-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EfdURdRs8T6WW7EfFmewtcK8sLq2Jl9gVIf459yiA65R8k4w9OQMJXyUzC4ntscV 8r/NbVjnP7lGvlFMYekdpA== 0000907243-97-000029.txt : 19970321 0000907243-97-000029.hdr.sgml : 19970321 ACCESSION NUMBER: 0000907243-97-000029 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19970319 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVERGREEN FUND CENTRAL INDEX KEY: 0000082693 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 132682545 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-40357 FILM NUMBER: 97559539 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02193 FILM NUMBER: 97559540 BUSINESS ADDRESS: STREET 1: 2500 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9146942020 MAIL ADDRESS: STREET 1: 2500 WESTCHESTER AVENUE CITY: PURCHASE STATE: NY ZIP: 10577 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN FUND INC/NY/ DATE OF NAME CHANGE: 19870527 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN FUND INC CALIFORNIA DATE OF NAME CHANGE: 19600201 485APOS 1 POST EFFECTIVE AMENDMENT Registration No. 2-40357/811-2193 - ------------------------------------------------------------------------------- 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. 33 /X/ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/ Amendment No. 33 /X/ (Check appropriate box or boxes) -------------------- EVERGREEN TRUST (Exact name of registrant as specified in charter) 2500 Westchester Avenue Purchase, N.Y. 10577 (Address of Principal Executive Offices) (Registrant's Telephone Number, Including Area Code (914) 694-2020) James P. Wallin, Esq. Evergreen Asset Management Corp. 2500 Westchester Avenue, Purchase, New York 10577 (Name and address of Agent for Service) It is proposed that this filing will become effective (check appropriate box) / /Immediately upon filing pursuant to paragraph (b) or / /on (date) pursuant to paragraph (b) or / /60 days after filing pursuant to paragraph (a)(i) or / /on (date) pursuant to paragraph (a)(i) or /X/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 September 30, 1996 was filed on or about November 27, 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 Fund(s); 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; Non- Fundamental 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; Securities Being Offered Purchase 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. ******************************************************************************* PROSPECTUS ******************************************************************************* THE EVERGREEN(SM) DOMESTIC GROWTH FUNDS ******************************************************************************* PROSPECTUS DATED JUNE 2, 1997 EVERGREEN FUND EVERGREEN AGGRESSIVE GROWTH FUND EVERGREEN SMALL CAP VALUE FUND PROSPECTUS DATED NOVEMBER 29, 1996 AS SUPPLEMENTED JUNE 2, 1997 EVERGREEN U.S. REAL ESTATE EQUITY FUND EVERGREEN LIMITED MARKET FUND, INC. CLASS A SHARES CLASS B SHARES CLASS C SHARES The Evergreen Domestic Growth Funds (the "Funds") are designed to provide investors with a selection of investment alternatives that seek to provide capital growth 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 ("SAI") dated June 2, 1997 for the Evergreen Fund, the Evergreen Aggressive Growth Fund and the Evergreen Small Cap Value Fund and dated November 29, 1996 as supplemented June 2, 1997 for the Evergreen U.S. Real Estate Equity Fund and the Evergreen Limited Market Fund, Inc. has been filed with the Securities and Exchange Commission and is incorporated by reference herein. The SAI provides information regarding certain matters discussed in this Prospectus and other matters that may be of interest to investors. Shareholders may obtain a copy of the SAI without charge by calling the Funds at (800) 343-2898. There can be no assurance that the investment objective of any Fund will be achieved. Investors are advised to read this Prospectus carefully. THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. KEEP THIS PROSPECTUS FOR FUTURE REFERENCE EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp. Copyright 1995, Evergreen Asset Management Corp. TABLE OF CONTENTS OVERVIEW OF THE FUNDS......................................................3 EXPENSE INFORMATION........................................................4 FINANCIAL HIGHLIGHTS.......................................................9 DESCRIPTION OF THE FUNDS..................................................20 INVESTMENT OBJECTIVES AND POLICIES..................................20 INVESTMENT PRACTICES AND RESTRICTIONS...............................23 OPTIONS, FUTURES AND DERIVATIVES....................................25 SPECIAL RISK CONSIDERATIONS.........................................28 MANAGEMENT OF THE FUNDS...................................................30 BOARD OF TRUSTEES/DIRECTORS.........................................30 INVESTMENT ADVISERS.................................................30 SUB-ADVISER.........................................................31 PORTFOLIO MANAGERS..................................................31 ADMINISTRATOR.......................................................32 SUBADMINISTRATOR....................................................32 DISTRIBUTION PLANS AND AGREEMENTS...................................33 PURCHASE AND REDEMPTION OF SHARES.........................................34 HOW TO BUY SHARES...................................................34 HOW TO REDEEM SHARES................................................39 EXCHANGE PRIVILEGE..................................................41 SHAREHOLDER SERVICES................................................42 EFFECT OF BANKING LAWS..............................................43 OTHER INFORMATION.........................................................44 DIVIDENDS, DISTRIBUTIONS AND TAXES..................................44 GENERAL INFORMATION.................................................45 OVERVIEW OF THE FUNDS The following summary is qualified in its entirety by the more detailed information contained elsewhere in this Prospectus. See "Description of the Funds" and "Management of the Funds." The investment adviser to the EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN LIMITED MARKET FUND, INC. is Evergreen Asset Management Corp. ("EAMC"). EAMC and its predecessors have served as investment adviser to the Evergreen mutual funds since 1971. EAMC is a wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB"), which in turn is a subsidiary of First Union Corporation, the sixth largest bank holding company in the United States. The Capital Management Group of First Union National Bank of North Carolina serves as investment adviser to EVERGREEN AGGRESSIVE GROWTH FUND. Keystone Investment Management Company ("Keystone") serves as investment adviser to the EVERGREEN SMALL CAP VALUE FUND. Keystone is an indirectly-owned subsidiary of FUNB. Keystone, or its affiliates, have provided investment advisory and management services to investment companies and private accounts since 1932. EVERGREEN FUND seeks to achieve capital appreciation by investing in the securities of little-known or relatively small companies, or companies undergoing changes which the Fund's investment adviser believes will have favorable consequences. Income will not be a factor in the selection of portfolio investments. EVERGREEN U.S. REAL ESTATE EQUITY FUND seeks long-term capital growth. Current income is a secondary objective. It invests primarily in equity securities of U.S. companies which are principally engaged in the real estate industry or which own significant real estate assets. It will not purchase direct interests in real estate. EVERGREEN LIMITED MARKET FUND, INC. seeks to achieve capital appreciation in the value of its shares. Income is not a factor in the selection of portfolio securities. In attempting to achieve its objective, the policy of EVERGREEN LIMITED MARKET FUND, INC. is to invest principally in securities of companies for which there is a relatively limited trading market. Generally these are little-known, small or special situation companies. EVERGREEN AGGRESSIVE GROWTH FUND seeks long-term capital appreciation by investing primarily in common stocks of emerging growth companies and in larger, more well established companies, all of which are viewed by the Fund's investment adviser as having above average appreciation potential. EVERGREEN SMALL CAP VALUE FUND seeks capital appreciation by investing in a diversified portfolio of common stocks of U.S. issuers which the investment adviser believes have underlying values, or potential values, exceeding their current values. THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE ACHIEVED. EXPENSE INFORMATION All Funds The table set forth below summarizes the shareholder transaction costs associated with an investment in Class A, Class B and Class C Shares of a Fund. For further information see "Purchase and Redemption of Shares" and "General Information -- Other Classes of Shares." 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) Maximum Deferred Sales Charge (as a % of None 5.00%* 1.00%* original purchase price or redemption proceeds, whichever is lower) - ----------------------- *The deferred sales charge declines over a six-year period from 5.00% during the month of purchase and the first twelve-month period following the month of purchase to 1.00% during the sixth twelve-month period following the month of purchase. No deferred sales charge is imposed on amounts redeemed thereafter. ANNUAL FUND OPERATING EXPENSES AND EXAMPLES 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 Class C Shares, 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 deferred sales charge applicable for that time period, and (iii) the expenses for Class B Shares reflect the conversion to Class A Shares seven years after the month of purchase (years seven through ten, therefore, reflect Class A expenses). EVERGREEN FUND
EXAMPLES Assuming Redemption ANNUAL OPERATING EXPENSES at End of Period Assuming No Redemption Class A Class B Class C Class A Class B Class C Class B Class C Management Fees .98% .98% .98% After 1 Year $ 61 $ 72 $ 32 $ 22 $ 22 12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 90 $ 97 $ 67 $ 67 $ 67 Other Expenses .17% .17% .17% After 5 Years $ 120 $ 135 $ 115 $ 115 $ 115 Total+ 1.40% 2.15% 2.15% After 10 Years $ 207 $ 220 $ 248 $ 220 $ 248
EVERGREEN U.S. REAL ESTATE EQUITY FUND
EXAMPLES Assuming Redemption at End of ANNUAL OPERATING EXPENSES Period Assuming No 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 $ 64 $ 75 $ 35 $ 25 $ 25 12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 100 $ 108 $ 78 $ 78 $ 78 Other Expenses After 5 Years $ 138 $ 153 $ 133 $ 133 $ 133 (after reimbursement)** .50% .50% .50% After 10 Years $ 244 $ 257 $ 284 $ 257 $ 284 Total+ 1.75% 2.50% 2.50%
EVERGREEN LIMITED MARKET FUND, INC.
EXAMPLES Assuming Redemption at End of ANNUAL OPERATING EXPENSES Period Assuming No 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 $ 65 $ 76 $ 36 $ 26 $ 26 12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 103 $ 111 $ 81 $ 81 $ 81 Other Expenses*** .60% .60% .60% After 5 Years $ 143 $ 158 $ 138 $ 138 $ 138 Total+ 1.85% 2.60% 2.60% After 10 Years $ 254 $ 267 $ 293 $ 267 $ 293
EVERGREEN AGGRESSIVE GROWTH FUND
EXAMPLES Assuming Redemption at End ANNUAL OPERATING EXPENSES of Period Assuming No Redemption Class A Class B Class C Class A Class B Class C Class B Class C Management Fees .60% .60% .60% After 1 Year $ 59 $ 70 $ 30 $ 20 $ 20 12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 84 $ 92 $ 62 $ 62 $ 62 Other Expenses .37% .37% .37% After 5 Years $ 111 $ 126 $ 106 $ 106 $ 106 Total+ 1.22% 1.97% 1.97% After 10 Years $ 188 $ 201 $ 230 $ 201 $ 230
EVERGREEN SMALL CAP VALUE FUND
EXAMPLES Assuming Redemption at End ANNUAL OPERATING EXPENSES of Period Assuming No Redemption Class A Class B Class C Class A Class B Class C Class B Class C Management Fees .95% .95% .95% After 1 Year $ 64 $ 75 $ 35 $ 25 $ 25 12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 100 $ 108 $ 78 $ 78 $ 78 Other .55% .55% .55% Expenses**** Total+ 1.75% 2.50% 2.50%
*Class A Shares can pay up to an annual rate of 0.75% of average net assets as a 12b-1 Fee. For the foreseeable future, the Class A Shares 12b-1 Fees will be limited to 0.25% of average net assets. **Reflects agreements by EAMC to limit aggregate operating expenses (including the Advisory Fees, but excluding interest, taxes, brokerage commissions, Rule 12b-1 distribution fees and shareholder servicing fees and extraordinary expenses) of EVERGREEN U.S. REAL ESTATE EQUITY FUND to an annual rate of 1.50% of average net assets until the Fund reaches net assets of $15 million. Absent such agreements, the estimated annual operating expenses for the Fund would be 2.50% of average net assets for Class A shares and 3.25% of average net assets for Class B and Class C Shares. ***The annual operating expenses and examples do not reflect fee waivers and expense reimbursements for the most recent fiscal period. Actual expenses net of fee waivers and expense reimbursements for the fiscal year ended September 30, 1996 for Class A, Class B and Class C Shares were 1.73%, 2.47% and 2.44%, respectively. From time to time, each Fund's investment adviser may, at its discretion, reduce or waive its fees or reimburse the Funds for certain of their expenses in order to reduce their expense ratios. Each Fund's investment adviser may cease these waivers and reimbursements at any time. ****Reflects agreements by Keystone to limit aggregate operating expenses (including the Advisory Fees, but excluding interest, taxes, brokerage commissions, Rule 12b-1 distribution fees and shareholder servicing fees and extraordinary expenses) of EVERGREEN SMALL CAP VALUE FUND to an annual rate of 1.50% of average net assets until the Fund reaches net assets of $15 million. Absent such agreements, the estimated annual operating expenses for the Fund would be 2.00%, 2.75% and 2.75% of average net assets for Class A, Class B and Class C Shares, respectively. + Total annual operating expenses represent estimated expenses for the fiscal year ending September 30, 1997. 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. These amounts have been restated to reflect current fee arrangements. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various costs and expenses borne by the Funds see "Management of the Funds." As a result of asset-based sales charges, long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted under the rules of the National Association of Securities Dealers, Inc. FINANCIAL HIGHLIGHTS The tables on the following pages represent, for each Fund, financial highlights for a share outstanding throughout each period. Price Waterhouse LLP has audited the financial highlights for (i) the five most recent fiscal years or the life of the Fund, if shorter, for EVERGREEN FUND and EVERGREEN U.S. REAL ESTATE EQUITY FUND, (ii) the fiscal year ended September 30, 1996 for EVERGREEN LIMITED MARKET FUND, INC., and (iii) for the fiscal periods ended September 30, 1995 and 1996 for EVERGREEN AGGRESSIVE GROWTH FUND. Ernst & Young LLP was EVERGREEN LIMITED MARKET FUND, INC.'s prior independent auditors and audited that Fund's financial highlights for each of the fiscal years in the four-year period ended September 30, 1995. A report of Price Waterhouse LLP and Ernst & Young LLP, as the case may be, on the audited information with respect to each Fund is contained in the annual report to shareholders of each Fund which in relevant part is incorporated by reference in the SAI. Shareholders should read the following information for each Fund in conjunction with the financial statements and related notes contained in such annual report which are incorporated by reference in the SAI. Further information about a Fund's performance is contained in the Fund's annual report to shareholders, which may be obtained without charge. EVERGREEN FUND -- CLASS A, B AND C SHARES
CLASS A SHARES CLASS B SHARES CLASS C SHARES JANUARY 3, JANUARY 3, JANUARY 3, 1995* 1995* 1995* YEAR ENDED THROUGH YEAR ENDED THROUGH YEAR ENDED THROUGH SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 1996 1995 PER SHARE DATA Net asset value, beginning of period............................. $15.55 $ 11.97 $15.48 $11.97 $15.48 $11.97 Income from investment operations: Net investment income (loss)....... .12 .01 (.03) (.02) -- (.01) Net realized and unrealized gain on investments................... 2.61 3.57 2.64 3.53 2.61 3.52 Total from investment operations..................... 2.73 3.58 2.61 3.51 2.61 3.51 Less distributions to shareholders from: Net investment income.............. (.06) -- (.02) -- (.04) -- Net realized gains................. (.58) -- (.58) -- (.58) -- Total distributions.............. (.64) -- (.60) -- (.62) -- Net asset value, end of period....... $17.64 $ 15.55 $ 17.49 $15.48 $ 17.47 $15.48 TOTAL RETURN+........................ 18.1% 29.9% 17.3% 29.3% 17.3% 29.3% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (in millions).......................... $87 $29 $254 $74 $6 $2 Ratios to average net assets: Expenses........................... 1.45% 1.70%#++ 2.18% 2.32%#++ 2.14%# 2.12%#++ Interest expense................... -- .01%++ -- .01%++ -- .01%++ Net investment income (loss)....... .63% .13%#++ (.10%) (.48%)#++ (.07%)# (.31%)#++ Portfolio turnover rate.............. 15% 19% 15% 19% 15% 19% Average commission rate paid per share.......................... $ .0603 N/A $ .0603 N/A $ .0603 N/A
* 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:
CLASS A SHARES CLASS B SHARES CLASS C SHARES JANUARY 3, JANUARY 3, JANUARY 3, 1995* 1995* 1995* THROUGH THROUGH YEAR ENDED THROUGH SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1995 1995 1996 1995 Expenses..................................... 1.75% 2.34% 2.38% 5.31% Net investment income (loss)................. .08% (.50%) (.31%) (3.50%)
EVERGREEN U.S. REAL ESTATE EQUITY FUND -- CLASS A, B AND C SHARES
CLASS A SHARES CLASS B SHARES CLASS C SHARES MARCH 10, MARCH 7, JULY 12, YEAR ENDED 1995* THROUGH YEAR ENDED 1995* THROUGH YEAR ENDED 1995* THROUGH SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1996| 1995 1996| 1995 1996| 1995 PER SHARE DATA Net asset value, beginning of period..................... $11.42 $9.21 $ 11.37 $9.19 $ 11.41 $ 10.87 Income from investment operations: Net investment income......... .20 .18 .13 .05 .13 .08 Net realized and unrealized gain on investments......... 1.28 2.03 1.27 2.13 1.28 .46 Total from investment operations................ 1.48 2.21 1.40 2.18 1.41 .54 Less distributions to shareholders from: Net investment income......... (.20) -- (.15) -- (.17) -- Net realized gains............ (.21) -- (.21) -- (.21) -- Total distributions......... (.41) -- (.36) -- (.38) -- Net asset value, end of period........................ $12.49 $ 11.42 $ 12.41 $ 11.37 $ 12.44 $ 11.41 TOTAL RETURN+................... 13.1% 24.0% 12.5% 23.7% 12.5% 5.0% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)............... $263 $5 $431 $160 $125 $3 Ratios to average net assets: Expenses...................... 1.72%# 1.78%++# 2.46%# 2.51%++# 2.47%# 2.49%++# Interest expense.............. .04% -- .04% -- .04% -- Net investment income......... 1.60%# 3.13%++# 1.05%# 2.00%++# 1.08%# 2.55%++# Portfolio turnover rate......... 169% 115% 169% 115% 169% 115% Average commission rate paid per share..................... $.0619 N/A $.0619 N/A $.0619 N/A
| Per share data is calculated based on average shares outstanding during the period. * 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 loss to average net assets, exclusive of any applicable state expense limitations, would have been the following:
CLASS A SHARES CLASS B SHARES CLASS C SHARES MARCH 10, MARCH 7, JULY 12, YEAR ENDED 1995* THROUGH YEAR ENDED 1995* THROUGH YEAR ENDED 1995* THROUGH SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 1996 1995 Expenses................ 9.65% 364.74% 6.19% 28.70% 18.82% 421.54% Net investment loss..... (6.33%) (359.83%) (2.68%) (24.19%) (15.27%) (416.50%)
EVERGREEN LIMITED MARKET FUND, INC. -- CLASS A, B AND C SHARES
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 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1996| 1995 1996| 1995 1996| 1995 PER SHARE DATA Net asset value, beginning of period............................. $ 18.41 $15.76 $18.30 $15.76 $18.31 $15.76 Income (loss) from investment operations: Net investment loss................ (.10) (.10) (.25) (.20) (.36) (.20) Net realized and unrealized gain (loss) on investments............ (.44) 2.75 (.42) 2.74 (.30) 2.75 Total from investment operations..................... (.54) 2.65 (.67) 2.54 (.66) 2.55 Less distributions to shareholders from net realized gains............ (.56) -- (.56) -- (.56) -- Net asset value, end of period....... $ 17.31 $18.41 $17.07 $18.30 $17.09 $18.31 TOTAL RETURN+........................ (2.9%) 16.8% (3.6%) 16.1% (3.6%) 16.2% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted).................... $903 $1,089 $1,461 $2,020 $27 $62 Ratios to average net assets: Expenses#.......................... 1.73% 1.51%++ 2.47% 2.26%++ 2.44% 2.25%++ Interest expense................... .02% -- .02% -- .02% -- Net investment loss#............... (.52%) (1.03%)++ (1.28%) (1.77%)++ (1.35%) (1.76%)++ Portfolio turnover rate.............. 160% 84% 160% 84% 160% 84% Average commission rate paid per share.......................... $.0497 N/A $.0497 N/A $ .0497 N/A
| Per share data based on average shares outstanding. * Commencement of class operations. + Total return is calculated 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 loss to average net assets, exclusive of any applicable state expense limitations, would have been the following:
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 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 1996 1995 Expenses......................... 3.08% 4.33% 3.26% 3.66% 32.28% 41.34% Net investment loss.............. (1.87%) (3.85%) (2.07%) (3.18%) (31.19%) (40.85%)
EVERGREEN AGGRESSIVE GROWTH FUND -- CLASS A SHARES
TEN MONTHS YEAR ELEVEN MONTHS ENDED ENDED ENDED OCTOBER SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED OCTOBER 31, 31, 1996 1995* 1994|# 1993|# 1992|# 1991|# 1990|# 1989|# 1988**|# PER SHARE DATA Net asset value, beginning of period............... $17.37 $13.85 $14.44 $11.76 $12.22 $7.37 $11.06 $7.62 $7.07 Income (loss) from investment operations: Net investment loss............... (.15) (.16) (.13) (.12) (.10) (.08) (.04) (.11) (.21) Net realized and unrealized gain (loss)............. 4.46 3.68 (.22) 3.06 1.84 5.59 (2.02) 3.55 .76 Total from investment operations..... 4.31 3.52 (.35) 2.94 1.74 5.51 (2.06) 3.44 .55 Less distributions to shareholders from: Net realized gains... (.64) -- (.24) (.26) (2.20) (.66) (1.63) -- -- Net asset value, end of period............... $21.04 $17.37 $13.85 $14.44 $11.76 $12.22 $7.37 $11.06 $7.62 TOTAL RETURN+.......... 25.6% 25.4% (2.4%) 25.3% 17.4% 79.8% (20.5%) 45.1% 9.3% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)...... $96,608 $70,858 $64,635 $58,053 $29,302 $23,509 $14,325 $21,241 $19,900 Ratios to average net assets of: Expenses............. 1.22% 1.47%++ 1.25% 1.31% 1.44% 1.59% 1.86% 1.78% 2.02%++ Net investment loss............... (.86%) (1.12%)++ (.92%) (.92%) (.93%) (.71%) (.49%) (1.19%) (1.36%)++ Portfolio turnover rate................. 33% 31% 59% 48% 46% 108% 100% 120% 45% Average commission rate paid per share....... $.0582 N/A N/A N/A N/A N/A N/A N/A N/A YEAR ENDED DECEMBER 31, 1987|# PER SHARE DATA Net asset value, beginning of period............... $8.77 Income (loss) from investment operations: Net investment loss............... (.11) Net realized and unrealized gain (loss)............. (1.34) Total from investment operations..... (1.45) Less distributions to shareholders from: Net realized gains... (.25) Net asset value, end of period............... $7.07 TOTAL RETURN+.......... (16.5%) RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)...... $25,700 Ratios to average net assets of: Expenses............. 1.57% Net investment loss............... (1.05%) Portfolio turnover rate................. 65% Average commission rate paid per share....... N/A
# Effective June 30, 1995, Evergreen Aggressive Growth Fund, a new series of Evergreen Trust, acquired substantially all of the net assets of ABT Emerging Growth Fund. ABT Emerging Growth Fund, which had a fiscal year that ended on October 31 was the accounting survivor in the combination. Accordingly, the information above includes the results of operations of ABT Emerging Growth Fund prior to June 30, 1995. * The Fund changed its fiscal year end from October 31, to September 30. ** The Fund changed its fiscal year end from December 31 to October 31. + Total return is calculated on net asset value for the period indicated and is not annualized. Initial sales charge is not reflected. ++ Annualized. | Per share data based on average shares outstanding. EVERGREEN AGGRESSIVE GROWTH FUND -- CLASS B AND C SHARES
CLASS B SHARES CLASS C SHARES JULY 7, AUGUST 3, YEAR 1995* YEAR 1995* ENDED THROUGH ENDED THROUGH SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 PER SHARE DATA Net asset value, beginning of period..................... $17.35 $15.82 $17.31 $16.42 Income (loss) from investment operations: Net investment loss........... (.16) (.03) (.15) (.01) Net realized and unrealized gain on investments......... 4.34 1.56 4.36 .90 Total from investment operations................ 4.18 1.53 4.21 .89 Less distributions to shareholders from net realized gains......................... (.64) -- (.64) -- Net asset value, end of period........................ $20.89 $17.35 $20.88 $17.31 TOTAL RETURN+................... 24.9% 9.7% 25.1% 5.4% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)............... $21,644 $2,858 $991 $416 Ratios to average net assets: Expenses...................... 1.98% 2.09%++ 1.96% 2.09%++ Net investment loss........... (1.60%) (1.71%)++ (1.57%) (1.51%)++ Portfolio turnover rate......... 33% 31% 33% 31% Average commission rate paid per share..................... $.0582 N/A $.0582 N/A
