited).
Statement of Assets and Liabilities as of January 31, 1996 (audited)
Statement of Operations for the fiscal year ended January 31, 1996
and July 31, 1996 (unaudited).
Statements of Changes in Net Assets for the ten months ended
January 31, 1995 and the fiscal year ended January 31,
1996(audited) and July 31, 1996 (unaudited).
Financial Highlights (Classes A, B, C and Y Shares)
Notes to Financial Statements
Report of Independent Auditors
Statements, schedules and historical information other than those
listed above have been omitted since they are either not applicable or
are not required or the required information is shown in the financial
statements or notes thereto.
b. Exhibits
Number Description
1(A) Amended and Restated Declaration of Trust**
1(B) Form of Instrument providing for the Establishment and
Designation of Classes**
2 By-Laws**
3 None
4 Instruments Defining Rights of Shareholders**
5(A) Investment Advisory Agreement**
5(B) Investment Subadvisory Agreement**
6 Distribution Agreement**
7 None
8 Custodian Agreement***
9 None
10 None
11 Consent of Ernst & Young, independent auditors
12 None
13 None
14 None
15 Rule 12b-1 Distribution Plans**
16 None
17 Copy of Financial Data Schedules
18 Not applicable
19 Not Applicable
Other Exhibits:
Power of Attorney
--------------------------
* Incorporated by reference to the Annual Report to Shareholders for
the fiscal year ended January 31, 1996 which has been previously filed
with the Commission and by reference to the Semi-Annual and Annual
Reports of Registrant on form NSAR for the aforementioned period. **
Incorporated by reference to Post-Effective Amendment No. 21 to
Registrant's registration statement on Form N-1A, File No.2-61391,
filed January 3, 1995. *** Incorporated by reference to Post-Effective
Amendment No.11 to Registrant's registration statement on Form N-1A,
File No.2-61391, filed February 6, 1986.
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities (as of December 31, 1996)
(1) (2)
Title of Class Number of
Record Shareholders
Class Y Shares of Beneficial Interest ($0.001 par value)
Class A Shares of Beneficial Interest ($0.001 par value)
Class B Shares of Beneficial Interest ($0.001 par value)
Class C Shares of Beneficial Interest ($0.001 par value)
Item 27. Indemnification
Article XI of the Registrant's By-laws contains the following
provisions regarding indemnification of Trustees and officers:
SECTION 11.1 Actions Against Trustee or Officer. The Trust shall
indemnify any individual who is a present or former Trustee or officer of the
Trust and who, by reason of his position as such, was, is, or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
any action or suit by or in the right of the Trust) against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually and
reasonably incurred by him in connection with the claim, action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon the plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
SECTION 11.2 Derivative Actions Against Trustees or Officers. The Trust
shall indemnify any individual who is a present or former Trustee or officer of
the Trust and who, by reason of his position as such, was, is, or is threatened
to be made a party to any threatened, pending or completed action or suit by or
on behalf of the Trust to obtain a judgment or decree in its favor, against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust, except that no indemnification shall be made in
respect of any claim, issue or matter as to which the individual has been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Trust, except to the extent that the court in which the action or
suit was brought determines upon application that, despite the adjudication of
liability but in view of all circumstances of the case, the person is fairly and
reasonably entitled to indemnity for those expenses which the court shall deem
proper, provided such Trustee or officer is not adjudged to be liable by reason
of his wilful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
SECTION 11.3 Expenses of Successful Defense. To the extent that a
Trustee or officer of the Trust has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in Section 11.1 or 11.2
or in defense of any claim, issue, or matter therein, he shall be indemnified
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection therewith.
SECTION 11.4 Required Standard of Conduct.
(a) Unless a court orders otherwise, any indemnification under Section
11.1 or 11.2 may be made by the Trust only as authorized in the specific case
after a determination that indemnification of the Trustee or officer is proper
in the circumstances because he has met the applicable standard of conduct set
forth in Section 11.1 or 11.2. The determination shall be made by: (i) the
Trustees, by a majority vote of a quorum consisting of Trustees who were not
parties to the action, suit or proceeding; or if the required quorum is not
obtainable, or if a quorum of disinterested Trustees so directs, (ii) an
independent legal counsel in a written opinion.