* 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. 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." Evergreen Fund The EVERGREEN FUND seeks to achieve its investment objective of capital appreciation principally through investments in common stocks and securities convertible into or exchangeable for common stocks of companies which are little-known, relatively small or represent special situations which, in the opinion of the Fund's investment adviser, offer potential for capital appreciation. A "little-known" company means one whose business is limited to a regional market or whose securities are closely held with only a small proportion traded publicly. A "relatively small" company means one which has a small share of the market for its products or services in comparison with other companies in its field, or which provides goods or services for a limited market. A "special situation" company is one which offers potential for capital appreciation because of a recent or anticipated change in structure, management, products or services. In addition to the securities described above, the Fund may invest in securities of relatively well-known and large companies with potential for capital appreciation. Investments may also be made to a limited degree in non-convertible debt securities and preferred stocks which offer an opportunity for capital appreciation. Short-term investments may also be made if the Fund's investment adviser believes that such action will benefit the Fund. See "Special Risk Considerations." EVERGREEN U.S. REAL ESTATE EQUITY FUND The EVERGREEN U.S. REAL ESTATE EQUITY FUND's investment objective is long-term capital growth, which it seeks to achieve through investment primarily in equity securities of domestic companies which are principally engaged in the real estate industry or which own significant real estate assets; the Fund will not purchase direct interests in real estate. Current income is a secondary objective. Equity securities include common stock, preferred stock and securities convertible into common stock. Under normal conditions, the Fund will invest not less than 65% of its total assets in equity securities of United States exchange or NASDAQ listed companies principally engaged in the real estate industry. A company is deemed to be "principally engaged" in the real estate industry if at least 50% of its assets (marked to market), gross income or net profits are attributable to ownership, construction, management or sale of residential, commercial or industrial real estate. Real estate industry companies may include among others: equity real estate investment trusts, which pool investors' funds for investment primarily in commercial real estate properties; mortgage real estate investment trusts, which invest pooled funds in real estate related loans; brokers or real estate developers; and companies with substantial real estate holdings, such as paper and lumber producers and hotel and entertainment companies. The Fund will only invest in real estate equity trusts and limited partnerships which are traded on major exchanges. See "Special Risk Considerations" with respect to the special risks involved with an investment in these types of securities. The remainder of the Fund's investments may be made in equity securities of issuers whose products and services are related to the real estate industry, such as manufacturers and distributors of building supplies and financial institutions which issue or service mortgages. The Fund may invest more than 25% of its total assets in any one sector of the real estate or real estate related industries. In addition, the Fund may, from time to time, invest in the securities of companies unrelated to the real estate industry whose real estate assets are substantial relative to the price of the companies' securities. Investments may also be made in securities of issuers unrelated to the real estate industry believed by the Fund's investment adviser to be undervalued and to have capital appreciation potential. Also, consistent with the secondary objective of current income, investments may also be made in non-convertible debt securities of such companies. The debt securities purchased (except for those described below) will be of investment grade or better quality (e.g., rated no lower than A by Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service ("Moody's") or any other nationally recognized statistical rating organization ("SRO"), or, if not so rated, believed by the Fund's investment adviser to be of comparable quality). However, up to 10% of total assets may be invested in unrated debt securities of issuers secured by real estate assets where the Fund's investment adviser believes that the securities are trading at a discount and the underlying collateral will ensure repayment of principal. In such situations, it is conceivable that the Fund could, in the event of default, end up holding the underlying real estate directly. EVERGREEN LIMITED MARKET FUND, INC. The investment objective of EVERGREEN LIMITED MARKET FUND, INC. is to achieve capital appreciation; income is not a factor in the selection of portfolio securities. The Fund seeks to achieve its objective principally through investments in common stocks of companies for which there is a relatively limited trading market. A relatively limited trading market is one in which only small amounts of stock are available at any given time generally through five or fewer market makers. The securities of such companies are often traded only over-the-counter or on a regional securities exchange, rarely on a national securities exchange, and may not trade every day or in the volume typical of trading on a national securities exchange. Investments by the Fund are made with a view toward taking advantage of market inefficiencies affecting the price of a company's securities or by exploiting the investment opportunities which may be inherent in companies offering new or unique products or services. Market inefficiency can result from a company being too small to be covered by most industry analysts, thereby resulting in a limited dissemination of information about the company or its industry. The companies in which the Fund may invest are small, but have at least $1,000,000 and generally no more than $150,000,000 of market capitalization (see "Special Risk Considerations"). The Fund may also invest in little-known or unpopular companies which may not be widely recommended for purchase by industry analysts due to some situation unique to the company or its industry. There are no restrictions as to types of businesses or industries in which the Fund may invest. The Fund's investment adviser believes that its investment research programs will uncover a variety of relatively unexploited investment opportunities. The Fund's investment adviser will attempt to screen the universe of companies falling within the capitalization range described above and invest primarily in what it believes to be the 100 best based on certain qualitative and quantitative criteria. Such companies may include those with the highest return on equity and consistent earnings growth. The criteria will be reviewed and evaluated on an ongoing basis by the Fund's investment adviser. In addition, the Fund will invest in other companies which do not meet the screening criteria. These will include companies which offer unique products or services or operate in industries or sectors that have, in the opinion of the Fund's investment adviser, significant growth prospects. In selecting investment opportunities for the Fund, the Fund's investment adviser will use certain proprietary computer screening techniques and the extensive library facilities of Lieber & Company, the Fund's sub-adviser. While the focus of EVERGREEN LIMITED MARKET FUND, INC. is on long-term capital appreciation, investments may on occasion be made with the expectation of short-term capital appreciation. Securities held for a short time period may be sold if the investment objective for such securities has been achieved or if other circumstances warrant. EVERGREEN AGGRESSIVE GROWTH FUND The EVERGREEN AGGRESSIVE GROWTH FUND's investment objective is to achieve long-term capital appreciation by investing primarily in common stocks of emerging growth companies and larger, more well established companies, all of which are viewed by the Fund's investment adviser as having above-average appreciation potential. Under normal circumstances, the Fund intends to invest at least 65% of its net assets in common stocks or securities convertible into common stocks. The Fund's investment adviser considers an emerging growth company to be one which is still in the developmental stage, yet has demonstrated, or is expected to achieve, growth of earnings over various major business cycles. Important qualities of any emerging growth company include sound management and a good product with growing market opportunities. To the extent that its assets are not invested in common stocks or securities convertible into common stocks, the Fund also may invest its assets in, or enter into repurchase agreements with banks or broker-dealers with respect to, investment grade corporate bonds, U.S. government securities, commercial paper and certificates of deposit of domestic banks. Consistent with its investment objective, the Fund also may invest in equity securities of seasoned, established companies which its investment adviser believes have above-average appreciation potential similar to that of companies in the developmental stage. This may be due, for example, to management change, new technology, new product or service developments, changes in demand, or other factors. Investments in stocks of emerging growth companies may involve special risks. Securities of lesser-known, relatively small and special situation companies tend to be speculative and volatile. Therefore, the current net asset value of the Fund's shares may vary significantly. Accordingly, 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 investment in the Fund be considered a balanced or complete investment program. EVERGREEN SMALL CAP VALUE FUND The EVERGREEN SMALL CAP VALUE FUND's investment objective is capital appreciation. The Fund seeks to achieve its investment objective by investing in a diversified portfolio of securities consisting primarily of common stocks of U.S. issuers that the Fund's investment adviser believes have an underlying value, or potential value, exceeding their current prices. Income is not a primary factor in the selection of securities. Under normal market conditions, the Fund will invest at least 65% of its total assets in common stocks of companies with a market capitalization of less than $1 billion determined at the time of purchase. In addition to common stocks, the Fund may invest in securities having common stock characteristics, such as convertible bonds and preferred stocks. The Fund may invest up to 25% of its assets in securities issued by companies located in foreign countries. In selecting securities for the portfolio, the Fund's investment adviser will assess the prospects for earnings growth of a company over the next 1-1/2 to 3 years and quantify the economic worth, or basic value, of a company. Using this value approach, the Fund's investment adviser relies primarily on the knowledge, experience and judgment of its in-house research staff. The Fund's investment adviser may also use information from a variety of outside sources, including brokerage firms, electronic data bases, specialized research firms and technical journals. See "Special Risks Considerations." The Fund may invest in convertible debt securities that are rated Baa or higher by Moody's or BBB or higher by S&P or, if unrated, deemed by the Fund's investment adviser to be of comparable quality. Securities rated Baa or BBB may have speculative characteristics. Changes in economic conditions or other circumstances are more likely to weaken the ability of the issuers of such debt securities to make principal and interest payments than is the case with higher rated securities. However, like the higher rated debt securities, these securities are considered investment grade. For a description of such ratings, see the SAI. INVESTMENT PRACTICES AND RESTRICTIONS DEFENSIVE INVESTMENTS. Each Fund may invest, without limitation, in high quality money market instruments, such as notes, certificates of deposit or bankers' acceptances, U.S. government securities, non-convertible investment grade debt securities or preferred stocks or hold its assets in cash if, in the opinion of the Funds' investment advisers, market conditions warrant a temporary defensive investment strategy. PORTFOLIO TURNOVER AND BROKERAGE. The annual portfolio turnover rates for each Fund, except the EVERGREEN SMALL CAP VALUE FUND, are set forth in the tables contained in the "Financial Highlights" section above. The portfolio turnover rate for the EVERGREEN SMALL CAP VALUE FUND is not expected to exceed 200% for the coming year. A high rate of portfolio turnover (100% or more) may involve correspondingly greater brokerage commissions and other transaction costs, which the Fund and its shareholders must bear. For further information about brokerage and distributions see "Dividends, Distributions and Taxes" or the SAI. It is contemplated that Lieber & Company ("Lieber"), an affiliate of EAMC and a member of the New York and American Stock Exchanges, will to the extent practicable effect substantially all of the portfolio transactions for EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN LIMITED MARKET FUND, INC. effected on those exchanges. See the SAI for further information regarding the brokerage allocation practices of the Funds. BORROWING. As a matter of fundamental policy, the Funds may not borrow money except as a temporary measure for extraordinary or emergency purposes. The proceeds from borrowings may be used to facilitate redemption requests which might otherwise require the untimely disposition of portfolio securities. The specific limits and other terms applicable to borrowing by each Fund are set forth in the SAI. 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. Each Fund's investment adviser will monitor the creditworthiness of such borrowers. Loans of securities by the Funds, if and when made, may not exceed 30% of the value of a Fund's net assets and must be collateralized by cash or U.S. government securities that are maintained at all times in an amount equal to at least 100% of the current market value of the securities loaned, including accrued interest. While such securities are on loan, the borrower will pay a Fund any income accruing thereon, and the Fund may invest the cash collateral in portfolio securities, thereby increasing its return. Any gain or loss in the market price of the loaned securities which occurs during the term of the loan would affect a Fund and its investors. A Fund has the right to call a loan and obtain the securities loaned at any time on notice of not more than five business days. A Fund may pay reasonable fees in connection with such loans. 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. ILLIQUID SECURITIES. The Funds may invest up to 15% of their net assets in illiquid securities and other securities which are not readily marketable, including non-negotiable time deposits, certain restricted securities not deemed by the Trustees or Directors to be liquid and repurchase agreements with maturities longer than seven days, except that EVERGREEN U.S. REAL ESTATE EQUITY FUND may only invest up to 10% of its assets in repurchase agreements with maturities longer than seven days. Securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (the "Securities Act"), which have been determined to be liquid, will not be considered by the Funds' investment advisers to be illiquid or not readily marketable and, therefore, are not subject to the aforementioned 15% limit. The inability of a Fund to dispose of illiquid or not readily marketable investments readily or at reasonable prices could impair a Fund's ability to raise cash for redemptions or other purposes. The liquidity of securities purchased by a Fund which are eligible for resale pursuant to Rule 144A will be monitored by each Fund's investment adviser on an ongoing basis, subject to the oversight of the Trustees or Directors. In the event that such a security is deemed to be no longer liquid, a Fund's holdings will be reviewed to determine what action, if any, is required to ensure that the retention of such security does not result in a Fund having more than 15% of its assets invested in illiquid or not readily marketable securities. REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements with member banks of the Federal Reserve System, including the Fund's Custodian, or primary dealers in U.S. government securities. A repurchase agreement is an arrangement whereby a Fund purchases a security and simultaneously agrees to resell it to the vendor at the same price plus interest. The arrangement results in a fixed rate of return that is not subject to market fluctuations during the holding period. A Fund will maintain 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 U.S. REAL ESTATE EQUITY FUND, EVERGREEN AGGRESSIVE GROWTH FUND and EVERGREEN SMALL CAP VALUE FUND may enter into "reverse repurchase agreements." A reverse repurchase agreement is an arrangement whereby the Fund agrees to sell portfolio securities to financial institutions such as banks and broker-dealers, and to repurchase them at a mutually agreed upon date for the price plus interest. At the time a Fund enters into a reverse repurchase agreement, it will be placed in a segregated custodial cash account, 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. A Fund will not enter into reverse repurchase agreements exceeding 5% of the value of its total assets. 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, FUTURES AND DERIVATIVES In addition to making investments directly in securities, EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN SMALL CAP VALUE FUND may write covered put and call options and hedge their investments by purchasing options and engaging in transactions in futures contracts and related options. The Funds may engage in foreign currency exchange transactions to protect against changes in future exchange rates. WRITING OPTIONS. EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN SMALL CAP VALUE FUND may write covered call and put options on certain portfolio securities in an attempt to earn income and realize a higher return on its portfolio. A call option gives the purchaser of the option the right to buy a security from the writer at the exercise price at any time during the option period. An option may not be written if, afterwards, securities comprising more than 5% of the market value of a Fund's equity securities would be subject to call options. A Fund realizes income from the premium paid to it in exchange for writing the call option. Once it has written a call option on a portfolio security and until the expiration of such option, a Fund forgoes the opportunity to profit from increases in the market price of such security in excess of the exercise price of the call option. Should the price of the security on which a call has been written decline, a Fund bears the risk of loss, which would be offset to the extent the Fund has received premium income. A Fund will only write "covered" options traded on recognized 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 call option has been written in an amount sufficient to satisfy the obligations arising under a call option, or (ii) in the case of both call and put options, the Fund's Custodian maintains cash or high-grade liquid debt securities belonging to the Fund in an amount not less that the amount needed to satisfy the Fund's obligations with respect to such options. A "closing purchase transaction" may be entered into with respect to a call option written by a Fund for the purpose of closing its position. The Fund will realize a profit (or loss) from such transaction if the cost of such transaction is less (or more) than the premium received from the writing of the option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option may be offset in whole or in part by unrealized appreciation of the underlying security owned by the Fund. PURCHASING PUT AND CALL OPTIONS ON SECURITIES. The Funds may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. This protection is provided during the life of the put option since the Fund, as holder of the put, is able to sell the underlying security at the exercise price regardless of any decline in the underlying security's market price. For the purchase of a put option to be profitable, the market price of the underlying security must decline below the exercise price more than enough to cover the premium and transaction costs. By using put options in this manner, any profit which the Fund might otherwise have realized on the underlying security will be reduced by the premium paid for the put option and by transaction costs. Each Fund may also purchase a call option to hedge against an increase in price of a security that it intends to purchase. This protection is provided during the life of the call option since the Fund, as holder of the call, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. For the purchase of a call option to be profitable, the market price of the underlying security must rise above the exercise price more than enough to cover the premium and transaction costs. By using call options in this manner, any profit which the Fund might have realized had it bought the underlying security at the time it purchased the call option will be reduced by the premium paid for the call option and by transaction costs. FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. In addition to writing covered call and put options, each Fund may purchase and sell various financial instruments ("Derivative Instruments) such as financial futures contracts (including interest rate, index and foreign currency futures contracts), options (such as options on securities, indices, foreign currencies and futures contracts), forward currency contracts and interest rate, equity index and currency swaps, caps, collars and floors. The index Derivative Instruments a Fund may use may be based on indices of U.S. or foreign equity or debt securities. These Derivative Instruments may be used, for example, to preserve a return or spread, to lock in unrealized market value gains or losses, to facilitate or substitute for the sale or purchase of securities, to manage the duration of securities, to alter the exposure of a particular investment or portion of a Fund's portfolio to fluctuations in interest rates or currency rates, to uncap a capped security or to convert a fixed rate security into a variable rate security or a variable rate security into a fixed rate security. A Fund's ability to use these instruments may be limited by market conditions, regulatory limits and tax considerations. A Fund might not use any of these strategies, and there can be no assurance that any strategy that is used will succeed. See the SAI for more information regarding these instruments and the risks relating thereto. CURRENCY AND OTHER FINANCIAL FUTURES CONTRACTS. 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 contract on a securities index does not involve the actual delivery of securities, but merely requires the payment of a cash settlement based on changes in the securities index. The Funds do not make payment or deliver securities upon entering into a futures contract. Instead, they put down a margin deposit, which is adjusted to reflect changes in the value of the contract and which remains in effect until the contract is terminated. The Funds may sell or purchase currency and other financial futures contracts. When a futures contract is sold by a Fund, the profit on the contract will tend to rise when the value of the underlying securities or currencies declines and to fall when the value of such securities or currencies increases. Thus, the Funds sell futures contracts in order to offset a possible decline in the profit on their securities or currencies. If a futures contract is purchased by a Fund, the value of the contract will tend to rise when the value of the underlying securities or currencies increases and to fall when the value of such securities or currencies declines. The Funds may enter into closing purchase and sale transactions in order to terminate a futures contract and may buy or sell put and call options for the purpose of closing out their options positions. The Funds' ability to enter into closing transactions depends on the development and maintenance of a liquid secondary market. There is no assurance that a liquid secondary market will exist for any particular contract or at any particular time. As a result, there can be no assurance that the Funds will be able to enter into an offsetting transaction with respect to a particular contract at a particular time. If the Funds are not able to enter into an offsetting transaction, the Funds will continue to be required to maintain the margin deposits on the contract and to complete the contract according to its terms, in which case the Funds would continue to bear market risk on the transaction. RISKS OF DERIVATIVE INSTRUMENTS. The use of Derivative instruments, including written put and call options, involves special risks, including: (1) the lack of, or imperfect, correlation between price movements of a Fund's current or proposed portfolio investments that are the subject of the transactions as well as price movements of the Derivative Instruments involved in the transaction; (2) possible lack of a liquid secondary market for any particular Derivative Instrument at a particular time; (3) the need for additional portfolio management skills and techniques; (4) losses due to unanticipated market price movements; (5) the fact that, while such strategies can reduce the risk of loss, they can also reduce the opportunity for gain, or even result in losses, by offsetting favorable price movements in portfolio investments; (6) incorrect forecasts by a Fund's investment adviser concerning interest or currency exchange rates or direction of price fluctuations of the investment that is the subject of the transaction, which may result in the strategy being ineffective; (7) loss of premiums paid by the Fund on options it purchases; and (8) the possible inability of the Fund to purchase or sell a portfolio security at a time when it would otherwise be favorable for it to do so, or the need to sell a portfolio security at a disadvantageous time, due to the need for the Fund to maintain "cover" or to segregate securities in connection with such transactions and the possible inability of the Fund to close out or liquidate its positions. Each Fund's investment adviser may use Derivative Instruments, including written put and call options, for hedging purposes (i.e., by paying a premium or foregoing the opportunity for profit in return for protection against downturns in markets generally or the prices of individual securities or currencies) and also may use Derivative Instruments to try to enhance the return characteristics of a Fund's portfolio of investments (i.e., by receiving premiums in connection with the writing of options and thereby accepting the risk of downturns in markets generally or the prices of individual securities or currencies or by paying premiums with the hope that the securities or currencies underlying Derivative Instruments will appreciate). The use of Derivative Instruments for hedging purposes or to enhance a Fund's return characteristics can increase investment risk. If a Fund's investment adviser judges market conditions incorrectly or employs a strategy that does not correlate well with the Fund's investments, these techniques could result in a loss, regardless of whether the intent was to reduce risk or increase return. These techniques may increase the volatility of a Fund and may involve a small investment of cash relative to the magnitude of the risk assumed, resulting in leverage. In addition, these techniques could result in a loss if the counterparty to the transaction does not perform as promised or if there is not a liquid secondary market to close out a position that the Fund has entered into. Options and futures transactions may increase portfolio turnover rates, which would result in greater commission expenses and transaction costs. SPECIAL RISK CONSIDERATIONS INVESTMENT IN SMALL COMPANIES. Investments in securities of little-known, relatively small or special situation companies ("Small Companies") may be speculative and volatile. Investing in Small Companies generally involves some or all of the following risks: 1. The company may lack management depth, potentially increasing the risks associated with the loss of key personnel. 2. The company may lack material and financial resources, possibly limiting the availability of financing. 3. The company may be developing or marketing new products or services for which there are no established markets and the market for the product or service could fail to develop as projected. 4. The securities of Small Companies are often closely held and only traded on the over-the-counter market or on a regional stock exchange. As a result, the securities of Small Companies are sometimes illiquid or subject to wide price fluctuations. As a result of the risk factors described above, the net asset value of each Fund's shares can be expected to vary significantly. Accordingly, each Fund should not be considered suitable for investors who are unable or unwilling to assume the associated risks, nor should investment in the Funds be considered a balanced or complete investment program. INVESTMENTS RELATED TO REAL ESTATE. EVERGREEN U.S. REAL ESTATE EQUITY FUND invests primarily in issuers whose activities are real estate related. Risks associated with investment in securities of companies in the real estate industry include: declines in the value of real estate; risks related to general and local economic conditions; overbuilding and increased competition; increases in property taxes and operating expenses; changes in zoning laws; casualty or condemnation losses; variations in rental income; changes in neighborhood values; the appeal of properties to tenants; and increase in interest rates. In the event of a default on such securities, the holder thereof could end up holding real estate directly and therefore be more directly subject to such risks. 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. FOREIGN SECURITIES RISKS. Investing in foreign securities of foreign issuers generally involves more risk than investing in a portfolio consisting solely of securities of domestic issuers for the following reasons: publicly available information on issuers and securities may be scarce; many foreign countries do not follow the same accounting, auditing and financial reporting standards as are used in the U.S.; market trading volumes may be smaller, resulting in less liquidity and more price volatility compared to U.S. securities of comparable quality; there may be less regulation of securities trading and its participants; the possibility may exist for expropriation, confiscatory taxation, nationalization, establishment of exchange controls, political or social instability of negative diplomatic developments; and dividend or interest withholding may be imposed at the source. Fluctuations in foreign exchange impose an additional level of risk, possibly affecting the value of the Fund's foreign investments and earnings, gains and losses realized through trades, and the unrealized appreciation or depreciation of investments. The Fund may also incur costs when it shifts assets from one country to another. OTHER INVESTMENT RESTRICTIONS. Each Fund has adopted additional investment restrictions that are set forth in the SAI. Unless otherwise noted, the restrictions and policies set forth above are not fundamental and may be changed without shareholder approval. MANAGEMENT OF THE FUNDS BOARD OF TRUSTEES/DIRECTORS Each Fund is governed by the Board of Trustees or Directors of the trust or corporation under which it was organized. Each Fund's Board of Trustees or Directors, as applicable, has absolute and exclusive control over the management and disposition of all assets of a Fund. INVESTMENT ADVISERS Each Fund has retained an investment adviser that, subject to the authority of a Fund's Trustees or Directors, (1) provides the Fund with investment advice, management and administrative services and (2) supervises the Fund's daily business affairs. The investment adviser to each Fund is a subsidiary of FUNB. FUNB is a subsidiary of First Union Corporation ("First Union"), the sixth largest bank holding company in the United States. First Union, headquartered in Charlotte, North Carolina, had $132 billion in consolidated assets as of February 28, 1997. First Union and its subsidiaries provide a broad range of financial services to individuals and businesses throughout the United States. EAMC, Keystone and the Capital Management Group of FUNB ("CMG") manage or otherwise oversee the investment of over $42.5 billion in assets belonging to a wide range of clients, including certain Evergreen and Keystone mutual funds. EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND, and EVERGREEN LIMITED MARKET FUND, INC. EAMC is the investment adviser to the EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND, and EVERGREEN LIMITED MARKET FUND, INC. EAMC, together with its predecessors, has provided investment advice to the Evergreen mutual funds since 1971. EAMC, located at 2500 Westchester Avenue, Purchase, New York 10577, is a wholly-owned subsidiary of First Union Bank of North Carolina ("FUNB"). For the services it renders to each Fund, EAMC receives an annual fee equal to 1.00% of the first $750,000,000 of the Fund's average daily net assets, plus 0.90% of the next $250,000,000 of such average daily net assets, plus 0.80% of such average daily net assets in excess of $1,000,000,000. For the fiscal year ended September 30, 1996, each of the Funds paid the following in investment advisory fees to EAMC as a percentage of its average net assets: EVERGREEN FUND, 0.98%; EVERGREEN U.S. REAL ESTATE EQUITY FUND, 0.00%; and EVERGREEN LIMITED MARKET FUND, INC. 1.00%. EVERGREEN SMALL CAP VALUE FUND. Keystone is the investment adviser to the EVERGREEN SMALL CAP VALUE FUND. Keystone, or its affiliates, has provided investment advisory and management services to investment companies and private accounts since 1932. Keystone is located at 200 Berkeley Street, Boston, Massachusetts 02116. For the services it renders to the EVERGREEN SMALL CAP VALUE FUND, Keystone receives an annual fee equal to 0.95% of the Fund's aggregate net asset value. EVERGREEN AGGRESSIVE GROWTH FUND. CMG provides investment advisory services to the EVERGREEN AGGRESSIVE GROWTH FUND. For the services it renders to the EVERGREEN AGGRESSIVE GROWTH FUND, CMG receives an annual fee equal to 0.60% of the Fund's average daily net assets. For the fiscal year ended September 30, 1996, EVERGREEN AGGRESSIVE GROWTH FUND paid 0.60% of its average net assets to CMG in investment advisory fees. Information regarding each Fund's total operating expenses and, to the extent applicable, any expense limitations or waivers, are set forth in the section "Financial Highlights." From time to time, each investment adviser may reduce or waive its fee or reimburse a Fund for which it serves as investment adviser for certain of the Fund's expenses in order to reduce the Fund's expense ratio. As a result, a Fund's total return would be higher than if the fees and any expenses had been paid by the Fund. SUB-ADVISER EAMC has entered into sub-advisory agreements with Lieber regarding EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN LIMITED MARKET FUND, INC. (the "Sub-Advisory Agreements"). The Sub-Advisory Agreements provide for Lieber's research department and staff to furnish EAMC with information, investment recommendations, advice and research and general consulting services regarding each Fund. For its services rendered, EAMC reimburses Lieber for the direct and indirect costs of performing such services. There is no additional charge to the Funds for the services provided by Lieber. Lieber is a subsidiary of First Union and is located at 2500 Westchester Avenue, Purchase, New York 10577. PORTFOLIO MANAGERS EVERGREEN FUND. Stephen A. Lieber has been the portfolio manager for EVERGREEN FUND since 1971. Mr. Lieber is the Chairman and Co-Chief Executive Officer of EAMC. Mr. Lieber has been associated with EAMC since he founded it, or its predecessors, in 1971. EVERGREEN AGGRESSIVE GROWTH FUND. The portfolio manager for EVERGREEN AGGRESSIVE GROWTH FUND is Harold J. Ireland, Jr., a Vice President of CMG who has been associated with CMG since 1995. Prior to that, Mr. Ireland was a Vice President of Palm Beach Capital Management, Inc. and served as portfolio manager of the Fund's predecessor, ABT Emerging Growth Fund, since 1985. EVERGREEN U.S. REAL ESTATE EQUITY FUND. Samuel A. Lieber has been the portfolio manager for EVERGREEN U.S. REAL ESTATE EQUITY FUND since the Fund's inception in March, 1995. Mr. Samuel Lieber has been associated with EAMC since 1985. EVERGREEN LIMITED MARKET FUND, INC. A committee, which includes Stephen A. Lieber and Nola Maddox Falcone, President and Co-Chief Executive Officer of EAMC, manages the portfolio of EVERGREEN LIMITED MARKET FUND, INC. The committee also draws upon the resources of certain other portfolio management and analytical personnel employed by EAMC or its affiliates. EVERGREEN SMALL CAP VALUE FUND. Warren J. Isabelle is the portfolio manager for EVERGREEN SMALL CAP VALUE FUND. He is also Chief Investment Officer for Equities of Keystone. Prior to joining Keystone in February, 1997, Mr. Isabelle managed the Pioneer Capital Growth Fund and the Pioneer Small Company Fund. He also served as Head of the Pioneer Special Equities Group. He has 14 years of investment experience. ADMINISTRATOR EKIS serves as administrator to the Funds and is entitled to receive a fee based on the aggregate average daily net assets of the Funds at a rate based on the total assets of the mutual funds administered by EKIS for which CMG, EAMC or Keystone also serve as investment adviser. As administrator, and subject to the supervision and control of the Trustees/Directors of the Funds, EKIS provides facilities, equipment and personnel to the Funds. EKIS's administration fee is calculated in accordance with the following schedule: AGGREGATE AVERAGE DAILY NET ASSETS OF FUNDS ADMINISTERED BY EKIS FOR WHICH ANY AFFILIATE OF ADMINISTRATIVE FEE FUNB SERVES AS INVESTMENT ADVISER 0.050% on the first $7 billion 0.035% on the next $3 billion 0.030% on the next $5 billion 0.020% on the next $10 billion 0.015% on the next $5 billion 0.010% on assets in excess of $30 billion SUBADMINISTRATOR BISYS Fund Services ("BISYS"), an affiliate of Evergreen Keystone Distributor, Inc. ("EKD"), distributor for the Evergreen Keystone group of mutual funds, serves as sub-administrator to the Funds and is entitled to receive a fee from the Funds calculated on the aggregate average daily net assets of the Funds at a rate based on the total assets of the mutual funds administered by EKIS for which FUNB affiliates also serve as investment adviser, calculated in accordance with the following schedule: AGGREGATE AVERAGE DAILY NET ASSETS OF FUNDS ADMINISTERED BY BISYS FOR WHICH ANY AFFILIATE OF SUB-ADMINISTRATIVE FEE FUNB SERVES AS INVESTMENT ADVISER 0.0100% on the first $7 billion 0.0075% on the next $3 billion 0.0050% on the next $15 billion 0.0040% on assets in excess of $25 billion The total assets of the mutual funds administered by EKIS for which FUNB affiliates also serve as investment advisers were approximately $29.2 billion as of February 28, 1997. DISTRIBUTION PLANS AND AGREEMENTS DISTRIBUTION PLANS. Each Fund's Class A, Class B and Class C Shares pays for the expenses associated with the distribution of its shares according to a distribution plan that it has adopted pursuant to Rule 12b-1 under the 1940 Act (each, a "Plan" or collectively the "Plans"). Under the Plans, each Fund may incur distribution-related and shareholder servicing-related expenses at the following rates: Maximum Annual Rate as a % of Class of Fund's Average Daily Net Assets Shares Attributable to the Class - --------------- ------------------------------- Class A 0.75%, currently limited to 0.25% Class B 1.00% Class C 1.00% Of the amount that each Class may pay under its respective distribution plan, up to 0.25% may constitute a service fee to be used to compensate organizations, which may include each Fund's investment adviser or their affiliates, for personal services rendered to shareholders and/or the maintenance of shareholder accounts. The Funds may not pay any distribution or services fees during any fiscal period in excess of the amounts set forth above. DISTRIBUTION AGREEMENTS. Each Fund has also entered into a distribution agreement (each a "Distribution Agreement" or collectively the "Distribution Agreements") with EKD. Pursuant to the Distribution Agreements, each Fund will compensate EKD for its services as distributor at the following rates: Maximum Annual Rate as a % of Class of Fund's Average Daily Net Assets Shares Attributable to the Class - --------------- ------------------------------- Class A 0.25% Class B 1.00% Class C 1.00% The Distribution Agreements provide that EKD will use the distribution fee received from a Fund for payments (i) to compensate broker-dealers or other persons for distributing shares of the Fund, including interest and principal payments made in respect of amounts paid to broker-dealers or other persons that have been financed (EKD may assign its rights to receive compensation under the Plans to secure such financings), (ii) to otherwise promote the sale of shares of the Fund, and (iii) to compensate broker-dealers, depository institutions and other financial intermediaries for providing administrative, accounting and other services with respect to the Fund's shareholders. FUNB or its affiliates may finance the payments made by EKD to compensate broker-dealers or other persons for distributing shares of the Fund. Since EKD's compensation under the Distribution Agreements is not directly tied to the expenses incurred by EKD, the amount of compensation received by it under the Distribution Agreements during any year may be more or less than its actual expenses and may result in a profit to EKD. Distribution expenses incurred by EKD in one fiscal year that exceed the level of compensation paid to EKD for that year may be paid from distribution fees received from a Fund in subsequent fiscal years. The Plans are in compliance with the Conduct Rules of the National Association of Securities Dealers, Inc. which effectively limit the annual asset-based sales charges and service fees that a mutual fund may pay on a class of shares to an annual rate of 0.75% and 0.25%, respectively, of the average aggregate annual net assets attributable to that class. The rules also limit the aggregate of all front-end, deferred and asset-based sales charges imposed with respect to a class of shares by a mutual fund that also charges a service fee to 6.25% of cumulative gross sales of shares of that class, plus interest on the unpaid amount at the prime rate plus 1% per annum. PURCHASE AND REDEMPTION OF SHARES HOW TO BUY SHARES You may purchase shares of any of the Funds through broker-dealers, banks or other financial intermediaries, or directly through EKD. In addition, you may purchase shares of any of the Funds by mailing to that Fund, c/o Evergreen Keystone Service Company ("EKSC"), P.O. Box 2121, Boston, Massachusetts 02106-2121, a completed account application and a check payable to the Fund. You may also telephone 1-800-343-2898 to obtain the number of an account to which you can wire or electronically transfer funds and then send in a completed account application. The minimum initial investment is $1,000, which may be waived in certain situations. Subsequent investments in any amount may be made by check, by wiring Federal funds, by direct deposit or by an electronic funds transfer. There is no minimum amount for subsequent investments. Investments of $25 or more are allowed under the Systematic Investment Plan. Share certificates are not issued. See the Share Purchase Application and SAI for more information. Only Class A, Class B and Class C shares are offered through this Prospectus (see "General Information" -- "Other Classes of Shares"). CLASS A SHARES-FRONT-END SALES CHARGE ALTERNATIVE. You may purchase Class A shares of each Fund at net asset value plus an initial sales charge on purchases under $1,000,000. You may purchase $1,000,000 of Class A shares without a front-end sales charge; however, a contingent deferred sales charge ("CDSC") equal to the lesser of 1% of the purchase price or the redemption value will be imposed on shares redeemed during the month of purchase and the 12- month period following the month of purchase. The schedule of charges for Class A shares is as follows: Initial Sales Charge
As a % of the Net As a % of the Commission to Dealer/Agent as a Amount of Purchase Amount Invested Offering Price % 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% Amounts between $1,000,000 - $2,999,999 None None 1.00%, plus For amounts between $3,000,000 - $4,999,999 None None .50%, plus For amounts of $5,000,000 and over None None .25%
No front-end sales charges are imposed on Class A shares purchased by (a) institutional investors, which may include bank trust departments and registered investment advisers; (b) investment advisers, consultants or financial planners who place trades for their own accounts or the accounts of their clients and who charge such clients a management, consulting, advisory or other fee; (c) clients of investment advisers or financial planners who place trades for their own accounts if the accounts are linked to the master account of such investment advisers or financial planners on the books of the broker-dealer through whom shares are purchased; institutional clients of broker-dealers, including retirement and deferred compensation plans and the trusts used to fund these plans, which place trades through an omnibus account maintained with a Fund by the broker-dealer; shareholders of record on October 12, 1990 in any series of Evergreen Investment Trust in existence on that date, and the members of their immediate families; current and retired employees of FUNB and its affiliates, EKD and any broker-dealer with whom EKD has entered into an agreement to sell shares of the Funds, and members of the immediate families of such employees; and upon the initial purchase of an Evergreen 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 purchased with a front-end sales charge or subject to a CDSC. Certain broker-dealers or other financial institutions may impose a fee on transactions in shares of the Funds. Class A shares may also be purchased at net asset value by qualified and non-qualified employee benefit and savings plans which make shares of the Funds and the other Evergreen Keystone 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 make the Evergreen Keystone 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 0.50% of the net asset value of shares purchased. These payments are subject to reclaim in the event shares are redeemed within twelve months after purchase. When Class A shares are sold, EKD will normally retain a portion of the applicable sales charge and pay the balance to the broker-dealer or other financial intermediary through whom the sale was made. EKD may also pay fees to banks from sales charges for services performed on behalf of the customers of such banks in connection with the purchase of shares of the Funds. In addition to compensation paid at the time of sale, entities whose clients have purchased Class A shares may receive a trailing commission equal to 0.25% of the average daily value on an annual basis of Class A shares held by their clients. Certain purchases of Class A shares may qualify for reduced sales charges in accordance with a Fund's Concurrent Purchases, Rights of Accumulation, Letter of Intent, Privilege for Certain Retirement Plans and Reinstatement Privilege. Consult the Share Purchase Application and SAI for additional information concerning these reduced sales charges. CLASS B SHARES -- DEFERRED SALES CHARGE ALTERNATIVE. You may purchase Class B shares at net asset value without an initial sales charge. However, you may pay a CDSC if you redeem shares within six years after the month of purchase. The amount of the CDSC (expressed as a percentage of the lesser of the current net asset value or original cost) will vary according to the number of years from the month of purchase of Class B shares as set forth below. CDSC REDEMPTION TIMING IMPOSED Month of purchase and the first twelve-month period following the month of purchase....................... 5.00% Second twelve-month period following the month of purchase........................................ 4.00% Third twelve-month period following the month of purchase......................................... 3.00% Fourth twelve-month period following the month of purchase......................................... 3.00% Fifth twelve-month period following the month of purchase......................................... 2.00% Sixth twelve-month period following the month of purchase......................................... 1.00% No CDSC is imposed on amounts redeemed thereafter. The CDSC is deducted from the amount of the redemption and is paid to EKD or its predecessor. Class B shares are subject to higher distribution and/or shareholder service fees than Class A shares for a period of seven years after the month of purchase (after which it is expected that they will convert to Class A shares without imposition of a front-end sales charge or exchange fee). The higher fees mean a higher expense ratio, so Class B shares pay correspondingly lower dividends and may have a lower net asset value than Class A shares. The maximum amount of Class B Shares that may be purchased is $250,000. See the SAI for further details. CLASS C SHARES -- LEVEL-LOAD ALTERNATIVE. Class C shares are only offered through broker-dealers who have special distribution agreements with EKD. You may purchase Class C shares at net asset value without any initial sales charge and, therefore, the full amount of your investment will be used to purchase Fund shares. However, you will pay a 1.00% CDSC, if you redeem shares during the month of purchase and the 12-month period following the month of purchase. No CDSC is imposed on amounts redeemed thereafter. Class C shares incur higher distribution and/or shareholder service fees than Class A shares but, unlike Class B shares, do not convert to any other class of shares of a Fund. The higher fees mean a higher expense ratio, so Class C shares pay correspondingly lower dividends and may have a lower net asset value than Class A shares. The maximum amount of Class C shares that may be purchased is $500,000. No CDSC will be imposed on Class C shares purchased by institutional investors, and through employee benefit and savings plans eligible for the exemption from front-end sales charges described under "Class A Shares-Front End Sales Charge Alternative", above. Broker-dealers and other financial intermediaries whose clients have purchased Class C shares may receive a trailing commission equal to 0.75% of the average daily value of such shares on an annual basis held by their clients more than one year from the date of purchase. The payment of trailing commissions will commence immediately with respect to shares eligible for exemption from the CDSC normally applicable to Class C shares. CONTINGENT DEFERRED SALES CHARGE Shares obtained from dividend or distribution reinvestment are not subject to a CDSC. Any CDSC imposed upon the redemption of Class A, Class B or Class C shares is a percentage of the lesser of (1) the net asset value of the shares redeemed or (2) the net asset value at the time of purchase of such shares. No CDSC is imposed on a redemption of shares of the Fund in the event of (1) death or disability of the shareholder; (2) a lump-sum distribution from a 401(k) plan or other benefit plan qualified under the Employee Retirement Income Security Act of 1974 ("ERISA"); (3) automatic withdrawals from ERISA plans if the shareholder is at least 59 1/2 years old; (4) involuntary redemptions of accounts having an aggregate net asset value of less than $1.00; (5) automatic withdrawals under the Systematic Withdrawal Plan of up to 1.00% per month of the shareholder's initial account balance; (6) withdrawals consisting of loan proceeds to a retirement plan participant; (7) financial hardship withdrawals made by a retirement plan participant; or (8) withdrawals consisting of returns of excess contributions or excess deferral amounts made to a retirement plan participant. The Funds may also sell Class A, Class B or Class C shares at net asset value without any initial sales charge or a CDSC to certain Directors, Trustees, officers and employees of the Funds, Keystone, FUNB, EAMC, EKD and certain of their affiliates, and to members of the immediate families of such persons, to registered representatives of firms with dealer agreements with EKD, and to a bank or trust company acting as a trustee for a single account. See the SAI for more information. 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 or Directors believe would accurately reflect fair value. Non-dollar denominated securities will be valued as of the close of the Exchange at the closing price of such securities in their principal trading markets. GENERAL. The decision as to which Class of shares is more beneficial to you depends on the amount of your investment and the length of time you will hold it. If you are making a large investment, thus qualifying for a reduced sales charge, you might consider Class A shares. If you are making a smaller investment, you might consider Class B shares since 100% of your purchase is invested immediately and since such shares will convert to Class A shares, which incur lower ongoing distribution and/or shareholder service fees, after seven years. If you are unsure of the time period of your investment, you might consider Class C shares since there are no initial sales charges and, although there is no conversion feature, the CDSC only applies to redemptions made during the first year. Consult your financial intermediary for further information. The compensation received by dealers and agents may differ depending on whether they sell Class A, Class B or Class C shares. There is no size limit on purchases of Class A shares. In addition to the discount or commission paid to broker-dealers, EKD may from time to time pay to broker-dealers additional cash or other incentives that are conditioned upon the sale of a specified minimum dollar amount of shares of a Fund and/or other Evergreen Keystone 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 broker-dealer and their immediate family members to urban or resort locations within or outside the United States. Such a dealer may elect to receive cash incentives of equivalent amount in lieu of such payments. EKD may also limit the availability of such incentives to certain specified dealers. EKD from time to time sponsors promotions involving First Union Brokerage Services, Inc. ("FUBS"), an affiliate of each Fund's investment adviser, and select broker-dealers, pursuant to which incentives are paid, including gift certificates and payments in amounts up to 1% of the dollar amount of shares of a Fund sold. Awards may also be made based on the opening of a minimum number of accounts. Such promotions are not being made available to all broker-dealers. Certain broker-dealers may also receive payments from EKD or a Fund's investment adviser over and above the usual trail commissions or shareholder servicing payments applicable to a given Class of shares. ADDITIONAL PURCHASE INFORMATION. As a condition of this offering, if a purchase is canceled due to nonpayment or because an investor's check does not clear, the investor will be responsible for any loss a Fund or the Fund's investment adviser incurs. If such investor is an existing shareholder, a Fund may redeem shares from an investor's account to reimburse the Fund or its investment adviser for any loss. In addition, such investors may be prohibited or restricted from making further purchases in any of the Evergreen Keystone 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 for cash, (at their net redemption value) on any day the Exchange is open, either directly by writing to the Fund, c/o EKSC, or through your financial intermediary. The amount you will receive is based on the net asset value adjusted for fractions of a cent (less any applicable CDSC for Class B or Class C shares) next calculated after the Fund receives your request in proper form. Proceeds generally will be sent to you within seven days. However, for shares recently purchased by check, a Fund will not send proceeds until it is reasonably satisfied that the check has been collected (which may take up to 15 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 documentation to a Fund and may charge you for this service. Certain financial intermediaries may require that you give instructions earlier than 4:00 p.m. (Eastern time). REDEEMING SHARES DIRECTLY BY MAIL OR TELEPHONE. Send a signed letter of instruction or stock power form to the Fund, c/o EKSC; the registrar, transfer agent and dividend-disbursing agent for each Fund. Stock power forms are available from your financial intermediary, EKSC, and many commercial banks. Additional documentation is required for the sale of shares by corporations, financial intermediaries, fiduciaries and surviving joint owners. Signature guarantees are required for all redemption requests for shares with a value of more than $50,000. Currently, the requirement for a signature guarantee has been waived on redemptions of $50,000 or less when the account address of record has been the same for a minimum period of 30 days. The Fund and EKSC reserve the right to withdraw this waiver at any time. A signature guarantee must be provided by a bank or trust company (not a Notary Public), a member firm of a domestic stock exchange or by other financial institutions whose guarantees are acceptable under the Securities Exchange Act of 1934 and EKSC's policies. Shareholders may withdraw amounts of $1,000 or more (up to $50,000) from their accounts by calling the telephone number on the front page of this Prospectus between the hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on which the Exchange or EKSC's offices are closed). The Exchange is closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Redemption requests received after 4:00 p.m. (Eastern time) will be processed using the net asset value determined on the next business day. Such redemption requests must include the shareholder's account name, as registered with a Fund, and the account number. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone redemptions. If you cannot reach the Fund by telephone, you should follow the procedures for redeeming by mail or through a broker-dealer as set forth herein. The telephone redemption service is not made available to shareholders automatically. Shareholders wishing to use the telephone redemption service must complete the appropriate sections on the Share Purchase Application and choose how the redemption proceeds are to be paid. Redemption proceeds will either (i) be mailed by check to the shareholder at the address in which the account is registered or (ii) be wired to an account with the same registration as the shareholder's account in a Fund at a designated commercial bank. In order to insure that instructions received by EKSC are genuine when you initiate a telephone transaction, you will be asked to verify certain criteria specific to your account. At the conclusion of the transaction, you will be given a transaction number confirming your request, and written confirmation of your transaction will be mailed the next business day. Your telephone instructions will be recorded. Redemptions by telephone are allowed only if the address and bank account of record have been the same for a minimum period of 30 days. The Fund reserves the right at any time to terminate, suspend, or change the terms of any redemption method described in this Prospectus, except redemption by mail, and to impose fees. Except as otherwise noted, neither the Funds, EKSC, nor EKD assumes responsibility for the authenticity of any instructions received by any of them from a shareholder in writing, over the Evergreen Keystone Express Line, or by telephone. EKSC will employ reasonable procedures to confirm that instructions received over Evergreen Keystone Express Line or by telephone are genuine. Neither the Funds, EKSC, nor the EKD will be liable when following instructions received over Evergreen Keystone Express Line or by telephone that EKSC reasonably believes are genuine. EVERGREEN KEYSTONE EXPRESS LINE. Evergreen Keystone Express Line offers you specific fund account information and price and yield quotations as well as the ability to do account transactions, including investments, exchanges and redemptions. You may access Evergreen Keystone Express Line by dialing toll free 1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a week. GENERAL. The sale of shares is a taxable transaction for Federal income tax purposes. The Funds may temporarily suspend the right to redeem their shares when (1) the Exchange is closed, other than customary weekend and holiday closings; (2) trading on the Exchange is restricted; (3) an emergency exists and the Funds cannot dispose of their investments or fairly determine their value; or (4) the Securities and Exchange Commission so orders. The Funds reserve the right to close an account that through redemption has fallen below $1,000 and has remained so for thirty days. Shareholders will receive sixty days' written notice to increase the account value to at least $1,000 before the account is closed. The Funds have elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which each Fund is obligated to redeem shares solely in cash, up to the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day period for any one shareholder. See the SAI 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 Keystone mutual funds through your financial intermediary, by calling or writing to EKSC or by using Evergreen Keystone Express Line as described below. Once an exchange request has been telephoned or mailed, it is irrevocable and may not be modified or canceled. Exchanges will be made on the basis of the relative net asset values of the shares exchanged next determined after an exchange request is received. An exchange that represents an initial investment in another Evergreen Keystone mutual fund is subject to the minimum investment and suitability requirements of each Fund. Each of the Evergreen Keystone 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 order must comply with the requirement for a redemption or repurchase order and must specify the dollar value or number of shares to be exchanged. An exchange is treated for Federal income tax purposes as a redemption and purchase of shares and may result in the realization of a capital gain or loss. Shareholders are limited to five exchanges per calendar year, with a maximum of three per calendar quarter. This exchange privilege may be modified or discontinued at any time by the Fund upon sixty days' notice to shareholders and is only available in states in which shares of the fund being acquired may lawfully be sold. No CDSC will be imposed in the event Class B or Class C shares are exchanged for Class B or Class C shares, respectively, of other Evergreen Keystone mutual funds. If you redeem shares, the CDSC applicable to the Class B or Class C shares of the Evergreen or Keystone 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. Exchange requests received by the Fund after 4:00 p.m. (Eastern time) will be processed using the net asset value determined at the close of the next business day. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone exchanges. You should follow the procedures outlined below for exchanges by mail if you are unable to reach EKSC by telephone. If you wish to use the telephone exchange service you should indicate this on the Share Purchase Application. As noted above, each Fund will employ reasonable procedures to confirm that instructions for the redemption or exchange of shares communicated by telephone are genuine. A telephone exchange may be refused by a Fund or EKSC if it is believed advisable to do so. Procedures for exchanging Fund shares by telephone may be modified or terminated at any time. Written requests for exchanges should follow the same procedures outlined for written redemption requests in the section entitled "How to Redeem Shares"; however, no signature guarantee is required. SHAREHOLDER SERVICES The Funds offer the following shareholder services. For more information about these services or your account, contact your financial intermediary, EKSC or the toll-free number on the front page of this Prospectus. Some services are described in more detail in the Share Purchase Application. SYSTEMATIC INVESTMENT PLAN. You may make monthly or quarterly investments into an existing account automatically in amounts of not less than $25 per month or $75 per quarter. You may open a Systematic Investment Plan in the EVERGREEN FUND and EVERGREEN AGGRESSIVE GROWTH 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 4:00 p.m. (Eastern time) will be credited to a shareholder's account the day the request is received. Shares purchased under the Systematic Investment Plan or Telephone Investment Plan may not be redeemed for ten days from the date of investment. SYSTEMATIC WITHDRAWAL PLAN. When an account of $10,000 or more is opened or when an existing account reaches that size, you may participate in the Systematic Withdrawal Plan by filling out the appropriate part of the Share Purchase Application. Under this plan, you may receive (or designate a third party to receive) a monthly or quarterly fixed-withdrawal payment in a stated amount of at least $75 and may be as much as 1.0% per month or 3.0% per quarter of the total net asset value of the Fund shares in your account when the Plan was opened. Fund shares will be redeemed as necessary to meet withdrawal payments. All participants must elect to have their dividends and capital gain distributions reinvested automatically. Any applicable Class B CDSC will be waived with respect to redemptions occurring under a Systematic Withdrawal Plan during a calendar year to the extent that such redemptions do not exceed 10% of (i) the initial value of the account plus (ii) the value, at the time of purchase, of any subsequent investments. Excessive withdrawals may decrease or deplete the value of your account. Moreover, because of the effect of the applicable sales charge, a Class A investor should not make continuous purchases of a Fund's shares while participating in a Systematic Withdrawal Plan. INVESTMENTS THROUGH EMPLOYEE BENEFIT AND SAVINGS PLANS. Certain qualified and non-qualified benefit and savings plans may make shares of the Funds and the other Evergreen Keystone 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." EAMC, Keystone or CMG may provide compensation to organizations providing administrative and recordkeeping services to plans which make shares of the Evergreen Keystone 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 a Fund at the net asset value per share at the close of business on the record date, unless otherwise requested by a shareholder in writing. If the transfer agent does not receive a written request for subsequent dividends and/or distributions to be paid in cash at least three full business days prior to a given record date, the dividends and/or distributions to be paid to a shareholder will be reinvested. DOLLAR COST AVERAGING. Through dollar cost averaging you can invest a fixed dollar amount each month or each quarter in any Evergreen Keystone mutual fund. This results in more shares being purchased when the selected Fund's net asset value is relatively low and fewer shares being purchased when the Fund's net asset value is relatively high and may result in a lower average cost per share than a less systematic investment approach. Prior to participating in dollar cost averaging, you must establish an account in an Evergreen Keystone mutual fund. You should designate on the application (1) the dollar amount of each monthly or quarterly investment you wish to make and (2) the Fund in which the investment is to be made. Thereafter, on the first day of the designated month, an amount equal to the specified monthly or quarterly investment will automatically be redeemed from your initial account and invested in shares of the designated fund. If you are a Class A investor and paid a sales charge on your initial purchase, the shares purchased will be eligible for Rights of Accumulation and the sales charge applicable to the purchase will be determined accordingly. In addition, the value of shares purchased will be included in the total amount required to fulfill a Letter of Intent. If a sales charge was not paid on the initial purchase, a sales charge will be imposed at the time of subsequent purchases, and the value of shares purchased will become eligible for Rights of Accumulation and Letters of Intent. See the SAI. TWO DIMENSIONAL INVESTING. You may elect to have income and capital gains distributions from any class of Evergreen Keystone mutual fund shares you own automatically invested to purchase the same class of shares of any other Evergreen Keystone mutual fund. You may select this service on your application and indicate the Evergreen Keystone mutual fund(s) into which distributions are to be invested. The value of shares purchased will be ineligible for Rights of Accumulation and Letters of Intent. See the SAI. TAX SHELTERED RETIREMENT PLANS. The Fund has various retirement plans available to you, including Individual Retirement Accounts (IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Salary Reduction Plans (SARSEPs); Tax Sheltered Annuity Plans; 403(b)(7) Plans; 401(k) Plans; Keogh Plans; Corporate Profit-Sharing Plans; and Money Purchase Plans. For details, including fees and application forms, call toll free 1-800-247-4075 or write to EKSC. EFFECT OF BANKING LAWS The Glass-Steagall Act and other banking laws and regulations ("Banking Laws") presently prohibit member banks of the Federal Reserve System or their non-bank affiliates ("Member Banks") from sponsoring, organizing, controlling, or distributing the shares of registered open-end investment companies such as the Funds. However, under the Banking Laws, a Member Bank 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. EAMC and Keystone, since they both are subsidiaries of FUNB, and CMG are subject to and in compliance with the aforementioned laws and regulations. Changes to applicable laws and regulations or future judicial or administrative decisions could result in CMG, Keystone or EAMC 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, Keystone or EAMC were prevented from continuing to provide the services called for under the investment advisory agreements, it is expected that the Trustees or Directors would identify, and call upon each Fund's shareholders to approve, a new investment adviser. If this were to occur, the Trustees or Directors would seek to take action so that the shareholders of any Fund would not suffer any adverse financial consequences. OTHER INFORMATION DIVIDENDS, DISTRIBUTIONS AND TAXES It is the policy of each Fund to distribute its investment company taxable income and any net realized capital gains to shareholders 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 in 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 writes to the Fund's transfer agent and requests payment in cash. Each Fund has qualified and intends to continue to qualify 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. Following the end of each calendar year, every shareholder of the Funds will be sent applicable tax information and information regarding the dividends and capital gain distributions made during the calendar year. 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%. EVERGREEN U.S. REAL ESTATE EQUITY FUND invests in real estate investment trusts which report the tax characteristics of their distributions to the Fund annually on a calendar year basis. The timing of such reporting to the Fund may affect the tax characteristics of distributions by the Fund 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 EKSC, that the investor's social security or taxpayer identification number is correct and that the investor is not currently subject to backup withholding or is exempt from backup withholding. A shareholder who acquires Class A shares of a Fund and sells or otherwise disposes of such shares within ninety days of acquisition may not be allowed to include certain sales charges incurred in acquiring such shares for purposes of calculating gain and loss realized upon a sale or exchange of shares of the Fund. The foregoing discussion of Federal income tax consequences is based on tax laws and regulations in effect on the date of this Prospectus, and is subject to change by legislative or administrative action. As the foregoing discussion is for general information only, you should also review the discussion of "Additional Tax Information" contained in the SAI. 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 CODE OF ETHICS. The Funds have adopted a Code of Ethics incorporating policies on personal securities trading as recommended by the Investment Company Institute. 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 FUND, EVERGREEN AGGRESSIVE GROWTH FUND and EVERGREEN SMALL CAP VALUE FUND are each separate investment series of the Evergreen Trust, a Massachusetts business trust reorganized in 1986 from a Maryland predecessor corporation. The EVERGREEN U.S. REAL ESTATE EQUITY FUND is a separate series of Evergreen Equity Trust, a Massachusetts business trust organized in 1988. EVERGREEN LIMITED MARKET FUND, INC. is a Maryland corporation organized in 1983. 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 Directors or 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 (or corporation in the case of the EVERGREEN LIMITED MARKET FUND, INC.) 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 was established in a Trust (or in EVERGREEN LIMITED MARKET FUND, INC.), each share of the series or any Class established thereunder would normally be entitled to one vote for all purposes. Generally, shares of each series and Class would vote together as a single Class on matters, such as the election of Trustees of Directors, that affect each series and Class in substantially the same manner. Class A, Class B, Class C and Class Y shares have identical voting, dividend, liquidation and other rights, except that each Class bears, to the extent applicable, its own distribution and 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 or Directors and, in liquidation of a Fund, are entitled to receive the net assets of the Fund. CUSTODIAN. State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each Fund's custodian. REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT. Evergreen Keystone Service Company, P.O. Box 2121, Boston, Massachusetts 02106-2121 acts as registrar, transfer agent and dividend-disbursing agent for each of the Funds. The transfer agent 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. EKD, an affiliate of BISYS, located at 125 West 55th Street, New York, New York 10019, is the principal underwriter of the Funds. BISYS also acts as sub-administrator to the Funds and provides certain sub-administrative services to Keystone in connection with its role as investment adviser to EVERGREEN SMALL CAP VALUE FUND and to EAMC in connection with its role as investment adviser to EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN LIMITED MARKET FUND, INC., 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 EAMC, (ii) certain institutional investors and (iii) investment advisory clients of EAMC, Keystone, CMG and 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 [and dividend] income it earned from its portfolio of investments (as defined by the SEC formula) for a 30-day period (net of expenses), divides it by the average number of shares entitled to receive dividends, and expresses the result as an annualized percentage rate based on the Fund's share price at the end of the 30-day period. This yield does not reflect gains or losses from selling securities. Performance data for each class of shares will be included in any advertisement or sales literature using performance data of a Fund. These advertisements may quote performance rankings or ratings of a Fund by financial publications or independent organizations such as Lipper Analytical Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various indices. The Fund may also advertise in items of sales literature an "actual distribution rate" which is computed by dividing the total ordinary income distributed (which may include the excess of short-term capital gains over losses) to shareholders for the latest twelve month period by the maximum public offering price per share on the last day of the period. Investors should be aware that past performance may not be reflective of future results. In marketing a Fund's shares, information may be provided that is designed to help individuals understand their investment goals and explore various financial strategies. Such information may include publications describing general principles of investing, such as asset allocation, diversification, risk tolerance, and goal setting; a questionnaire designed to help create a personal financial profile; and an action plan offering investment alternatives. The information provided to investors may also include discussions of other Evergreen Keystone 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. EKD may also reprint, and use as advertising and sales literature, articles from Evergreen Events, a quarterly magazine provided to Evergreen Keystone 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 EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND, EVERGREEN AGGRESSIVE GROWTH FUND and EVERGREEN SMALL CAP VALUE FUND operate provide that no Trustee or shareholder will be personally liable for the obligations of the Trust and that every written contract made by the Trust shall contain a provision to that effect. If any Trustee or shareholder were required to pay any liability of the Trust, that person would be entitled to reimbursement from the general assets of the Trust. ADDITIONAL INFORMATION. This Prospectus and the SAI, which has been incorporated by reference herein, do not contain all the information set forth in the Registration Statements filed by the Trusts or EVERGREEN LIMITED MARKET FUND, INC. with the SEC under the Securities Act. 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. ******************************************************************************** PROSPECTUS ******************************************************************************** THE EVERGREEN(SM) DOMESTIC GROWTH FUNDS ******************************************************************************** PROSPECTUS DATED JUNE 2, 1997 EVERGREEN FUND EVERGREEN AGGRESSIVE GROWTH FUND EVERGREEN SMALL CAP VALUE FUND PROSPECTUS DATED NOVEMBER 29, 1996 AS SUPPLEMENTED JUNE 2, 1997 EVERGREEN U.S. REAL ESTATE EQUITY FUND EVERGREEN LIMITED MARKET FUND, INC. CLASS Y SHARES The Evergreen Domestic Growth Funds (the "Funds") are designed to provide investors with a selection of investment alternatives that seek to provide capital growth 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 ("SAI") dated June 2, 1997 for the Evergreen Fund, the Evergreen Aggressive Growth Fund and the Evergreen Small Cap Value Fund and dated November 29, 1996 as supplemented June 2, 1997 for the Evergreen U.S. Real Estate Equity Fund and the Evergreen Limited Market Fund, Inc. has been filed with the Securities and Exchange Commission and is incorporated by reference herein. The SAI provides information regarding certain matters discussed in this Prospectus and other matters that may be of interest to investors. Shareholders may obtain a copy of the SAI without charge by calling the Funds at (800) 343-2898. There can be no assurance that the investment objective of any Fund will be achieved. Investors are advised to read this Prospectus carefully. THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. KEEP THIS PROSPECTUS FOR FUTURE REFERENCE EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp. Copyright 1995, Evergreen Asset Management Corp. TABLE OF CONTENTS Page OVERVIEW OF THE FUNDS.......................................................4 EXPENSE INFORMATION.........................................................4 FINANCIAL HIGHLIGHTS........................................................6 DESCRIPTION OF THE FUNDS....................................................7 INVESTMENT OBJECTIVES AND POLICIES....................................7 INVESTMENT PRACTICES AND RESTRICTIONS.................................9 SPECIAL RISK CONSIDERATIONS..........................................13 OTHER INVESTMENT RESTRICTIONS........................................14 MANAGEMENT OF THE FUNDS....................................................14 BOARD OF TRUSTEES/DIRECTORS..........................................14 INVESTMENT ADVISERS..................................................14 SUB-ADVISER..........................................................15 PORTFOLIO MANAGERS...................................................15 ADMINISTRATOR........................................................16 SUBADMINISTRATOR.....................................................16 PURCHASE AND REDEMPTION OF SHARES..........................................17 HOW TO BUY SHARES....................................................17 HOW TO REDEEM SHARES.................................................18 EXCHANGE PRIVILEGE...................................................19 SHAREHOLDER SERVICES OVERVIEW OF THE FUNDS The following summary is qualified in its entirety by the more detailed information contained elsewhere in this Prospectus. See "Description of the Funds" and "Management of the Funds." The investment adviser to the EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN LIMITED MARKET FUND, INC. is Evergreen Asset Management Corp. ("EAMC"). EAMC and its predecessors have served as investment adviser to the Evergreen mutual funds since 1971. EAMC is a wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB"), which in turn is a subsidiary of First Union Corporation, the sixth largest bank holding company in the United States. The Capital Management Group of First Union National Bank of North Carolina serves as investment adviser to EVERGREEN AGGRESSIVE GROWTH FUND. Keystone Investment Management Company ("Keystone") serves as investment adviser to the EVERGREEN SMALL CAP VALUE FUND. Keystone is an indirectly-owned subsidiary of FUNB. Keystone, or its affiliates, have provided investment advisory and management services to investment companies and private accounts since 1932. EVERGREEN FUND seeks to achieve capital appreciation by investing in the securities of little-known or relatively small companies, or companies undergoing changes which the Fund's investment adviser believes will have favorable consequences. Income will not be a factor in the selection of portfolio investments. EVERGREEN U.S. REAL ESTATE EQUITY FUND seeks long-term capital growth. Current income is a secondary objective. It invests primarily in equity securities of U.S. companies which are principally engaged in the real estate industry or which own significant real estate assets. It will not purchase direct interests in real estate. EVERGREEN LIMITED MARKET FUND, INC. seeks to achieve capital appreciation in the value of its shares. Income is not a factor in the selection of portfolio securities. In attempting to achieve its objective, the policy of EVERGREEN LIMITED MARKET FUND, INC. is to invest principally in securities of companies for which there is a relatively limited trading market. Generally these are little-known, small or special situation companies. EVERGREEN AGGRESSIVE GROWTH FUND seeks long-term capital appreciation by investing primarily in common stocks of emerging growth companies and in larger, more well established companies, all of which are viewed by the Fund's investment adviser as having above average appreciation potential. EVERGREEN SMALL CAP VALUE FUND seeks capital appreciation by investing in a diversified portfolio of common stocks of U.S. issuers which the investment adviser believes have underlying values, or potential values, exceeding their current values. THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE ACHIEVED. EXPENSE INFORMATION The table set forth below summarizes the shareholder transaction costs associated with an investment in Class Y Shares of a Fund. For further information see "Purchase and Redemption of Shares" and "General Information -- Other Classes of Shares." CLASS Y SHARES SHAREHOLDER TRANSACTION EXPENSES NO LOAD OPTION Maximum Sales Charge Imposed on Purchases None Maximum Sales Load Imposed on Dividend Reinvestments None Maximum Deferred Sales Charge None Exchange Fee None ANNUAL FUND OPERATING EXPENSES AND EXAMPLES The following tables show for each 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 FUND Annual Operating Expenses Examples ------------------ --------------- Management Fees 0.98% After 1 Year $ 12 Other Expenses 0.17% After 3 Years $ 37 ----- Total 1.15% After 5 Years $ 63 After 10 Years $140 EVERGREEN U.S. REAL ESTATE EQUITY FUND Annual Operating Expenses Examples ------------------ --------------- Management Fees 1.00% After 1 Year $ 15 Other Expenses* 0.50% After 3 Years $ 47 ----- Total 1.50% After 5 Years $ 82 After 10 Years $179 EVERGREEN LIMITED MARKET FUND, INC. Annual Operating Expenses Examples ------------------ ---------------- Management Fees 1.00% After 1 Year $ 16 Other Expenses** 0.60% After 3 Years $ 50 Total 1.60% After 5 Years $ 87 After 10 Years $190 EVERGREEN AGGRESSIVE GROWTH FUND Annual Operating Expenses Examples ------------------ ---------------- Management Fees 0.60% After 1 Year $10 Other Expenses 0.37% After 3 Years $31 ----- Total 0.97% After 5 Years $54 After 10 Years $119 EVERGREEN SMALL CAP VALUE FUND Annual Operating Expenses Examples ------------------ ---------------- Management Fees 0.95% After 1 Year $15 Other Expenses*** 0.55% After 3 Years $47 ------- Total 1.50% *Reflects an agreement by EAMC to limit aggregate operating expenses (including the Advisory Fees, but excluding interest, taxes, brokerage commissions and extraordinary expenses) of EVERGREEN U.S. REAL ESTATE EQUITY FUND to an annual rate of 1.50% of average net assets until the fund reaches net assets of $15 million. Absent such agreements, the estimated annual operating expenses for Class Y Shares would have been 2.25% of average net assets. **The annual operating expenses and examples of EVERGREEN LIMITED MARKET FUND, INC. do not reflect fee waivers and expense reimbursements for the most recent fiscal period. Actual expenses net of fee waivers and expense reimbursements for the fiscal year ended September 30, 1996 for Class Y Shares were 1.55%. ***Reflects agreements by Keystone to limit aggregate operating expenses (including the Advisory Fees, but excluding interest, taxes, brokerage commissions and extraordinary expenses) of EVERGREEN SMALL CAP VALUE FUND to an annual rate of 1.50% of average net assets until the Fund reaches net assets of $15 million. Absent such agreements, the estimated annual operating expenses for the Fund would be 1.75% of average net assets. The Fund offers Class A, B and C Shares which have different expenses and sales charges. From time to time, each fund's investment adviser may, at its discretion, reduce or waive its fees or reimburse the Funds for certain of their expenses in order to reduce their expense ratios. Each Fund's investment adviser may cease these waivers and reimbursements at any time. The purpose of the foregoing table is to assist an investor in understanding the various costs and expenses that an investor in Class Y 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. These amounts have been restated to reflect current fee arrangements. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various costs and expenses borne by the Funds see "Management of the Funds." FINANCIAL HIGHLIGHTS The tables on the following pages represent, for each Fund, financial highlights for a share outstanding throughout each period. Price Waterhouse LLP has audited the financial highlights for (i) the five most recent fiscal years or the life of the Fund, if shorter, for EVERGREEN FUND and EVERGREEN U.S. REAL ESTATE EQUITY FUND, (ii) the fiscal year ended September 30, 1996 for EVERGREEN LIMITED MARKET FUND, INC., and (iii) for the fiscal periods ended September 30, 1995 and 1996 for EVERGREEN AGGRESSIVE GROWTH FUND. Ernst & Young LLP was EVERGREEN LIMITED MARKET FUND, INC.'s prior independent auditors and audited that Fund's financial highlights for each of the fiscal years in the four-year period ended September 30, 1995. A report of Price Waterhouse LLP and Ernst & Young LLP, as the case may be, on the audited information with respect to each Fund is contained in the annual report to shareholders of each Fund which in relevant part is incorporated by reference in the SAI. Shareholders should read the following information for each Fund in conjunction with the financial statements and related notes contained in such annual report which are incorporated by reference in the SAI. Further information about a Fund's performance is contained in the Fund's annual report to shareholders, which may be obtained without charge. Further information about a Fund's performance is contained in the Fund's annual report to shareholders, which may be obtained without charge. EVERGREEN FUND -- CLASS Y SHARES
YEAR ENDED SEPTEMBER 30, 1996 1995 1994 1993 1992 1991 1990 1989 1988* PER SHARE DATA Net asset value, beginning of period.................................. $15.59 $14.62 $14.46 $13.10 $13.32 $ 9.66 $14.01 $12.47 $15.12 Income (loss) from investment operations: Net investment income...................... .24 .10 .07 .09 .09 .17 .24 .32 .21 Net realized and unrealized gain (loss) on investments.............................. 2.55 3.10 .79 1.96 .55 3.93 (3.62) 1.99 (1.05) Total from investment operations............................. 2.79 3.20 .86 2.05 .64 4.10 (3.38) 2.31 (.84) Less distributions to shareholders from: Net investment income...................... (.09) (.07) (.09) (.07) (.17) (.18) (.36) (.21) (.25) Net realized gains......................... (.58) (2.16) (.61) (.62) (.69) (.26) (.61) (.56) (1.56) Total distributions...................... (.67) (2.23) (.70) (.69) (.86) (.44) (.97) (.77) (1.81) Net asset value, end of period............. $17.71 $15.59 $14.62 $14.46 $13.10 $13.32 $9.66 $14.01 $12.47 TOTAL RETURN+................................ 18.4% 26.8% 6.2% 15.8% 5.2% 43.7% (25.4%) 20.0% 1.9% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (in millions)...... $841 $612 $526 $657 $722 $755 $525 $867 $751 Ratios to average net assets: Operating expenses......................... 1.15% 1.16% 1.13% 1.11% 1.13% 1.15% 1.15% 1.11% 1.03% Interest expense........................... -- .06% .09% .01% -- -- -- -- -- Net investment income...................... .93% .53% .40% .60% .56% 1.45% 1.83% 2.46% 1.70% Portfolio turnover rate...................... 15% 19% 19% 21% 32% 35% 39% 40% 42% Average commission rate paid per share....... $.0603 N/A N/A N/A N/A N/A N/A N/A N/A 1987* PER SHARE DATA Net asset value, beginning of period.................................. $13.55 Income (loss) from investment operations: Net investment income...................... .17 Net realized and unrealized gain (loss) on investments.............................. 2.65 Total from investment operations............................. 2.82 Less distributions to shareholders from: Net investment income...................... (.13) Net realized gains......................... (1.12) Total distributions...................... (1.25) Net asset value, end of period............. $15.12 TOTAL RETURN+................................ 22.5% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (in millions)...... $808 Ratios to average net assets: Operating expenses......................... 1.03% Interest expense........................... -- Net investment income...................... 1.32% Portfolio turnover rate...................... 46% Average commission rate paid per share....... N/A