(b) Nothing contained in this Article XI shall be construed to protect
any Trustee or officer of the Trust against any liability to the Trust or its
Shareholders to which he would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office (any such conduct being hereinafter called
"Disabling Conduct"). No indemnification shall be made pursuant to this Article
XI unless:
(i) There is a final determination on the merits by a court or other
body before whom the action, suit or proceeding was brought that the individual
to be indemnified was not liable by reason of Disabling Conduct; or
(ii) In the absence of such a judicial determination, there is a
reasonable determination, based upon a review of the facts, that such individual
was not liable by reason of Disabling Conduct, which determination shall be made
by:
(A) A majority of a quorum of Trustees who are neither "interested
persons" of the Trust, as defined in section 2(a) (19) of the 1940 Act, nor
parties to the action, suit or proceeding; or
(B) An independent legal counsel in a written opinion.
SECTION 11.5 Advance Payments. Notwithstanding any provision of this
Article XI, any advance payment of expenses by the Trust to any Trustee or
officer of the Trust shall be made only upon the undertaking by or on behalf of
such Trustee or officer to repay the advance unless it is ultimately determined
that he is entitled to indemnification as above provided, and only if one of the
following conditions is met:
(a) the Trustee or officer to be indemnified provides a security for his
undertaking; or
(b) The Trust is insured against losses arising by reason of any lawful
advances; or
(c) There is a determination, based on a review of readily available facts,
that there is reason to believe that the Trustee or officer to be indemnified
ultimately will be entitled to indemnification, which determination shall be
made by:
(i) A majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)
(19) of the 1940 Act, nor parties to the action, suit or
proceeding; or
(ii) An independent legal counsel in a written opinion.
SECTION 11.6 Former Trustees and Officers. The indemnification provided
by this Article XI shall continue as to an individual who has ceased to be a
Trustee or officer of the Trust and inure to the benefit of the legal
representatives of such individual and shall not be deemed exclusive of any
other rights to which any Trustee, officer, employee or agent of the Trust may
be entitled under any agreement, vote of Trustees or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding office as such; provided, that no Person may satisfy any right of
indemnity granted herein or to which he may be otherwise entitled, except out of
the Trust Property, and no Shareholder shall be personally liable with respect
to any claim for indemnity.
SECTION 11.7 Insurance. The Trust may purchase and maintain insurance
on behalf of any person who is or was a Trustee, officer, employee, or agent of
the Trust, against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such. However, the Trust shall
not purchase insurance to indemnify any Trustee or officer against liability for
any conduct in respect of which the 1940 Act prohibits the Trust itself from
indemnifying him.
SECTION 11.8 Other Rights to Indemnification. The indemnification
provided for herein shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any By-Law, agreement, vote
of Shareholders or disinterested Trustees or otherwise.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer, or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business or Other Connections of Investment Adviser
(a) For a description of the other business of the investment adviser, see
the section entitled "Management of the Funds-Investment Adviser" in Part A.
Evergreen Asset Management Corp., the Registrant's investment adviser, and
Lieber and Company, the Registrant's sub-adviser also act as such to the
Evergreen Trust, The Evergreen Total Return Fund, The Evergreen Limited Market
Fund, Inc., Evergreen Growth and Income Fund, The Evergreen Money Market Trust,
The Evergreen American Retirement Trust, The Evergreen Municipal Trust,
Evergreen Equity Trust, Evergreen Foundation Trust and Evergreen Variable Trust,
all registered investment companies. Stephen A. Lieber, Theodore J. Israel, Jr.,
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
George E. Battle, Jr. John R. Belk
President of the Board of Senior Vice President
Bishops of AME Zion Church Belk Stores Services, Inc.
South Atlantic Region 2801 W. Tyvola Road
Two First Union Center-Ste 2040 Charlotte, NC 29217-4500
Charlotte, NC 28202
Daniel T. Blue, Jr. Ben Mayo Boddie
Partner Chairman & CEO
Thigpen, Blue, Stephens & Fellers Boddie-Noell Enterprises, Inc.
205 Fayetteville Street Mall P.O. Box 1908
Raleigh, NC 27602 Rocky Mount, NC 27802
Raymond A. Bryan, Jr. John F.A.V. Cecil
Chairman & CEO President
T.A. Loving Company Biltmore Dairy Farms, Inc.
P.O. Drawer 919 P.O. Box 5355
Goldsboro, NC 27530 Asheville, NC 28813
John W. Copeland John Crosland, Jr.
President Chairman of the Board
Ruddick Corporation The Crosland Group, Inc.
2000 Two First Union Center 135 Scaleybark Road
Charlotte, NC 28282 Charlotte, NC 28209
J. William Disher Malcolm E. Everett, III
Chairman & President President & CEO
Lance Incorporated First Union National Bank
P.O. Box 32368 of North Carolina
Charlotte, NC 28232 310 S. Tryon Street
Charlotte, NC 28288-0006
James F. Goodmon Shelton Gorelick
President & Chief President
Executive Officer SGIC, Inc.