* Net of expense limitation in fiscal years 1988 and 1987. + Total return is calculated on net asset value for the period indicated and is not annualized. EVERGREEN U.S. REAL ESTATE EQUITY FUND -- CLASS Y SHARES
NINE MONTHS SEPTEMBER 1, 1993* YEAR ENDED YEAR ENDED ENDED THROUGH SEPTEMBER 30, 1996| SEPTEMBER 30, 1995 SEPTEMBER 30, 1994# DECEMBER 31, 1993 PER SHARE DATA Net asset value, beginning of period........................... $11.44 $10.07 $ 10.71 $ 10.00 Income (loss) from investment operations: Net investment income............ .24 .23 .11 .04 Net realized and unrealized gain (loss) on investments.......... 1.29 1.46 (.75) .72 Total from investment operations................... 1.53 1.69 (.64) .76 Less distributions to shareholders from: Net investment income............ (.20) (.20) -- (.04) In excess of net investment income......................... -- -- -- (.01) Net realized gains............... (.21) (.12) -- -- Total distributions............ (.41) (.32) -- (.05) Net asset value, end of period..... $12.56 $11.44 $ 10.07 $ 10.71 TOTAL RETURN+...................... 13.6% 17.6% (6.0%) 7.6% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)......................... $10,601 $9,456 $8,630 $4,610 Ratios to average net assets: Expenses**....................... 1.46% 1.50% 1.49%++ .44%++ Interest expense................. .04% -- -- -- Net investment income**.......... 2.02% 2.45% 1.60%++ 1.93%++ Portfolio turnover rate............ 169% 115% 102% 17% Average commission rate paid per share............................ $.0619 N/A N/A N/A
| Per share data is calculated based on average shares outstanding during the period. # The Fund changed its fiscal year end from December 31 to September 30. * Commencement of 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:
NINE MONTHS SEPTEMBER 1, 1993* YEAR ENDED YEAR ENDED ENDED THROUGH SEPTEMBER 30,1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 DECEMBER 31, 1993 Expenses............................ 2.25% 2.70% 2.65% 3.59% Net investment income (loss)........ 1.23% 1.25% .44% (1.21%)
EVERGREEN LIMITED MARKET FUND, INC. -- CLASS Y SHARES
YEAR YEAR FOUR MONTHS ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED MAY 31, 1996 1995 1994* 1994 1993 1992 1991 1990 1989| PER SHARE DATA Net asset value, beginning of period.............. $18.42 $21.74 $21.20 $20.87 $21.02 $18.81 $17.69 $21.02 $16.82 Income (loss) from investment operations: Net investment income (loss)..... (.08) (.23) (.05) (.07) (.03) .02 .56 .45 .16 Net realized and unrealized gain (loss) on investments....... (.43) .59 .59 1.67 1.57 3.33 1.67 .25 4.37 Total from investment operations...... (.51) .36 .54 1.60 1.54 3.35 2.23 .70 4.53 Less distributions to shareholders from: Net investment income............ -- -- -- -- -- (.14) (.53) (.36) (.05) Net realized gains............. (.56) (3.68) -- (1.27) (1.69) (1.00) (.58) (3.67) (.28) Total distributions... (.56) (3.68) -- (1.27) (1.69) (1.14) (1.11) (4.03) (.33) Net asset value, end of period........... $17.35 $18.42 $21.74 $21.20 $20.87 $21.02 $18.81 $17.69 $21.02 TOTAL RETURN+......... (2.7%) 4.8% 2.6% 7.6% 7.5% 18.3% 14.4% 4.2% 27.4% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)..... $39,622 $64,721 $99,340 $96,357 $80,605 $62,172 $45,687 $37,838 $37,292 Ratios to average net assets: Expenses............ 1.55%# 1.36% 1.37%++ 1.26% 1.24% 1.25% 1.32% 1.33% 1.30% Interest expense.... .02% -- -- -- -- -- -- -- -- Net investment income (loss)..... (.38%)# (.87%) (.70%)++ (.33%) (.07%) .22% 3.32% 2.25% .86% Portfolio turnover rate................ 160% 84% 36% 89% 29% 55% 59% 46% 45% Average commission rate paid per share............... $.0497 N/A N/A N/A N/A N/A N/A N/A N/A 1988 PER SHARE DATA Net asset value, beginning of period.............. $18.55 Income (loss) from investment operations: Net investment income (loss)..... -- Net realized and unrealized gain (loss) on investments....... (.78) Total from investment operations...... (.78) Less distributions to shareholders from: Net investment income............ -- Net realized gains............. (.95) Total distributions... (.95) Net asset value, end of period........... $16.82 TOTAL RETURN+......... (4.0%) RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted)..... $23,007 Ratios to average net assets: Expenses............ 1.47% Interest expense.... -- Net investment income (loss)..... .01% Portfolio turnover rate................ 47% Average commission rate paid per share............... N/A
* The Fund changed its fiscal year end from May 31 to September 30. | Investment income, expenses and net investment income are based on 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 loss to average net assets would have been the following:
YEAR ENDED SEPTEMBER 30, 1996 Expenses.................................... 1.60% Net investment loss......................... (.43%)
EVERGREEN AGGRESSIVE GROWTH FUND -- CLASS Y SHARES
CLASS Y SHARES JULY 7, YEAR 1995* ENDED THROUGH SEPTEMBER 30, SEPTEMBER 30, 1996 1995 PER SHARE DATA: Net asset value, beginning of period........................ $17.38 $15.79 Income (loss) from investment operations: Net investment loss........... (.06) (.01) Net realized and unrealized gain on investments......... 4.41 1.60 Total from investment operations................ 4.35 1.59 Less distributions to shareholders from net realized gains......................... (.64) -- Net asset value, end of period........................ $21.09 $17.38 TOTAL RETURN+................... 25.8% 10.1% RATIOS & SUPPLEMENTAL DATA: Net assets, end of period (000's omitted)...................... $25,918 $1,889 Ratios to average net assets: Expenses...................... .97% 1.08%++ Net investment loss........... (.60%) (.71%)++ Portfolio turnover rate......... 33% 31% Average commission rate paid per share......................... $.0582 N/A
* 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. 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." EVERGREEN FUND The EVERGREEN FUND seeks to achieve its investment objective of capital appreciation principally through investments in common stocks and securities convertible into or exchangeable for common stocks of companies which are little-known, relatively small or represent special situations which, in the opinion of the Fund's investment adviser, offer potential for capital appreciation. A "little-known" company means one whose business is limited to a regional market or whose securities are closely held with only a small proportion traded publicly. A "relatively small" company means one which has a small share of the market for its products or services in comparison with other companies in its field, or which provides goods or services for a limited market. A "special situation" company is one which offers potential for capital appreciation because of a recent or anticipated change in structure, management, products or services. In addition to the securities described above, the Fund may invest in securities of relatively well-known and large companies with potential for capital appreciation. Investments may also be made to a limited degree in non-convertible debt securities and preferred stocks which offer an opportunity for capital appreciation. Short-term investments may also be made if the Fund's investment adviser believes that such action will benefit the Fund. See "Special Risk Considerations." EVERGREEN U.S. REAL ESTATE EQUITY FUND The EVERGREEN U.S. REAL ESTATE EQUITY FUND'S investment objective is long-term capital growth, which it seeks to achieve through investment primarily in equity securities of domestic companies which are principally engaged in the real estate industry or which own significant real estate assets; the Fund will not purchase direct interests in real estate. Current income is a secondary objective. Equity securities include common stock, preferred stock and securities convertible into common stock. Under normal conditions, the Fund will invest not less than 65% of its total assets in equity securities of United States exchange or NASDAQ listed companies principally engaged in the real estate industry. A company is deemed to be "principally engaged" in the real estate industry if at least 50% of its assets (marked to market), gross income or net profits are attributable to ownership, construction, management or sale of residential, commercial or industrial real estate. Real estate industry companies may include among others: equity real estate investment trusts, which pool investors' funds for investment primarily in commercial real estate properties; mortgage real estate investment trusts, which invest pooled funds in real estate related loans; brokers or real estate developers; and companies with substantial real estate holdings, such as paper and lumber producers and hotel and entertainment companies. The Fund will only invest in real estate equity trusts and limited partnerships which are traded on major exchanges. See "Special Risk Considerations" with respect to the special risks involved with an investment in these types of securities. The remainder of the Fund's investments may be made in equity securities of issuers whose products and services are related to the real estate industry, such as manufacturers and distributors of building supplies and financial institutions which issue or service mortgages. The Fund may invest more than 25% of its total assets in any one sector of the real estate or real estate related industries. In addition, the Fund may, from time to time, invest in the securities of companies unrelated to the real estate industry whose real estate assets are substantial relative to the price of the companies' securities. Investments may also be made in securities of issuers unrelated to the real estate industry believed by the Fund's investment adviser to be undervalued and to have capital appreciation potential. Also, consistent with the secondary objective of current income, investments may also be made in non-convertible debt securities of such companies. The debt securities purchased (except for those described below) will be of investment grade or better quality (e.g., rated no lower than A by Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service ("Moody's") or any other nationally recognized statistical rating organization ("SRO"), or, if not so rated, believed by the Fund's investment adviser to be of comparable quality). However, up to 10% of total assets may be invested in unrated debt securities of issuers secured by real estate assets where the Fund's investment adviser believes that the securities are trading at a discount and the underlying collateral will ensure repayment of principal. In such situations, it is conceivable that the Fund could, in the event of default, end up holding the underlying real estate directly. EVERGREEN LIMITED MARKET FUND, INC. The investment objective of EVERGREEN LIMITED MARKET FUND, INC. is to achieve capital appreciation; income is not a factor in the selection of portfolio securities. The Fund seeks to achieve its objective principally through investments in common stocks of companies for which there is a relatively limited trading market. A relatively limited trading market is one in which only small amounts of stock are available at any given time generally through five or fewer market makers. The securities of such companies are often traded only over-the-counter or on a regional securities exchange, rarely on a national securities exchange, and may not trade every day or in the volume typical of trading on a national securities exchange. Investments by the Fund are made with a view toward taking advantage of market inefficiencies affecting the price of a company's securities or by exploiting the investment opportunities which may be inherent in companies offering new or unique products or services. Market inefficiency can result from a company being too small to be covered by most industry analysts, thereby resulting in a limited dissemination of information about the company or its industry. The companies in which the Fund may invest are small, but have at least $1,000,000 and generally no more than $150,000,000 of market capitalization (see "Special Risk Considerations"). The Fund may also invest in little-known or unpopular companies which may not be widely recommended for purchase by industry analysts due to some situation unique to the company or its industry. There are no restrictions as to types of businesses or industries in which the Fund may invest. The Fund's investment adviser believes that its investment research programs will uncover a variety of relatively unexploited investment opportunities. The Fund's investment adviser will attempt to screen the universe of companies falling within the capitalization range described above and invest primarily in what it believes to be the 100 best based on certain qualitative and quantitative criteria. Such companies may include those with the highest return on equity and consistent earnings growth. The criteria will be reviewed and evaluated on an ongoing basis by the Fund's investment adviser. In addition, the Fund will invest in other companies which do not meet the screening criteria. These will include companies which offer unique products or services or operate in industries or sectors that have, in the opinion of the Fund's investment adviser, significant growth prospects. In selecting investment opportunities for the Fund, the Fund's investment adviser will use certain proprietary computer screening techniques and the extensive library facilities of Lieber & Company, the Fund's sub-adviser. While the focus of EVERGREEN LIMITED MARKET FUND, INC. is on long-term capital appreciation, investments may on occasion be made with the expectation of short-term capital appreciation. Securities held for a short time period may be sold if the investment objective for such securities has been achieved or if other circumstances warrant. EVERGREEN AGGRESSIVE GROWTH FUND The EVERGREEN AGGRESSIVE GROWTH FUND'S investment objective is to achieve long-term capital appreciation by investing primarily in common stocks of emerging growth companies and larger, more well established companies, all of which are viewed by the Fund's investment adviser as having above-average appreciation potential. Under normal circumstances, the Fund intends to invest at least 65% of its net assets in common stocks or securities convertible into common stocks. The Fund's investment adviser considers an emerging growth company to be one which is still in the developmental stage, yet has demonstrated, or is expected to achieve, growth of earnings over various major business cycles. Important qualities of any emerging growth company include sound management and a good product with growing market opportunities. To the extent that its assets are not invested in common stocks or securities convertible into common stocks, the Fund also may invest its assets in, or enter into repurchase agreements with banks or broker-dealers with respect to, investment grade corporate bonds, U.S. government securities, commercial paper and certificates of deposit of domestic banks. Consistent with its investment objective, the Fund also may invest in equity securities of seasoned, established companies which its investment adviser believes have above-average appreciation potential similar to that of companies in the developmental stage. This may be due, for example, to management change, new technology, new product or service developments, changes in demand, or other factors. Investments in stocks of emerging growth companies may involve special risks. Securities of lesser-known, relatively small and special situation companies tend to be speculative and volatile. Therefore, the current net asset value of the Fund's shares may vary significantly. Accordingly, 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 investment in the Fund be considered a balanced or complete investment program. EVERGREEN SMALL CAP VALUE FUND The EVERGREEN SMALL CAP VALUE FUND'S investment objective is capital appreciation. The Fund seeks to achieve its investment objective by investing in a diversified portfolio of securities consisting primarily of common stocks of U.S. issuers that the Fund's investment adviser believes have an underlying value, or potential value, exceeding their current prices. Income is not a primary factor in the selection of securities. Under normal market conditions, the Fund will invest at least 65% of its total assets in common stocks of companies with a market capitalization of less than $1 billion determined at the time of purchase. In addition to common stocks, the Fund may invest in securities having common stock characteristics, such as convertible bonds and preferred stocks. The Fund may invest up to 25% of its assets in securities issued by companies located in foreign countries. In selecting securities for the portfolio, the Fund's investment adviser will assess the prospects for earnings growth of a company over the next 1-1/2 to 3 years and quantify the economic worth, or basic value, of a company. Using this value approach, the Fund's investment adviser relies primarily on the knowledge, experience and judgment of its in-house research staff. The Fund's investment adviser may also use information from a variety of outside sources, including brokerage firms, electronic data bases, specialized research firms and technical journals. See "Special Risks Considerations." The Fund may invest in convertible debt securities that are rated Baa or higher by Moody's or BBB or higher by S&P or, if unrated, deemed by the Fund's investment adviser to be of comparable quality. Securities rated Baa or BBB may have speculative characteristics. Changes in economic conditions or other circumstances are more likely to weaken the ability of the issuers of such debt securities to make principal and interest payments than is the case with higher rated securities. However, like the higher rated debt securities, these securities are considered investment grade. For a description of such ratings, see the SAI. INVESTMENT PRACTICES AND RESTRICTIONS DEFENSIVE INVESTMENTS Each Fund may invest, without limitation, in high quality money market instruments, such as notes, certificates of deposit or bankers' acceptances, U.S. government securities, non-convertible investment grade debt securities or preferred stocks or hold its assets in cash if, in the opinion of the Funds' investment advisers, market conditions warrant a temporary defensive investment strategy. PORTFOLIO TURNOVER AND BROKERAGE The annual portfolio turnover rates for each Fund, except the EVERGREEN SMALL CAP VALUE FUND, are set forth in the tables contained in the "Financial Highlights" section above. The portfolio turnover rate for the EVERGREEN SMALL CAP VALUE FUND is not expected to exceed 200% for the coming year. A high rate of portfolio turnover (100% or more) may involve correspondingly greater brokerage commissions and other transaction costs, which the Fund and its shareholders must bear. For further information about brokerage and distributions see "Dividends, Distributions and Taxes" or the SAI. It is contemplated that Lieber & Company ("Lieber"), an affiliate of EAMC and a member of the New York and American Stock Exchanges, will to the extent practicable effect substantially all of the portfolio transactions for EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN LIMITED MARKET FUND, INC. effected on those exchanges. See the SAI for further information regarding the brokerage allocation practices of the Funds. BORROWING As a matter of fundamental policy, the Funds may not borrow money except as a temporary measure for extraordinary or emergency purposes. The proceeds from borrowings may be used to facilitate redemption requests which might otherwise require the untimely disposition of portfolio securities. The specific limits and other terms applicable to borrowing by each Fund are set forth in the SAI. 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. Each Fund's investment adviser will monitor the creditworthiness of such borrowers. Loans of securities by the Funds, if and when made, may not exceed 30% of the value of a Fund's net assets and must be collateralized by cash or U.S. government securities that are maintained at all times in an amount equal to at least 100% of the current market value of the securities loaned, including accrued interest. While such securities are on loan, the borrower will pay a Fund any income accruing thereon, and the Fund may invest the cash collateral in portfolio securities, thereby increasing its return. Any gain or loss in the market price of the loaned securities which occurs during the term of the loan would affect a Fund and its investors. A Fund has the right to call a loan and obtain the securities loaned at any time on notice of not more than five business days. A Fund may pay reasonable fees in connection with such loans. 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. ILLIQUID SECURITIES The Funds may invest up to 15% of their net assets in illiquid securities and other securities which are not readily marketable, including non-negotiable time deposits, certain restricted securities not deemed by the Trustees or Directors to be liquid and repurchase agreements with maturities longer than seven days, except that EVERGREEN U.S. REAL ESTATE EQUITY FUND may only invest up to 10% of its assets in repurchase agreements with maturities longer than seven days. Securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (the "Securities Act"), which have been determined to be liquid, will not be considered by the Funds' investment advisers to be illiquid or not readily marketable and, therefore, are not subject to the aforementioned 15% limit. The inability of a Fund to dispose of illiquid or not readily marketable investments readily or at reasonable prices could impair a Fund's ability to raise cash for redemptions or other purposes. The liquidity of securities purchased by a Fund which are eligible for resale pursuant to Rule 144A will be monitored by each Fund's investment adviser on an ongoing basis, subject to the oversight of the Trustees or Directors. In the event that such a security is deemed to be no longer liquid, a Fund's holdings will be reviewed to determine what action, if any, is required to ensure that the retention of such security does not result in a Fund having more than 15% of its assets invested in illiquid or not readily marketable securities. REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS Each Fund may enter into repurchase agreements with member banks of the Federal Reserve System, including the Fund's Custodian, or primary dealers in U.S. government securities. A repurchase agreement is an arrangement whereby a Fund purchases a security and simultaneously agrees to resell it to the vendor at the same price plus interest. The arrangement results in a fixed rate of return that is not subject to market fluctuations during the holding period. A Fund will maintain 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 U.S. REAL ESTATE EQUITY FUND, EVERGREEN AGGRESSIVE GROWTH FUND AND EVERGREEN SMALL CAP VALUE FUND may enter into "reverse repurchase agreements." A reverse repurchase agreement is an arrangement whereby the Fund agrees to sell portfolio securities to financial institutions such as banks and broker-dealers, and to repurchase them at a mutually agreed upon date for the price plus interest. At the time a Fund enters into a reverse repurchase agreement, it will be placed in a segregated custodial cash account, 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. A Fund will not enter into reverse repurchase agreements exceeding 5% of the value of its total assets. 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, FUTURES AND DERIVATIVES In addition to making investments directly in securities, EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN SMALL CAP VALUE FUND may write covered put and call options and hedge their investments by purchasing options and engaging in transactions in futures contracts and related options. The Funds may engage in foreign currency exchange transactions to protect against changes in future exchange rates. WRITING OPTIONS. EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN SMALL CAP VALUE FUND may write covered call and put options on certain portfolio securities in an attempt to earn income and realize a higher return on its portfolio. A call option gives the purchaser of the option the right to buy a security from the writer at the exercise price at any time during the option period. An option may not be written if, afterwards, securities comprising more than 5% of the market value of a Fund's equity securities would be subject to call options. A Fund realizes income from the premium paid to it in exchange for writing the call option. Once it has written a call option on a portfolio security and until the expiration of such option, a Fund forgoes the opportunity to profit from increases in the market price of such security in excess of the exercise price of the call option. Should the price of the security on which a call has been written decline, a Fund bears the risk of loss, which would be offset to the extent the Fund has received premium income. A Fund will only write "covered" options traded on recognized 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 call option has been written in an amount sufficient to satisfy the obligations arising under a call option, or (ii) in the case of both call and put options, the Fund's Custodian maintains cash or high-grade liquid debt securities belonging to the Fund in an amount not less that the amount needed to satisfy the Fund's obligations with respect to such options. A "closing purchase transaction" may be entered into with respect to a call option written by a Fund for the purpose of closing its position. The Fund will realize a profit (or loss) from such transaction if the cost of such transaction is less (or more) than the premium received from the writing of the option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option may be offset in whole or in part by unrealized appreciation of the underlying security owned by the Fund. PURCHASING PUT AND CALL OPTIONS ON SECURITIES. The Funds may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. This protection is provided during the life of the put option since the Fund, as holder of the put, is able to sell the underlying security at the exercise price regardless of any decline in the underlying security's market price. For the purchase of a put option to be profitable, the market price of the underlying security must decline below the exercise price more than enough to cover the premium and transaction costs. By using put options in this manner, any profit which the Fund might otherwise have realized on the underlying security will be reduced by the premium paid for the put option and by transaction costs. Each Fund may also purchase a call option to hedge against an increase in price of a security that it intends to purchase. This protection is provided during the life of the call option since the Fund, as holder of the call, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. For the purchase of a call option to be profitable, the market price of the underlying security must rise above the exercise price more than enough to cover the premium and transaction costs. By using call options in this manner, any profit which the Fund might have realized had it bought the underlying security at the time it purchased the call option will be reduced by the premium paid for the call option and by transaction costs. FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. In addition to writing covered call and put options, each Fund may purchase and sell various financial instruments ("Derivative Instruments) such as financial futures contracts (including interest rate, index and foreign currency futures contracts), options (such as options on securities, indices, foreign currencies and futures contracts), forward currency contracts and interest rate, equity index and currency swaps, caps, collars and floors. The index Derivative Instruments a Fund may use may be based on indices of U.S. or foreign equity or debt securities. These Derivative Instruments may be used, for example, to preserve a return or spread, to lock in unrealized market value gains or losses, to facilitate or substitute for the sale or purchase of securities, to manage the duration of securities, to alter the exposure of a particular investment or portion of a Fund's portfolio to fluctuations in interest rates or currency rates, to uncap a capped security or to convert a fixed rate security into a variable rate security or a variable rate security into a fixed rate security. A Fund's ability to use these instruments may be limited by market conditions, regulatory limits and tax considerations. A Fund might not use any of these strategies, and there can be no assurance that any strategy that is used will succeed. See the SAI for more information regarding these instruments and the risks relating thereto. CURRENCY AND OTHER FINANCIAL FUTURE CONTRACTS. 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 contract on a securities index does not involve the actual delivery of securities, but merely requires. The Funds do not make payment or deliver securities upon entering into a futures contract. Instead, they put down a margin deposit, which is adjusted to reflect changes in the value of the contract and which remains in effect until the contract is terminated. The Funds may sell or purchase currency and other financial futures contracts. When a futures contract is sold by a Fund, the profit on the contract will tend to rise when the value of the underlying securities or currencies declines and to fall when the value of such securities or currencies increases. Thus, the Funds sell futures contracts in order to offset a possible decline in the profit on their securities or currencies. If a futures contract is purchased by a Fund, the value of the contract will tend to rise when the value of the underlying securities or currencies increases and to fall when the value of such securities or currencies declines. The Funds may enter into closing purchase and sale transacations 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 depostis 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. RISKS OF DERIVATIVE INSTRUMENTS. The use of Derivative instruments, including written put and call options, involves special risks, including: (1) the lack of, or imperfect, correlation between price movements of a Fund's current or proposed portfolio investments that are the subject of the transactions as well as price movements of the Derivative Instruments involved in the transaction; (2) possible lack of a liquid secondary market for any particular Derivative Instrument at a particular time; (3) the need for additional portfolio management skills and techniques; (4) losses due to unanticipated market price movements; (5) the fact that, while such strategies can reduce the risk of loss, they can also reduce the opportunity for gain, or even result in losses, by offsetting favorable price movements in portfolio investments; (6) incorrect forecasts by a Fund's investment adviser concerning interest or currency exchange rates or direction of price fluctuations of the investment that is the subject of the transaction, which may result in the strategy being ineffective; (7) loss of premiums paid by the Fund on options it purchases; and (8) the possible inability of the Fund to purchase or sell a portfolio security at a time when it would otherwise be favorable for it to do so, or the need to sell a portfolio security at a disadvantageous time, due to the need for the Fund to maintain "cover" or to segregate securities in connection with such transactions and the possible inability of the Fund to close out or liquidate its positions. Each Fund's investment adviser may use Derivative Instruments, including written put and call options, for hedging purposes (i.e., by paying a premium or foregoing the opportunity for profit in return for protection against downturns in markets generally or the prices of individual securities or currencies) and also may use Derivative Instruments to try to enhance the return characteristics of a Fund's portfolio of investments (i.e., by receiving premiums in connection with the writing of options and thereby accepting the risk of downturns in markets generally or the prices of individual securities or currencies or by paying premiums with the hope that the securities or currencies underlying Derivative Instruments will appreciate). The use of Derivative Instruments for hedging purposes or to enhance a Fund's return characteristics can increase investment risk. If a Fund's investment adviser judges market conditions incorrectly or employs a strategy that does not correlate well with the Fund's investments, these techniques could result in a loss, regardless of whether the intent was to reduce risk or increase return. These techniques may increase the volatility of a Fund and may involve a small investment of cash relative to the magnitude of the risk assumed, resulting in leverage. In addition, these techniques could result in a loss if the counterparty to the transaction does not perform as promised or if there is not a liquid secondary market to close out a position that the Fund has entered into. Options and futures transactions may increase portfolio turnover rates, which would result in greater commission expenses and transaction costs. SPECIAL RISK CONSIDERATIONS INVESTMENT IN SMALL COMPANIES Investments in securities of little-known, relatively small or special situation companies ("Small Companies") may be speculative and volatile. Investing in Small Companies generally involves some or all of the following risks: 1. The company may lack management depth, potentially increasing the risks associated with the loss of key personnel. 2. The company may lack material and financial resources, possibly limiting the availability of financing. 3. The company may be developing or marketing new products or services for which there are no established markets and the market for the product or service could fail to develop as projected. 4. The securities of Small Companies are often closely held and only traded on the over-the -counter market or on a regional stock exchange. As a result, the securities of Small Companies are sometimes illiquid or subject to wide price fluctuations. As a result of the risk factors described above, the net asset value of each Fund's shares can be expected to vary significantly. Accordingly, each Fund should not be considered suitable for investors who are unable or unwilling to assume the associated risks, nor should investment in the Funds be considered a balanced or complete investment program. INVESTMENTS RELATED TO REAL ESTATE EVERGREEN U.S. REAL ESTATE EQUITY FUND invests primarily in issuers whose activities are real estate related. Risks associated with investment in securities of companies in the real estate industry include: declines in the value of real estate; risks related to general and local economic conditions; overbuilding and increased competition; increases in property taxes and operating expenses; changes in zoning laws; casualty or condemnation losses; variations in rental income; changes in neighborhood values; the appeal of properties to tenants; and increase in interest rates. In the event of a default on such securities, the holder thereof could end up holding real estate directly and therefore be more directly subject to such risks. 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. FOREIGN SECURITIES RISKS Investing in foreign securities of foreign issuers generally involves more risk than investing in a portfolio consisting solely of securities of domestic issuers for the following reasons: publicly available information on issuers and securities may be scarce; many foreign countries do not follow the same accounting, auditing and financial reporting standards as are used in the U.S.; market trading volumes may be smaller, resulting in less liquidity and more price volatility compared to U.S. securities of comparable quality; there may be less regulation of securities trading and its participants; the possibility may exist for expropriation, confiscatory taxation, nationalization, establishment of exchange controls, political or social instability of negative diplomatic developments; and dividend or interest withholding may be imposed at the source. Fluctuations in foreign exchange impose an additional level of risk, possibly affecting the value of the Fund's foreign investments and earnings, gains and losses realized through trades, and the unrealized appreciation or depreciation of investments. The Fund may also incur costs when it shifts assets from one country to another. OTHER INVESTMENT RESTRICTIONS Each Fund has adopted additional investment restrictions that are set forth in the SAI. Unless otherwise noted, the restrictions and policies set forth above are not fundamental and may be changed without shareholder approval. MANAGEMENT OF THE FUNDS BOARD OF TRUSTEES/DIRECTORS Each Fund is governed by the Board of Trustees or Directors of the trust or corporation under which it was organized. Each Fund's Board of Trustees or Directors, as applicable, has absolute and exclusive control over the management and disposition of all assets of a Fund. INVESTMENT ADVISERS Each Fund has retained an investment adviser that, subject to the authority of a Fund's Trustees or Directors, (1) provides the Fund with investment advice, management and administrative services and (2) supervises the Fund's daily business affairs. The investment adviser to each Fund is a subsidiary of FUNB. FUNB is a subsidiary of First Union Corporation ("First Union"), the sixth largest bank holding company in the United States. First Union, headquartered in Charlotte, North Carolina, had $132 billion in consolidated assets as of February 28, 1997. First Union and its subsidiaries provide a broad range of financial services to individuals and businesses throughout the United States. Capital Management Group of FUNB ("CMG") manages or otherwise oversees the investment of over $45 billion in assets belonging to a wide range of clients, including all of the series of Evergreen investment Trust and certain other Evergreen mutual funds. EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND, AND EVERGREEN LIMITED MARKET FUND, INC. EAMC is the investment adviser to the EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND, and EVERGREEN LIMITED MARKET FUND, INC. EAMC, together with its predecessors, has provided investment advice to the Evergreen mutual funds since 1971. EAMC, located at 2500 Westchester Avenue, Purchase, New York 10577, is a wholly-owned subsidiary of First Union Bank of North Carolina ("FUNB"). For the services it renders to each Fund, EAMC receives an annual fee equal to 1.00% of the first $750,000,000 of the Fund's average daily net assets, plus 0.90% of the next $250,000,000 of such average daily net assets, plus 0.80% of such average daily net assets in excess of $1,000,000,000. For the fiscal year ended September 30, 1996, each of the Funds paid the following in investment advisory fees to EAMC as a percentage of its average net assets: EVERGREEN FUND, 0.98%; EVERGREEN U.S. REAL ESTATE EQUITY FUND, 0.00%; and EVERGREEN LIMITED MARKET FUND, INC. 1.00%. EVERGREEN SMALL CAP VALUE FUND Keystone is the investment adviser to the EVERGREEN SMALL CAP VALUE FUND. Keystone, or its affiliates, has provided investment advisory and management services to investment companies and private accounts since 1932. Keystone is located at 200 Berkeley Street, Boston, Massachusetts 02116. For the services it renders to the EVERGREEN SMALL CAP VALUE FUND, Keystone receives an annual fee equal to 0.95% of the Fund's aggregate net asset value. EVERGREEN AGGRESSIVE GROWTH FUND CMG provides investment advisory services to the EVERGREEN AGGRESSIVE GROWTH FUND. For the services it renders to the EVERGREEN AGGRESSIVE GROWTH FUND, CMG receives an annual fee equal to 0.60% of the Fund's average daily net assets. For the fiscal year ended September 30, 1996, EVERGREEN AGGRESSIVE GROWTH FUND paid 0.60% of its average net assets to CMG in investment advisory fees. Information regarding each Fund's total operating expenses and, to the extent applicable, any expense limitations or waivers, are set forth in the section "Financial Highlights." From time to time, each investment adviser may reduce or waive its fee or reimburse a Fund for which it serves as investment adviser for certain of the Fund's expenses in order to reduce the Fund's expense ratio. As a result, a Fund's total return would be higher than if the fees and any expenses had been paid by the Fund. SUB-ADVISER EAMC has entered into sub-advisory agreements with Lieber regarding EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN LIMITED MARKET FUND, INC. (the "Sub-Advisory Agreements"). The Sub-Advisory Agreements provide for Lieber's research department and staff to furnish EAMC with information, investment recommendations, advice and research and general consulting services regarding each Fund. For its services rendered, EAMC reimburses Lieber for the direct and indirect costs of performing such services. There is no additional charge to the Funds for the services provided by Lieber. Lieber is a subsidiary of First Union and is located at 2500 Westchester Avenue, Purchase, New York 10577. PORTFOLIO MANAGERS EVERGREEN FUND Stephen A. Lieber has been the portfolio manager for EVERGREEN FUND since 1971. Mr. Lieber is the Chairman and Co-Chief Executive Officer of EAMC. Mr. Lieber has been associated with EAMC since he founded it, or its predecessors, in 1971. EVERGREEN AGGRESSIVE GROWTH FUND The portfolio manager for EVERGREEN AGGRESSIVE GROWTH FUND is Harold J. Ireland, Jr., a Vice President of CMG who has been associated with CMG since 1995. Prior to that, Mr. Ireland was a Vice President of Palm Beach Capital Management, Inc. and served as portfolio manager of the Fund's predecessor, ABT Emerging Growth Fund, since 1985. EVERGREEN U.S. REAL ESTATE EQUITY FUND Samuel A. Lieber has been the portfolio manager for EVERGREEN U.S. REAL ESTATE EQUITY FUND since the Fund's inception in March, 1995. Mr. Samuel Lieber has been associated with EAMC since 1985. EVERGREEN LIMITED MARKET FUND, INC. A committee, which includes Stephen A. Lieber and Nola Maddox Falcone, President and Co-Chief Executive Officer of EAMC, manages the portfolio of Evergreen Limited Market Fund, Inc. The committee also draws upon the resources of certain other portfolio management and analytical personnel employed by EAMC or its affiliates. EVERGREEN SMALL CAP VALUE FUND Warren J. Isabelle is the portfolio manager for Evergreen Small Cap Value Fund. He is also Chief Investment Officer for Equities of Keystone. Prior to joining Keystone in February, 1997, Mr. Isabelle managed the Pioneer Capital Growth Fund and the Pioneer Small Company Fund. He also served as Head of the Pioneer Special Equities Group. He has 14 years of investment experience. ADMINISTRATOR EKIS serves as administrator to the Funds and is entitled to receive a fee based on the aggregate average daily net assets of the Funds at a rate based on the total assets of the mutual funds administered by EKIS for which CMG, EAMC or Keystone also serve as investment adviser. As administrator, and subject to the supervision and control of the Trustees/Directors of the Funds, EKIS provides facilities, equipment and personnel to the Funds. EKIS's administration fee is calculated in accordance with the following schedule: Aggregate Average Daily Net Assets of Funds Administered by EKIS For Which any Affiliate of FUNB Administrative Fee Serves as Investment Adviser - ------------------------- ----------------------------------------------------- 0.050% on the first $7 billion 0.035% on the next $3 billion 0.030% on the next $5 billion 0.020% on the next $10 billion 0.015% on the next $5 billion 0.010% on assets in excess of $30 billion SUBADMINISTRATOR BISYS Fund Services ("BISYS"), an affiliate of Evergreen Keystone Distributor, Inc. ("EKD"), distributor for the Evergreen Keystone group of mutual funds, serves as sub-administrator to the Funds and is entitled to receive a fee from the Funds calculated on the average daily net assets of the Funds at a rate based on the total assets of the mutual funds administered by EKIS for which FUNB affiliates also serve as investment adviser, calculated in accordance with the following schedule: Aggregate Average Daily Net Assets of Funds Administered by BISYS For Which any Affiliate of Sub-Administrative Fee FUNB Serves as Investment Adviser - ------------------------ ---------------------------------------------------- 0.0100% on the first $7 billion 0.0075% on the next $3 billion 0.0050% on the next $15 billion 0.0040% on assets in excess of $25 billion The total assets of the mutual funds administered by EKIS for which FUNB affiliates also serve as investment advisers were approximately $29.2 billion as of February 28, 1997. PURCHASE AND REDEMPTION OF SHARES HOW TO BUY SHARES Class Y shares are offered at net asset value without a front-end sales charge or a contingent deferred sales load. Class Y shares are only offered to (1) persons who at or prior to December 31, 1994, owned shares in a mutual fund advised by EAMC, (2) certain institutional investors and (3) investment advisory clients of CMG, EAMC or their affiliates. Eligible investors may purchase Class Y shares of any of the Funds through broker-dealers, banks or other financial intermediaries, or directly through EKD. In addition, you may purchase Class Y shares of any of the Funds by mailing to that Fund, c/o Evergreen Keystone Service Company ("EKSC"), P.O. Box 2121, Boston, Massachusetts 02106- 2121, a completed account application and a check payable to the Fund. You may also telephone 1-800-343-2898 to obtain the number of an account to which you can wire or electronically transfer funds and then send in a completed account application. The minimum initial investment is $1,000, which may be waived in certain situations. Subsequent investments in any amount may be made by check, by wiring Federal funds, by direct deposit or by an electronic funds transfer. There is no minimum amount for subsequent investments. Investments of $25 or more are allowed under the Systematic Investment Plan. Share certificates are not issued. See the Share Purchase Application and SAI for more information. Only Class Y shares are offered through this Prospectus (see "General Information" -- "Other Classes of Shares"). HOW THE FUNDS VALUE THEIR SHARES The net asset value of each Class of shares of a Fund is calculated by dividing the value of the amount of the Fund's net assets attributable to that Class by the number of outstanding shares of that Class. Shares are valued each day the New York Stock Exchange (the "Exchange") is open as of the close of regular trading (currently 4:00 p.m. Eastern time). The securities in a Fund are valued at their current market value determined on the basis of market quotations or, if such quotations are not readily available, such other methods as the Trustees or Directors believe would accurately reflect fair value. Non-dollar denominated securities will be valued as of the close of the Exchange at the closing price of such securities in their principal trading markets. ADDITIONAL PURCHASE INFORMATION As a condition of this offering, if a purchase is canceled due to nonpayment or because an investor's check does not clear, the investor will be responsible for any loss a Fund or the Fund's investment adviser incurs. If such investor is an existing shareholder, a Fund may redeem shares from an investor's account to reimburse the Fund or its investment adviser for any loss. In addition, such investors may be prohibited or restricted from making further purchases in any of the Evergreen Keystone 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 Class Y shares in a Fund to the Fund for cash, (at their net redemption value) on any day the Exchange is open, either directly by writing to the Fund, c/o EKSC, or through your financial intermediary. The amount you will receive is the net asset value adjusted for fractions of a cent next calculated after the Fund receives your request in proper form. Proceeds generally will be sent to you within seven days. However, for shares recently purchased by check, a Fund will not send proceeds until it is reasonably satisfied that the check has been collected (which may take up to 15 days). Once a redemption request has been telephoned or mailed, it is irrevocable and may not be modified or canceled. REDEEMING SHARES THROUGH YOUR FINANCIAL INTERMEDIARY A Fund must receive instructions from your financial intermediary before 4:00 p.m. (Eastern time) for you to receive that day's net asset value. Your financial intermediary is responsible for furnishing all necessary documentation to a Fund and may charge you for this service. Certain financial intermediaries may require that you give instructions earlier than 4:00 p.m. (Eastern time). REDEEMING SHARES DIRECTLY BY MAIL OR TELEPHONE Send a signed letter of instruction or stock power form to the Fund, c/o EKSC; the registrar, transfer agent and dividend-disbursing agent for each Fund. Stock power forms are available from your financial intermediary, EKSC, and many commercial banks. Additional documentation is required for the sale of shares by corporations, financial intermediaries, fiduciaries and surviving joint owners. Signature guarantees are required for all redemption requests for shares with a value of more than $50,000. Currently, the requirement for a signature guarantee has been waived on redemptions of $50,000 or less when the account address of record has been the same for a minimum period of 30 days. The Fund and EKSC reserve the right to withdraw this waiver at any time. A signature guarantee must be provided by a bank or trust company (not a Notary Public), a member firm of a domestic stock exchange or by other financial institutions whose guarantees are acceptable under the Securities Exchange Act of 1934 and EKSC's policies. Shareholders may withdraw amounts of $1,000 or more (up to $50,000) from their accounts by calling the telephone number on the front page of this Prospectus between the hours of 8:00 a.m. and 5:30 p.m.(Eastern time) each business day (i.e., any weekday exclusive of days on which the Exchange or EKSC's offices are closed). The Exchange is closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Redemption requests received after 4:00 p.m. (Eastern time) will be processed using the net asset value determined on the next business day. Such redemption requests must include the shareholder's account name, as registered with a Fund, and the account number. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone redemptions. If you cannot reach the Fund by telephone, you should follow the procedures for redeeming by mail or through a broker-dealer as set forth herein. The telephone redemption service is not made available to shareholders automatically. Shareholders wishing to use the telephone redemption service must complete the appropriate sections on the Share Purchase Application and choose how the redemption proceeds are to be paid. Redemption proceeds will either (i) be mailed by check to the shareholder at the address in which the account is registered or (ii) be wired to an account with the same registration as the shareholder's account in a Fund at a designated commercial bank. In order to insure that instructions received by EKSC are genuine when you initiate a telephone transaction, you will be asked to verify certain criteria specific to your account. At the conclusion of the transaction, you will be given a transaction number confirming your request, and written confirmation of your transaction will be mailed the next business day. Your telephone instructions will be recorded. Redemptions by telephone are allowed only if the address and bank account of record have been the same for a minimum period of 30 days. The Fund reserves the right at any time to terminate, suspend, or change the terms of any redemption method described in this Prospectus, except redemption by mail, and to impose fees. Except as otherwise noted, neither the Funds, EKSC, nor EKD assumes responsibility for the authenticity of any instructions received by any of them from a shareholder in writing, over the Evergreen Keystone Express Line, or by telephone. EKSC will employ reasonable procedures to confirm that instructions received over Evergreen Keystone Express Line or by telephone are genuine. Neither the Funds, EKSC, nor the EKD will be liable when following instructions received over Evergreen Keystone Express Line or by telephone that EKSC reasonably believes are genuine. EVERGREEN KEYSTONE EXPRESS LINE. Evergreen Keystone Express Line offers you specific fund account information and price and yield quotations as well as the ability to do account transactions, including investments, exchanges and redemptions. You may access Evergreen Keystone Express Line by dialing toll free 1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a week. GENERAL. The sale of shares is a taxable transaction for Federal income tax purposes. The Funds may temporarily suspend the right to redeem their shares when (1) the Exchange is closed, other than customary weekend and holiday closings; (2) trading on the Exchange is restricted; (3) an emergency exists and the Funds cannot dispose of their investments or fairly determine their value; or (4) the Securities and Exchange Commission so orders. The Funds reserve the right to close an account that through redemption has fallen below $1,000 and has remained so for thirty days. Shareholders will receive sixty days' written notice to increase the account value to at least $1,000 before the account is closed. The Funds have elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which each Fund is obligated to redeem shares solely in cash, up to the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day period for any one shareholder. See the SAI for further details. EXCHANGE PRIVILEGE HOW TO EXCHANGE SHARES You may exchange some or all of your Class Y shares for shares of the same Class in the other Evergreen Keystone mutual funds through your financial intermediary, by calling or writing to EKSC or by using Evergreen Keystone Express Line as described below. Once an exchange request has been telephoned or mailed, it is irrevocable and may not be modified or canceled. Exchanges will be made on the basis of the relative net asset values of the shares exchanged next determined after an exchange request is received. An exchange that represents an initial investment in another Evergreen Keystone mutual fund is subject to the minimum investment and suitability requirements of each Fund. Each of the Evergreen Keystone 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 order must comply with the requirement for a redemption or repurchase order and must specify the dollar value or number of shares to be exchanged. An exchange is treated for Federal income tax purposes as a redemption and purchase of shares and may result in the realization of a capital gain or loss. Shareholders are limited to five exchanges per calendar year, with a maximum of three per calendar quarter. This exchange privilege may be modified or discontinued at any time by the Fund upon sixty days' notice to shareholders and is only available in states in which shares of the fund being acquired may lawfully be sold. EXCHANGES THROUGH YOUR FINANCIAL INTERMEDIARY A Fund must receive exchange instructions from your financial intermediary before 4:00 p.m. (Eastern time) for you to receive that day's net asset value. Your financial intermediary is responsible for furnishing all necessary documentation to a Fund and may charge you for this service. EXCHANGES BY TELEPHONE AND MAIL Exchange requests received by the Fund after 4:00 p.m. (Eastern time) will be processed using the net asset value determined at the close of the next business day. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone exchanges. You should follow the procedures outlined below for exchanges by mail if you are unable to reach EKSC by telephone. If you wish to use the telephone exchange service you should indicate this on the Share Purchase Application. As noted above, each Fund will employ reasonable procedures to confirm that instructions for the redemption or exchange of shares communicated by telephone are genuine. A telephone exchange may be refused by a Fund or EKSC if it is believed advisable to do so. Procedures for exchanging Fund shares by telephone may be modified or terminated at any time. Written requests for exchanges should follow the same procedures outlined for written redemption requests in the section entitled "How to Redeem Shares"; however, no signature guarantee is required. SHAREHOLDER SERVICES The Funds offer the following shareholder services. For more information about these services or your account, contact your financial intermediary, EKSC or the toll-free number on the front page of this Prospectus. Some services are described in more detail in the Share Purchase Application. SYSTEMATIC INVESTMENT PLAN You may make monthly or quarterly investments into an existing account automatically in amounts of not less than $25 per month or $75 per quarter. You may open a Systematic Investment Plan in the EVERGREEN FUND and EVERGREEN AGGRESSIVE GROWTH 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 4:00 p.m. (Eastern time) will be credited to a shareholder's account the day the request is received. Shares purchased under the Systematic Investment Plan or Telephone Investment Plan may not be redeemed for ten days from the date of investment. SYSTEMATIC WITHDRAWAL PLAN When an account of $10,000 or more is opened or when an existing account reaches that size, you may participate in the Systematic Withdrawal Plan by filling out the appropriate part of the Share Purchase Application. Under this plan, you may receive (or designate a third party to receive) a monthly or quarterly fixed-withdrawal payment in a stated amount of at least $75 and may be as much as 1.0% per month or 3.0% per quarter of the total net asset value of the Fund shares in your account when the Plan was opened. 