Capitol Broadcasting P.O. Box 35229
Company, Inc. Charlotte, NC 28235-5129
P.O. Box 12000
Raleigh, NC 27605
Charles L. Grace James E. S. Hynes
President Chairman
Cummins Atlantic, Inc. Hynes Sales Company, Inc.
P.O. Box 240729 P.O. Box 220948
Charlotte, NC 28224-0729 Charlotte, NC 28222
Mackey J. McDonald Earl N. Phillips, Jr.
President & CEO President
V F Corporation First Factors Corporation
P.O. Box 1022 P.O. Box 2730
Wyomissing, PA 19610 High Point, NC 27261
J. Gregory Poole, Jr. John P. Rostan, III
Chairman & President General Partner
Gregory Poole Equipment Company Heritage Investments, LLP
P.O. Box 469 P.O. Box 970
Raleigh, NC 27602 Valdese, NC 28690
Nelson Schwab, III George Shinn
Managing Director Owner and Chairman
Carousel Capatal Company Shinn Enterprises, Inc.
4201 Congress St., Suite 440 100 Hive Drive
Charlotte, NC 28209 Charlotte, NC 28217
Harley F. Shuford, Jr. Stanley E. Wright
President and CEO Retired President and Chief
Shuford Industries Executive Officer
P.O. Box 608 219 Fayetteville Street Mall
Hickory, NC 28603 Raleigh Federal Savings Bank
Raleigh, NC 27601
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
EXECUTIVE OFFICERS
Edward E. Crutchfield, Chairman & CEO, First Union Corporation
John R. Georgius, Vice Chairman, First Union Corporation
B.J. Walker, Vice Chariman, First Union Corporation
Malcolm E. Everett, President, FUNB of NC
Austin A. Adams, EVP, First Union Corporation
Marion A. Cowell Jr., EVP, First Union Corporation
Robert T. Atwood, EVP & CFO, First Union Corporation
Leigh Bullen, Controller, FUNB of NC
H. Burt Melton, EVP, First Union Corporation
Don R. Johnson, EVP, First Union Corporation
Malcolm T. Murray, EVP, First Union Corporation
Alvin T. Sale, EVP, First Union Corporation
Richard K. Wagoner, EVP, FUNB of NC
James H. Hatch, SVP & Corporate Controller, First Union Corporation
Richard C. Highfield, SVP, First Union Corporation
Ben C. Maffitt, SVP, FUNB of NC
Donald A. McMullen, EVP, FUNB of NC
Kenneth R. Stancliff, SVP, First Union Corporation
Fred Winkler, EVP, FUNB of NC
Peter J. Schild, SVP, First Union Corporation
Betty Trautwein, SVP, FUNB of NC
Alice Lehman, SVP, First Union Corporation
Nina Archer, SVP, FUNB of NC
All of the Executive Officers are located at the following
address: First Union National Bank of North Carolina, One First
Union Center, Charlotte, NC 28288.
Item 29. Principal Underwriters
Evergreen Keystone Distributor, Inc. (formerly known as Evergreen Funds
Distributor, Inc.) The Director and principal executive officers are:
Director Michael C. Petrycki
Officers Robert A. Hering President
Michael C. Petrycki Vice President
Gordon M. Forrester Vice President
Lawrence Wagner VP, Chief Financial Officer
Steven D. Blecher VP, Treasurer, Secretary
Elizabeth Q. Solazzo Assistant Secretary
Thalia M. Cody Assistant Secretary
Evergreen Keystone Distributor, Inc. acts as Distributor for the
following registered investment companies or separate series thereof:
Evergreen Trust
Evergreen Fund
Evergreen Aggressive Growth Fund
Evergreen Equity Trust:
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Global Leaders Fund
The Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
The Evergreen Total Return Fund
The Evergreen American Retirement Trust:
The Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
The Evergreen Foundation Trust:
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
The Evergreen Municipal Trust:
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Florida High Income Municipal Bond Fund
Evergreen Tax Exempt Money Market Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Money Market Trust
Evergreen Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen Investment Trust
Evergreen Emerging Markets Growth Fund
Evergreen International Equity Fund
Evergreen Balanced Fund
Evergreen Value Fund
Evergreen Utility Fund
Evergreen Short-Intermediate Bond Fund*(formerly Evergreen Fixed Income)
Evergreen U.S. Government Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen High Grade Tax Free Fund
Evergreen Treasury Money Market Fund
The Evergreen Lexicon Fund:
Evergreen Intermediate-Term Government Securities Fund
Evergreen Intermediate-Term Bond Fund
Evergreen Tax Free Trust:
Evergreen Pennsylvania Tax Free Money Market Fund
Evergreen New Jersey Tax Free Income Fund
Evergreen Variable Trust:
Evergreen VA Fund
Evergreen VA Growth and Income Fund
Evergreen VA Foundation Fund
Evergreen VA Global Leaders Fund
Item 30. Location of Accounts and Records
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained at the offices of the Registrant's Custodian, State
Street Bank and Trust Company, 2 Heritage Drive, North Quincy, Massachusetts
02171 or the offices of Evergreen Asset Management Corp., 2500 Westchester
Avenue, Purchase, New York 10577.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
has duly caused this Post-Effective Amendment No. 25 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on the 22nd day of
January, 1997.