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 a Fund at the net asset value per share at the close of business on the record date, unless otherwise requested by a shareholder in writing. If the transfer agent does not receive a written request for subsequent dividends and/or distributions to be paid in cash at least three full business days prior to a given record date, the dividends and/or distributions to be paid to a shareholder will be reinvested. DOLLAR COST AVERAGING Through dollar cost averaging you can invest a fixed dollar amount each month or each quarter in any Evergreen Keystone mutual fund. This results in more shares being purchased when the selected Fund's net asset value is relatively low and fewer shares being purchased when the Fund's net asset value is relatively high and may result in a lower average cost per share than a less systematic investment approach. Prior to participating in dollar cost averaging, you must establish an account in an Evergreen Keystone mutual fund. You should designate on the application (1) the dollar amount of each monthly or quarterly investment you wish to make and (2) the Fund in which the investment is to be made. Thereafter, on the first day of the designated month, an amount equal to the specified monthly or quarterly investment will automatically be redeemed from your initial account and invested in shares of the designated fund. TWO DIMENSIONAL INVESTING You may elect to have income and capital gains distributions from any Class Y Evergreen Keystone mutual fund shares you own automatically invested to purchase the same class of shares of any other Evergreen Keystone mutual fund. You may select this service on your application and indicate the Evergreen Keystone mutual fund(s) into which distributions are to be invested. TAX SHELTERED RETIREMENT PLANS The Fund has various retirement plans available to you, including Individual Retirement Accounts (IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Salary Reduction Plans (SARSEPs); Tax Sheltered Annuity Plans; 403(b)(7) Plans; 401(k) Plans; Keogh Plans; Corporate Profit-Sharing Plans; and Money Purchase Plans. For details, including fees and application forms, call toll free 1-800-247-4075 or write to EKSC. EFFECT OF BANKING LAWS The Glass-Steagall Act and other banking laws and regulations ("Banking Laws") presently prohibit member banks of the Federal Reserve System or their non-bank affiliates ("Member Banks") from sponsoring, organizing, controlling, or distributing the shares of registered open-end investment companies such as the Funds. However, under the Banking Laws, a Member Bank 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. EAMC and Keystone, since they both are subsidiaries of FUNB, and CMG are subject to and in compliance with the aforementioned laws and regulations. Changes to applicable laws and regulations or future judicial or administrative decisions could result in CMG, Keystone or EAMC 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, Keystone or EAMC were prevented from continuing to provide the services called for under the investment advisory agreements, it is expected that the Trustees or Directors would identify, and call upon each Fund's shareholders to approve, a new investment adviser. If this were to occur, the Trustees or Directors would seek to take action so that the shareholders of any Fund would not suffer any adverse financial consequences. OTHER INFORMATION DIVIDENDS, DISTRIBUTIONS AND TAXES It is the policy of each Fund to distribute its investment company taxable income and any net realized capital gains to shareholders 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 in 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 writes to the Fund's transfer agent and requests payment in cash. Each Fund has qualified and intends to continue to qualify 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. Following the end of each calendar year, every shareholder of the Funds will be sent applicable tax information and information regarding the dividends and capital gain distributions made during the calendar year. 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%. EVERGREEN U.S. REAL ESTATE EQUITY FUND invests in real estate investment trusts which report the tax characteristics of their distributions to the Fund annually on a calendar year basis. The timing of such reporting to the Fund may affect the tax characteristics of distributions by the Fund 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 EKSC, that the investor's social security or taxpayer identification number is correct and that the investor is not currently subject to backup withholding or is 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 SAI. 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 CODE OF ETHICS The Funds have adopted a Code of Ethics incorporating policies on personal securities trading as recommended by the Investment Company Institute. 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 FUND, EVERGREEN AGGRESSIVE GROWTH FUND AND EVERGREEN SMALL CAP VALUE FUND are each separate investment series of the Evergreen Trust, a Massachusetts business trust reorganized in 1986 from a Maryland predecessor corporation. The EVERGREEN U.S. REAL ESTATE EQUITY FUND is a separate series of Evergreen Equity Trust, a Massachusetts business trust organized in 1988. EVERGREEN LIMITED MARKET FUND, INC. is a Maryland corporation organized in 1983. 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 Directors or 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. Each Trust or Corporation 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 was established in a Trust or corporation each share of the series or any Class established thereunder would normally be entitled to one vote for all purposes. Generally, shares of each series and Class would vote together as a single Class on matters, such as the election of Trustees of Directors, that affect each series and Class in substantially the same manner. Class A, Class B, Class C and Class Y shares have identical voting, dividend, liquidation and other rights, except that each Class bears, to the extent applicable, its own distribution and 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 or Directors and, in liquidation of a Fund, are entitled to receive the net assets of the Fund. CUSTODIAN State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each Fund's custodian. REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT Evergreen Keystone Service Company, P.O. Box 2121, Boston, Massachusetts 02106-2121 acts as registrar, transfer agent and dividend-disbursing agent for each of the Funds. PRINCIPAL UNDERWRITER EKD, an affiliate of BISYS, located at 125 West 55th Street, New York, New York 10019, is the principal underwriter of the Funds. BISYS also acts as sub-administrator to the Funds and provides certain sub-administrative services to Keystone in connection with its role as investment adviser to EVERGREEN SMALL CAP VALUE FUND and to EAMC in connection with its role as investment adviser to EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND and EVERGREEN LIMITED MARKET FUND, INC., 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 EAMC, (ii) certain institutional investors and (iii) investment advisory clients of EAMC, Keystone, CMG and 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. Shareholders may obtain information concerning each Fund's Class A, B and C shares from EKSC. 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. 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. Yield is a way of showing the rate of income the Fund earns on its investments as a percentage of the Fund's share price. The Fund's yield is calculated according to accounting methods that are standardized by the SEC for all stock and bond funds. Because yield accounting methods differ from the method used for other accounting purposes, the Fund's yield may not equal its distribution rate, the income paid to your account or the net investment income reported in the Fund's financial statements. To calculate yield, the Fund takes the interest [and dividend] income it earned from its portfolio of investments (as defined by the SEC formula) for a 30-day period (net of expenses), divides it by the average number of shares entitled to receive dividends, and expresses the result as an annualized percentage rate based on the Fund's share price at the end of the 30-day period. This yield does not reflect gains or losses from selling securities. Performance data for each class of shares will be included in any advertisement or sales literature using performance data of a Fund. These advertisements may quote performance rankings or ratings of a Fund by financial publications or independent organizations such as Lipper Analytical Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various indices. The Fund may also advertise in items of sales literature an "actual distribution rate" which is computed by dividing the total ordinary income distributed (which may include the excess of short-term capital gains over losses) to shareholders for the latest twelve month period by the maximum public offering price per share on the last day of the period. Investors should be aware that past performance may not be reflective of future results. In marketing a Fund's shares, information may be provided that is designed to help individuals understand their investment goals and explore various financial strategies. Such information may include publications describing general principles of investing, such as asset allocation, diversification, risk tolerance, and goal setting; a questionnaire designed to help create a personal financial profile; and an action plan offering investment alternatives. The information provided to investors may also include discussions of other Evergreen Keystone 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. EKD may also reprint, and use as advertising and sales literature, articles from Evergreen Events, a quarterly magazine provided to Evergreen Keystone 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 EVERGREEN FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND, EVERGREEN AGGRESSIVE GROWTH FUND and EVERGREEN SMALL CAP VALUE FUND operate provide that no Trustee or shareholder will be personally liable for the obligations of the Trust and that every written contract made by the Trust shall contain a provision to that effect. If any Trustee or shareholder were required to pay any liability of the Trust, that person would be entitled to reimbursement from the general assets of the Trust. ADDITIONAL INFORMATION This Prospectus and the SAI, which has been incorporated by reference herein, do not contain all the information set forth in the Registration Statements filed by the Trusts or EVERGREEN LIMITED MARKET FUND, INC. with the SEC under the Securities Act. 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. STATEMENT OF ADDITIONAL INFORMATION THE EVERGREEN DOMESTIC GROWTH FUNDS 2500 WESTCHESTER AVENUE, PURCHASE, NEW YORK 10577 800-343-2898 JUNE 2, 1997 EVERGREEN FUND ("EVERGREEN") EVERGREEN AGGRESSIVE GROWTH FUND ("AGGRESSIVE") EVERGREEN SMALL CAP VALUE FUND ("SMALL CAP") NOVEMBER 29, 1996, AS SUPPLEMENTED JUNE 2, 1997 EVERGREEN U.S. REAL ESTATE EQUITY FUND ("U.S. REAL ESTATE") EVERGREEN LIMITED MARKET FUND, INC. ("LIMITED MARKET") This Statement of Additional Information ("SAI") dated June 2, 1997 pertains to all classes of shares of Evergreen, Aggressive and Small Cap and November 29, 1996, as supplemented June 2, 1997, pertains to all classes of shares of U.S. Real Estate and Limited Market. It is not a prospectus and should be read in conjunction with the Prospectus dated June 2, 1997 for Evergreen, Aggressive and Small Cap and November 29, 1996, as supplemented June 2,1997, for U.S. Real Estate and Limited Market in which you are making or contemplating an investment. The Evergreen Domestic Growth Funds are offered through two separate prospectuses: one offering Class A, Class B and Class C shares, and a separate prospectus offering Class Y shares of each Fund. Copies of each Prospectus may be obtained without charge by calling the number listed above. TABLE OF CONTENTS INVESTMENT OBJECTIVES AND POLICIES.....................................1 INVESTMENT RESTRICTIONS................................................1 CERTAIN RISK CONSIDERATIONS............................................1 MANAGEMENT.............................................................1 INVESTMENT ADVISERS....................................................1 Evergreen, U.S. Real Estate and Limited Market...................8 Aggressive.......................................................8 Small Cap........................................................8 Advisory Fees....................................................8 Continuation of the Advisory Agreement...........................9 General.........................................................10 Expense Limitations.............................................11 DISTRIBUTION PLANS.....................................................1 Fees Paid Pursuant to Distribution Plans........................12 ALLOCATION OF BROKERAGE................................................1 ADDITIONAL TAX INFORMATION.............................................1 NET ASSET VALUE.......................................................15 PURCHASE OF SHARES.....................................................1 General.........................................................16 Alternative Purchase Arrangements...............................17 Deferred Sales Charge Alternative--Class B Shares...............21 Level-Load Alternative--Class C Shares..........................22 Class Y Shares..................................................22 GENERAL INFORMATION ABOUT THE FUNDS...................................23 Capitalization and Organization.................................23 Distributor.....................................................24 Counsel.........................................................24 Independent Auditors............................................24 PERFORMANCE INFORMATION...............................................24 Total Return....................................................24 YIELD CALCULATIONS....................................................26 Non-Standardized Performance....................................26 GENERAL...............................................................26 Additional Information..........................................27 FINANCIAL STATEMENTS..................................................27 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 following expands upon the discussion in the Prospectus regarding certain investments of each Fund. OPTIONS EVERGREEN may write covered call options to a limited extent on its portfolio securities ("covered options") in an attempt to earn additional income. A call option gives the purchaser of the option the right to buy a security from the writer at the exercise price at any time during the option period. The premium paid to the writer is the consideration for undertaking the obligations under the option contract. The writer foregoes the opportunity to profit from an increase in the market price of the underlying security above the exercise price except insofar as the premium represents such a profit. The Fund retains the risk of loss should the price of the underlying security decline. The Fund will write only covered call option contracts and will receive premium income from the writing of such contracts. EVERGREEN 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. The 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. 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/Directors. 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 EVERGREEN and LIMITED MARKET may not invest more than 5% of their net assets, at the time of the investment in question, in the securities of any one issuer other than the U.S. government and its agencies or instrumentalities. Neither AGGRESSIVE, SMALL CAP nor U.S. REAL ESTATE may invest more than 5% of its total assets, at the time of the investment in question, in the securities of any one issuer other than the U.S. government and its agencies or instrumentalities, except that up to 25% of the value of a Fund's total assets may be invested without regard to such 5% limitation. 2. TEN PERCENT LIMITATION ON SECURITIES OF ANY ONE ISSUER None of AGGRESSIVE*, EVERGREEN, LIMITED MARKET, SMALL CAP or U.S. REAL ESTATE* 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. 3. INVESTMENT FOR PURPOSES OF CONTROL OR MANAGEMENT None of EVERGREEN, U.S. REAL ESTATE*, LIMITED MARKET*, SMALL CAP* or AGGRESSIVE* may invest in companies for the purpose of exercising control or management. 4. PURCHASE OF SECURITIES ON MARGIN None of EVERGREEN, AGGRESSIVE*, LIMITED MARKET, U.S. REAL ESTATE* OR SMALL CAP 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 EVERGREEN may not invest more than 5% of its net assets in securities of unseasoned issuers that have been in continuous operation for less than three years, including operating periods of their predecessors. Neither AGGRESSIVE* nor U.S. REAL ESTATE* may invest more than 15% 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, except obligations issued or guaranteed by the U.S. government and its agencies or instrumentalities (this limitation does not apply to real estate investment trusts). 6. UNDERWRITING None of AGGRESSIVE, EVERGREEN, LIMITED MARKET, SMALL CAP or U.S. REAL ESTATE may engage in the business of underwriting the securities of other issuers. 7. INTERESTS IN OIL, GAS OR OTHER MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS None of AGGRESSIVE, EVERGREEN, LIMITED MARKET OR U.S. REAL ESTATE may purchase, sell or invest in interests in oil, gas or other mineral exploration or development programs. 8. CONCENTRATION IN ANY ONE INDUSTRY U.S. REAL ESTATE may not concentrate its investments in any one industry, except that the Fund will invest at least 65% of its total assets in securities of companies engaged principally in the real estate industry. None of EVERGREEN, LIMITED MARKET, SMALL CAP or AGGRESSIVE 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; provided, that this limitation shall not apply with respect to each Fund, to obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities. For purposes of this restriction, utility companies, gas, electric, water and telephone companies will be considered separate industries. 9. WARRANTS None of AGGRESSIVE*, EVERGREEN, LIMITED MARKET or U.S. REAL ESTATE* may invest more than 5% of its net assets in warrants, and, of this amount, no more than 2% of each Fund's total net assets may be invested in warrants that are listed on neither the New York nor the American Stock Exchange. 10.OWNERSHIP BY TRUSTEES(DIRECTORS)/OFFICERS None of AGGRESSIVE*, EVERGREEN, LIMITED MARKET or U.S. REAL ESTATE* may purchase or retain the securities of any issuer if (i) one or more officers or Trustees/Directors 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 AGGRESSIVE*, EVERGREEN, LIMITED MARKET or U.S. REAL ESTATE* 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). 12.LENDING OF FUNDS AND SECURITIES The Funds may not lend their 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 AGGRESSIVE, U.S. REAL ESTATE, EVERGREEN, SMALL CAP or LIMITED MARKET 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 net assets. 13.COMMODITIES Neither AGGRESSIVE, SMALL CAP nor U.S. REAL ESTATE may purchase, sell or invest in physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent a Fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities). Neither EVERGREEN nor LIMITED MARKET may purchase, sell or invest in commodities or commodity contracts. 14.REAL ESTATE None of AGGRESSIVE, EVERGREEN, LIMITED MARKET, SMALL CAP or U.S. REAL ESTATE 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) U.S. REAL ESTATE may purchase securities secured by real estate or interests therein, or issued by companies or investment trusts which invest in real estate or interests therein. 15.BORROWING, SENIOR SECURITIES, REVERSE REPURCHASE AGREEMENTS LIMITED MARKET may not 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 provided that the aggregate amount of such borrowings shall not exceed 5% of the value of the Fund's total net assets at the time of any such borrowing, or mortgage, pledge or hypothecate its assets, except in an amount sufficient to secure any such borrowing. LIMITED MARKET may not issue senior securities, as defined in the Investment Company Act of 1940, as amended, except insofar as the Fund may be deemed to have issued a senior security by reason of borrowing money in accordance with the restrictions described above. EVERGREEN may not borrow money except from banks as a temporary measure for extraordinary or emergency purposes (i) on an unsecured basis, subject to the requirements that the value of the Fund's assets, including the proceeds of borrowings, does not at any time become less than 300% of the Fund's indebtedness; provided, however, that if the value of the Fund's assets becomes less than such amount, the Fund will reduce its borrowings within three business days so that the value of the Fund's assets will be at least 300% of its indebtedness, or (ii) may make such borrowings on a secured basis, provided that the aggregate amount of such borrowings shall not exceed 5% of the value of its total net assets at the time of any such borrowing, or mortgage, pledge or hypothecate its assets, except in an amount not exceeding 15% of its total net assets taken at cost to secure such borrowing. AGGRESSIVE may not borrow money except on an unsecured basis up to 25% of its net assets, subject to the requirements that the value of the Fund's assets, including the proceeds of borrowings, does not at any time become less than 300% of the Fund's indebtedness; provided, however, that if the value of the Fund's assets becomes less than such amount, the Fund will reduce its borrowings within three business days so that the value of the Fund's assets will be at least 300% of its indebtedness. U.S. REAL ESTATE may not 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 the 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. The Fund will not enter into reverse repurchase agreements exceeding 5% of the value of its total assets. SMALL CAP may not borrow money, except (1) from a bank, provided that immediately after any such borrowing there is asset coverage of at least 300% for all of the Fund's borrowings, and, in the event that such asset coverage at any time falls below 300% the Fund will reduce its borrowings so that its asset coverage is at least 300%; and (2) for temporary purposes in an amount not to exceed 5% of the value of the Fund's total assets. 16.JOINT TRADING None of AGGRESSIVE*, EVERGREEN, LIMITED MARKET or U.S. REAL ESTATE* may participate on a joint or joint and several basis in any trading account in any securities. (A Fund's "bunching" of orders for the purchase or sale of portfolio securities with its investment adviser or accounts under its management to reduce brokerage commissions, to average prices among them or to facilitate such transactions is not considered a trading account in securities for purposes of this restriction). 17.OPTIONS Neither LIMITED MARKET nor U.S. REAL ESTATE* may write, purchase or sell put or call options, or combinations thereof, except that U.S. REAL ESTATE may do so as permitted under "Description of the Funds - Investment Objectives and Policies" in its Prospectus. EVERGREEN may not write, purchase or sell put or call options, or combinations thereof, except that the 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 total 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. NON-FUNDAMENTAL OPERATING POLICIES Certain Funds have adopted additional non-fundamental operating policies. Operating policies may be changed by the Board of Trustees/Directors without a shareholder vote. 1. FUTURES AND OPTIONS TRANSACTIONS With respect to U.S. REAL ESTATE, which may invest in futures and options, the Fund 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 EVERGREEN, LIMITED MARKET, SMALL CAP or U.S. REAL ESTATE 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/ Directors have determined to be liquid. CERTAIN RISK CONSIDERATIONS There can be no assurance that a Fund will achieve its investment objective, and an investment in the Fund involves certain risks which are described under "Description of the Funds - Investment Practices and Restrictions; Special Risk Considerations" in the Prospectus. While U.S. REAL ESTATE is technically diversified within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"), because the investment alternatives of the Fund are restricted by a policy of concentrating at least 65% of its total assets in companies in the real estate industry, investors should understand that investment in this Fund may be subject to greater risk and market fluctuation than an investment in a portfolio of securities representing a broader range of industry investment alternatives. MANAGEMENT The Trustees and executive officers of Evergreen Trust and Evergreen Equity Trust (the "Trusts") and the Directors and executive officers of Limited Market, their ages, addresses and principal occupations during the past five years are set forth below:
Name, Age and Address of Position With Trustees/Directors & Certain Trusts/ Limited Principal Occupation(s) During Past Officers Market Five Years - ------------------------------ --------------- ----------------------------------- LAURENCE B. ASHKIN (68), 180 Trustee/Director. Real estate developer and construction East Pearson Street, Chicago, consultant since 1980; President of Centrum IL. Equities since 1987 and Centrum Properties, Inc. since 1980. FOSTER BAM (69), Greenwich Trustee/Director. Partner in the law firm of Cummings and Plaza, Greenwich, CT. Lockwood since 1968. JAMES S. HOWELL (72), 4124 Chairman and Retired Vice President of Lance Inc. (food Crossgate Road, Charlotte, NC. Trustee/ Director. manufacturing); Chairman of the Distribution Comm. Foundation for the Carolinas from 1989 to 1993. ROBERT J. JEFFRIES (73), 2118 Trustee/Director Corporate consultant since 1967. Ne Bedford Drive, Sun City Emeritus*. Center, GERALD M. MCDONNELL (57), 209 Trustee/Director. Sales Representative with Nucor-Yamoto Inc. Ease Nucor Rd. Norfolk, NE. (steel producer) since 1988. THOMAS L. MCVERRY (58), 4419 Trustee/Director. Director of Carolina Cooperative Federal Parkview Drive, Charlotte, NC. Credit Union since 1990 and Rexham Corporation from 1988 to 1990; Vice President of Rexham Industries, Inc. (diversified manufacturer) from 1989 to 1990; Vice President-Finance and Resources, Rexham Corporation from 1979 to 1990. WILLIAM WALT PETTIT**(41), Holcomb Partner in the law firm Holcomb and Pettit, and Pettit, P.A., 227 West Trade P.A. since 1990; Attorney, Clontz and Clontz St., Charlotte, NC. from 1980 to 1990. RUSSELL A. SALTON, III, M.D. Trustee/Director. Medical Director, U.S. Healthcare of (49) Regency Executive Park, Charlotte, North Carolina since 1995, Charlotte, NC. President, Primary Physician Care from 1990 to 1996. MICHAEL S. SCOFIELD (53), 212 Trustee/Director. Attorney, Law Offices of Michael S. Scofield S. Tryon Street, Suite 1280, since 1969. Charlotte, NC. JOHN J. PILEGGI (37), 230 Park President and Consultant to BISYS Fund Services since Avenue, Suite 910, New York, NY. Treasurer. 1996. Senior Managing Director, Furman Selz LLC since 1992; Managing Director from 1984 to 1992. GEORGE O. MARTINEZ (37), 3435 Secretary. Senior Vice President/Director of Stelzer Road, Columbus, OH. Administration and Regulatory Services, BISYS Fund Services since April 1995; Vice President/Assistant General Counsel, Alliance Capital Management from 1988 to 1995. *Robert J. Jeffries has been serving as a Trustee/Director Emeritus since January 1, 1997. ** Mr. Pettit may be deemed to be an "interested person" within the meaning of the 1940 Act. The officers listed above hold the same positions with forty-two investment companies offering a total of__ investment funds within the Evergreen Keystone mutual fund complex. Messrs. Howell, Salton and Scofield are Trustees/Directors of all forty-two investment companies. Messrs. McDonnell, McVerry and Pettit are Trustees/Directors of forty-one of the investment companies (excluded is Evergreen Variable Trust). Messrs. Ashkin and Bam are Trustees/Directors and Mr. Jeffries is a Trustee/Director Emeritus of forty of the investment companies (excluded are Evergreen Variable Trust and Evergreen Investment Trust). The officers of the Trusts are all officers and/or employees of The BISYS Group, Inc. ("BISYS"), except for Mr. John J. Pileggi who is a consultant to BISYS. BISYS is an affiliate of Evergreen Keystone Distributor, Inc., the distributor of each Class of shares of each Fund. The Funds do not pay any direct remuneration to any officer or Trustee who is an "affiliated person" of either First Union National Bank of North Carolina, Evergreen Asset Management Corp., Keystone Investment Management Company ("Keystone") or their affiliates. See "Investment Advisers." Currently, none of the Trustees is an "affiliated person" as defined in the 1940 Act. AS OF THE DATE OF THIS SAI, THE OFFICERS AND TRUSTEES/DIRECTORS OF THE TRUSTS AND LIMITED MARKET AS A GROUP OWNED LESS THAN 1% OF THE OUTSTANDING SHARES OF CLASS A, B, C AND Y OF ANY OF THE FUNDS. Set forth below is information with respect to each person, who, to U.S. Real Estate and Limited Market Fund's knowledge, owned beneficially or of record more than 5% of a class of each Fund's total outstanding shares as of November 1, 1996.