EVERGREEN TOTAL RETURN FUND
/s/ John J. Pileggi
by-----------------------------
John J. Pileggi, President
by James P. Wallin
Attorney - In - Fact
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 25 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
----------- ----- ----
/s/John J. Pileggi
----------------------- President and January 22, 1997
John J. Pileggi Treasurer
by James P. Wallin
Attorney - In - Fact
/s/ Laurence B. Ashkin
----------------------- Trustee January 22, 1997
Laurence B. Ashkin
by James P. Wallin
Attorney - In - Fact
/s/Foster Bam
----------------------- Trustee January 22, 1997
Foster Bam
by James P. Wallin
Attorney - In - Fact
/s/James S. Howell
----------------------- Trustee January 22, 1997
James S. Howell
by James P. Wallin
Attorney - In - Fact
/s/Gerald M. McDonnell
----------------------- Trustee January 22, 1997
Gerald M. McDonnell
by James P. Wallin
Attorney - In - Fact
/s/Thomas L. McVerry
----------------------- Trustee January 22, 1997
Thomas L. McVerry
by James P. Wallin
Attorney - In - Fact
/s/William Walt Pettit
----------------------- Trustee January 22, 1997
William Walt Pettit
by James P. Wallin
Attorney - In - Fact
/s/Russell A. Salton, III, M.D
------------------------------ Trustee January 22, 1997
Russell A. Salton, III, M.D
by James P. Wallin
Attorney - In - Fact
/s/Michael S. Scofield
----------------------- Trustee January 22, 1997
Michael S. Scofield
by James P. Wallin
Attorney - In - Fact
INDEX TO EXHIBITS
Exhibit
Number Description
------- ------------
11 Consent of Independent
Accountants
17 Financial Data Schedules
Other Exhibit
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘485APOS’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| | 1/31/97 | | 2 | | | | | 24F-2NT, 485APOS, N-30D, NSAR-B |
| | 1/29/97 | | 2 |
| Filed on: | | 1/22/97 | | 147 |
| | 12/31/96 | | 145 |
| | 7/31/96 | | 2 | | 144 | | | N-30D, NSAR-A |
| | 6/30/96 | | 107 |
| | 4/1/96 | | 3 | | 76 | | | 485B24E, 497J, NSAR-B |
| | 3/29/96 | | 1 | | | | | 24F-2NT |
| | 2/29/96 | | 28 | | 109 |
| | 1/31/96 | | 1 | | 144 | | | 24F-2NT, N-30D, NSAR-B |
| | 1/19/96 | | 126 |
| | 12/31/95 | | 6 | | 137 |
| | 7/8/95 | | 109 | | 110 |
| | 7/7/95 | | 108 | | 131 |
| | 4/20/95 | | 107 | | 110 |
| | 1/31/95 | | 23 | | 144 | | | 24F-2NT, N-30D/A, NSAR-BT |
| | 1/3/95 | | 8 | | 144 |
| | 12/31/94 | | 6 | | 116 |
| | 12/30/94 | | 110 | | 131 |
| | 12/13/94 | | 110 |
| | 9/2/94 | | 6 | | 135 |
| | 6/30/94 | | 28 | | 145 |
| | 6/23/94 | | 105 | | 107 |
| | 4/1/94 | | 107 | | 115 |
| | 3/31/94 | | 23 | | 144 | | | NSAR-B |
| | 2/28/94 | | 135 |
| | 1/4/94 | | 107 | | 135 |
| | 12/31/93 | | 19 | | 116 |
| | 11/2/93 | | 107 | | 115 |
| | 10/1/93 | | 107 | | 115 |
| | 9/2/93 | | 11 | | 50 |
| | 1/25/93 | | 135 |
| | 12/31/92 | | 12 | | 51 |
| | 12/14/92 | | 131 |
| List all Filings |
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