Name and Address Name of Fund/Class No. of Shares % of Class - ------------------------- ---------------------- --------------- --------------- Fubs & Co. Febo U.S. Real Estate/A 2,608 12.24% Astrid & Bernard Celestin 401 S. Tryon St. Charlotte, NC 28202-1911 Charles Schwab & Co. Inc. U.S. Real Estate/A 4,780 22.43% Special Custody Account for the Exclusive Benefit of Customers Attn: Mutual Fund Dept. 101 Montgomery St. San Fransisco, CA 84104-4177 Dorothy M. Reif Revocable Trus U.S. Real Estate/A 1,529 7.17% U/A DTD 08/19/92 401 S. Tryon St. Charolotte, NC 28202-1911 Joseph T. Reif TR U.S. Real Estate/A 1,529 7.17% Joseph T. Reif Revocable Trust U/A DTD 8/19/92 401 S. Tryon St. Charlotte, NC 28202-1911 First Union Nat'l Bank NC C/F U.S. Real Estate/A 1,194 5.60% Daniel E. Polk IRA 401 S.Tryon St. Charlotte, NC 28202-1911 Donaldson Lufkin Jenrette U.S. Real Estate/A 1,986 9.32% Securities Corporation Inc P.O. Box 2052 Jersey City, NJ 07303-2052 Fubs & Co. Febo U.S. Real Estate/A 1,865 8.75% Isaac Lalo and Michele Lalo 401 S. Tryon St. Charlotte, NC 28202-1911 First Union National Bank U.S. Real Estate/B 2,284 5.21% NC C/F Lawrence L. Horner IRA 401 S. Tryon Street Charlotte, NC 28288-1911 FUBS & CO. Febo U.S. Real Estate/B 3,626 8.27% June P. Mooring 401 S. Tryon Street Charlotte, NC 28304-1911 Fubs & Co. Febo U.S. Real Estate/B 5,607 12.79% TTEE FBO Alan R. Finnieston Karen L. Finnieston C/O First Union National Bank 401 S. Tryon Street CMG-2-1151 Charlotte, NC 28288-1911 First Fidelity Bank-CT C/F U.S. Real Estate/B 2,530 5.77% Betty J. Carney IRA Fubs & Co. Febo 401 S. Tryon Street Charlotte, NC 28288-1911 Charles A. Rossi U.S. Real Estate/B 7,974 18.19% Edna Rossi Fubs & Co. Febo 401 S. Tryon Street Charlotte, NC 28288-1911 Southwest Securities Inc. FBO U.S. Real Estate/B 2,463 5.62% Jerry W. Bayless TTEE P.O. Box 509002 Dallas, TX 75250-9002 Brian Mccou U.S. Real Estate/C 7,968 27.73% Fubs & Co. Febo 401 S. Tryon Street Charlotte, NC 28288-1911 Merrill Lynch U.S. Real Estate/C 17,447 60.72% Trade House Account - AID Private Client Group Attn: Book Entry 4800 Dear Lake Dr. East 3rd Fl. Jacksonville, FL 32246-6484 Donaldson Lufkin Jenrette U.S. Real Estate/C 1,608 5.60% Securities Corporation Inc P.O. Box 2052 Jersey City, NJ 07303-2052 Constance E. Lieber* U.S. Real Estate/Y 77,526 9.39% C/O Lieber & Co. 2500 Westchester Avenue Purchase, NY 10577 Stephen A. Lieber* U.S. Real Estate/Y 225,899 27.37% C/O Lieber & Co. 2500 Westchester Avenue Purchase, NY 10577 The Essel Foundation* U.S. Real Estate/Y 50,123 6.07% C/O Lieber & Co. 2500 Westchester Avenue Purchase, NY 10577 Charles Schwab & Co. Inc. U.S. Real Estate/Y 59,203 7.17% Reinvest Account Attn: Mutual Funds Dept. 101 Montgomery Street San Francisco, CA 94104-4122 Fubs & Co. Cust Limited Market/A 6,000 11.73% FBO Edward M. Armfield, Sr. C/O First Union National Bank 301 S. Tryon Street Charlotte, NC 28288-0001 Fubs & Co. Febo Limited Market/A 3,566 6.97% Gerald Herson C/O First Union National Bank 401 S. Tryon Street Charlotte, NC 28288-1911 Fubs & Co. Febo Limited Market/A 2,833 5.54% Anthony J. Defranzo Jr. C/O First Union National Bank 401 S Tryon Street Charlotte, NC 28288-1911 Charles Schwab & Co. Inc. Limited Market/A 2,978 5.82% Special Custody Account for the Exclusive Benefit of Customers Reinvest Account Mut FDS Dept 101 Montgomery St. San Francisco, CA 94104-4122 First Union National Bank FL C Limited Market/C 213 13.61% Kathleen L. Hannan MD Sep. C/O FUNB 401 S. Tryon Street Charlotte, NC 28288-1911 First Union National Bank GA C Limited Market/C 1,064 67.87% Janet E. Dauugherty IRA C/O FUNB 401 S. Tryon Street Charlotte, NC 28288-1911 First Union Natl. Bank GA C/F Limited Market/C 80 5.13% Stephen W. Sachs IRA 401 S. Tryon Street Charlotte, NC 28288-1911 Charles Schwab & Co. Inc. Limited Market/Y 189,005 8.63% Reinvest Account Mutual Fund Dept. 101 Montgomery Street San Francisco, CA 94104-4122 Contance E. Lieber Limited Market/Y 170,046 7.77% C/O Lieber & Co. 2500 Westchester Avenue Purchase, NY 10577 Stephen A. Lieber Limited Market/Y 237,691 10.86% C/O Lieber & Co. 2500 Westchester Avenue Purchase, NY 10577 Harris Trust & Svgs Bank A/C Limited Market/Y 143,281 6.54% Delta Air Lines Master TR TR 03 70314 - Att Dina Peterson C/O Lieber & Co. 2500 Westchester Ave.
- -------------------------------- *As a result of his direct and beneficial ownership of 38.46% of the shares of U.S. Real Estate on November 1, 1996, Stephen A.Lieber may be deemed to "control" the Fund, as that term is defined in the 1940 Act. Set forth below is information with respect to each person, who, to Evergreen, Aggressive and Small Cap knowledge, owned beneficially or of record more than 5% of a class of each Fund's total outstanding shares as of February 28, 1997.
Name and Address Name of Fund/Class No. of Shares % of Class - ------------------------- ---------------------- --------------- --------------- First Union National Bank/EB/I Evergreen Fund/Y 3,898,502 8.43% Cash Account Attn Trust Operations Fund Group 401 S. Tryon St. 3rd Floor CMG 1151 Charlotte, NC 28202-1911 First Union National Bank/EB/I Evergreen Fund/Y 10,029,266 21.69% Reinvest Account Attn Trust Operations Fund Group 401 S. Tryon St. 3rd Floor CMG 1151 Charlotte, NC 28202-1911 Merrill Lynch Evergreen Aggressive 296,678 6.59% Trade House Account - AID Growth Fund/A Private Client Group Attn Book Entry 4800 Deer Lake Dr. East 3rd Floor Jacksonville, FL 32246-6484 Merrill Lynch Evergreen Aggressive 27,894 31.37% Trade House Account - AID Growth Fund/C Private Client Group Attn Book Entry 4800 Deer Lake Drive East 3rd Floor Jacksonville, FL 32246-6484 Fubs & Co. Febo Evergreen Aggressive 5,485 6.17% Octavio Riano-Avila and Growth Fund/C Rosalba Chauez de Riano 4995 NW 72nd Avenue Miami, FL 33166-5643 First Union National Bank Evergreen Aggressive 1,100,255 55.39% Trust Accounts Growth Fund/Y Attn Ginny Batten 11th Floor CMG-1151 301 S. Tryon Street Charlotte, NC 28288-0002 First Union National Bank Evergreen Aggressive 571,535 28.77% Trust Accounts Growth Fund/Y Attn Ginny Batten 11th Floor CMG-1151 301 S. Tryon Street Charlotte, NC 28288-0002 INVESTMENT ADVISERS (See also "Management of the Funds" in each Fund's Prospectus) EVERGREEN, U.S. REAL ESTATE AND LIMITED MARKET The investment adviser to Evergreen, U.S. Real Estate and Limited Market is Evergreen Asset Management Corp., a New York corporation, with offices at 2500 Westchester Avenue, Purchase, New York ("EAMC" or the "Adviser"). EAMC 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. AGGRESSIVE The investment adviser of Aggressive is FUNB which provides investment advisory services through its Capital Management Group. SMALL CAP The investment adviser to Small Cap is Keystone Investment Management Company ("Keystone" or the "Adviser"). Keystone is an indirectly-owned subsidiary of FUNB. ADVISORY FEES 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, except Small Cap, for the three most recent fiscal periods reflected in its registration statement are set forth below: Year Ended Year Ended Year Ended 9/30/96 9/30/95 9/30/94 ----------- -------------- ------------ EVERGREEN Advisory Fee $9,145,287 $5,472,439 $5,738,633 Expense Reimbursement $ 9,740 $ 24,130 U.S. REAL ESTATE Advisory Fee $104,850 $ 85,509 $ 57,506 Waiver (104,850) ( 85,509) ($57,506) Net Advisory Fee $ 0 $ 0 $ 0 Expense Reimbursement $107,348 $ 43,013 $9,102 LIMITED MARKET Advisory Fee $510,421 $800,642 $314,648 Waiver (27,044) -- -- Net Advisory Fee $483,377 $800,642 $314,648 Expense Reimbursement $ 37,344 $ 48,100 $ 0 Year Ended Period Ended AGGRESSIVE* 9/30/96 7/1/95 - 9/30/95 ----------- -------------- $612,492 $106,041 *Aggressive commenced operations as successor Fund to ABT Emerging Growth Fund on June 30, 1995. Therefore, the first year's figures set forth in the table above reflect the advisory fees paid to the Fund's Adviser for the period from the commencement of operations through September 30, 1995. The advisory fees paid to Palm Beach Capital Management, Ltd., investment adviser to ABT Emerging Growth Fund for the period November 1, 1994 through June 30, 1995, totalled $248,815. SUB-ADVISER EAMC has entered into sub-advisory agreements with Lieber & Company ("Lieber") regarding Evergreen, U.S. Real Estate and Limited Market (the "Sub-Advisory Agreements"). The Sub-Advisory Agreements provide for Lieber's research department and staff to furnish EAMC with information, investment recommendations, advice and research and general consulting services regarding each Fund. For its services rendered, EAMC reimubrses Lieber for the direct and indirect costs of performing such services. There is no additional charge to the Funds for the services performed by Lieber. Lieber is a subsidiary of First Union and is located at 2500 Westchester Avenue, Purchase, New York 10577. CONTINUATION OF THE ADVISORY AGREEMENTS ALL FUNDS, EXCEPT SMALL CAP. The Investment Advisory Agreements will continue in effect from year to year provided that their continuance is approved annually by a vote of a majority of the Trustees of each Trust and Directors of Limited Market including a majority of (i) those Trustees/Directors who are not parties thereto or "interested persons" (as defined in the 1940 Act) of any such party (the "Independent Trustees, in the case of each Trust, and the "Independent Directors," in the case of Limited Market), cast in person at a meeting duly called for the purpose of voting on such approval or (ii) the outstanding voting shares of each Fund. SMALL CAP. With respect to Small Cap, the Investment Advisory Agreement dated March 11, 1997 will continue in effect until March 11, 1998. Thereafter, the Investment Advisory Agreement will continue in effect from year to year provided that such continuance is approved annually by a vote of a majority of (i) the Trustees of Evergreen Trust, including a majority of the Independent Trustees, cast in person at a meeting duly called for the purpose of voting on such approval or (ii) the outstanding voting securities of the Fund. GENERAL 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 its registration under the Securities Act of 1933, as amended, and the 1940 Act, printing prospectuses (for existing shareholders) as they are updated, state qualifications, mailings, brokerage, custodian and stock transfer charges, printing, legal and auditing expenses, expenses of shareholder meetings and reports to shareholders. Notwithstanding the foregoing, each Adviser will pay the costs of printing and distributing prospectuses used for prospective shareholders. Each Investment Advisory Agreement is 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 and Limited Market's Trustees/Directors or by the respective Adviser. Each Investment Advisory Agreement will automatically terminate in the event of its 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. 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 EAMC, FUNB or Keystone acts as investment adviser or between the Fund and any advisory clients of EAMC, FUNB, Keystone or Lieber. Each Fund may from time to time engage in such transactions but only in accordance with these procedures and if they are equitable to each participant and consistent with each participant's investment objectives. EKIS provides administrative services to Aggressive and each of the portfolios of Evergreen Investment Trust for a fee based on the average daily net assets of each fund administered by EKIS for which EAMC, FUNB or Keystone 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. BISYS, an affiliate of Evergreen Keystone Distributor, Inc. (the "Distributor"), serves as sub-administrator to Aggressive [AND SMALL CAP] and is entitled to receive a fee from the Fund based on the average daily net assets of Aggressive [AND SMALL CAP] at a rate calculated on the total assets of the mutual funds administered by EKIS for which FUNB, EAMC or Keystone 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 EKIS for which EAMC, FUNB or Keystone serves as investment adviser were approximately $30 billion as of February 28, 1997. For the period July 1, 1995 through September 30, 1995 and the fiscal year ended September 30, 1996, Aggressive paid EAMC $9,1462 and $51,109, respectively, in administration service fees. EXPENSE LIMITATIONS Each Adviser has in some instances voluntarily limited (and may in the future limit) expenses of certain of the Funds. Until U.S. Real Estate reaches $15 million in net assets, EAMC has voluntarily agreed to reimburse the Fund to the extent that the Fund's aggregate operating expenses (including the Adviser's fee, but excluding interest, taxes, brokerage commissions, Rule 12b-1 distribution fees and extraordinary expenses) exceed 1.50% of its average net assets for any fiscal year. DISTRIBUTION PLANS (See also "Management of the Funds - Distribution Plans and Agreements" in each Fund's Prospectus) Distribution fees are accrued daily and paid monthly on the Class A, Class B and Class C shares and are charged as class expenses, as accrued. The distribution fees attributable to the Class B shares and Class C shares are designed to permit an investor to purchase such shares through broker-dealers without the assessment of a front-end sales charge, and, in the case of Class C shares, without the assessment of a contingent deferred sales charge ("CDSC") 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 CDSC 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 and the Directors of Limited Market for their review on a quarterly basis. Also, each Plan provides that the selection and nomination of Independent Trustees/Directors are committed to the discretion of such Independent Trustees/Directors 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 Securities and Exchange Commission 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. 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/Directors of each Trust and Limited Market 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 Independent Trustees/ Directors and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto. 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 the Funds and holders of Class A, Class B and Class C shares and (ii) stimulate administrators to render administrative support services to the Funds 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. Any Plan or Distribution Agreement may be terminated (i) 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 Independent Trustees/Directors, or (ii) 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. 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/Directors of a Trust and Limited Market or the holders of the Fund's outstanding voting securities, voting separately by Class, and in either case, by a majority of the Independent Trustees/Directors, cast in person at a meeting called for the purpose of voting on such approval. However, a 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. FEES PAID PURSUANT TO DISTRIBUTION PLANS For the fiscal year ended September 30, 1996, the Funds incurred the following distribution services fees: CLASS EVERGREEN U.S. REAL ESTATE LIMITED MARKET AGGRESSIVE GROWTH - -------- ----------- ---------------- -------------- ----------------- Class A $149,922 $307 $2,471 $197,507 Class B $160,792 $2,250 $12,608 $26,469 Class C $10,292 $328 $310 $3,308 ALLOCATION OF BROKERAGE Decisions regarding each Fund's portfolio are made by its Adviser, subject to the supervision and control of the Trustees/Directors. 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 EAMC, 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 Adviser shall be prompt execution at the most favorable price. An Adviser will also consider such factors as the price of the securities and the size and difficulty of execution of the order. If these objectives may be met with more than one firm, the Adviser will also consider the availability of statistical and investment data and economic facts and opinions helpful to the Adviser. To the extent that receipt of these services for which the Adviser or its affiliates might otherwise have paid, it would tend to reduce their expenses. Under Section 11(a) of the Securities Exchange Act of 1934, as amended, and the rules adopted thereunder by the Securities and Exchange Commission, Lieber may be compensated for effecting transactions in portfolio securities for a Fund on a national securities exchange provided the conditions of the rules are met. Each Fund advised by EAMC 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, the Adviser will seek the best execution at the most favorable price while paying a commission rate no higher than that offered to other clients of Lieber or that which can be reasonably expected to be offered by an unaffiliated broker-dealer having comparable execution capability in a similar transaction. However, no Fund will engage in transactions in which Lieber would be a principal. While no Fund advised by EAMC contemplates any ongoing arrangements with other brokerage firms, brokerage business may be given from time to time to other firms. In addition, the Trustees/Directors have adopted procedures pursuant to Rule 17e-1 under the 1940 Act to ensure that all brokerage transactions with Lieber, as an affiliated broker-dealer, are fair and reasonable. Any profits from brokerage commissions accruing to Lieber as a result of portfolio transactions for the Fund will accrue to FUNB and to its ultimate parent, First Union. The Investment Advisory Agreements 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 a Fund. The following chart shows: (i) the brokerage commissions paid by each Fund advised by EAMC during their last three fiscal years; (ii) the amount and percentage thereof paid to Lieber; and (iii) the percentage of the total dollar amount of all portfolio transactions with respect to which commissions have been paid which were effected by Lieber: YEAR YEAR YEAR ENDED ENDED ENDED 9/30/96 9/30/95 9/30/94 --------- --------- --------- EVERGREEN Total Brokerage Commissions $590,105 $342,559 $535,816 Dollar Amount paid to Lieber $515,522 $252,069 $478,391 % paid to Lieber 87% 74% 89% % of Transactions Effected by Lieber 82% 73% 90% U.S. REAL ESTATE Total Brokerage Commissions $114,230 $71,440 $49,723 Dollar Amount paid to Lieber $109,622 $68,714 $48,400 % paid to Lieber 96% 96% 97% % of Transactions Effected by Lieber 94% 95% 98% LIMITED MARKET Total Brokerage Commissions $317,058 $414,048 $94,996 Dollar Amount paid to Lieber $153,596 $125,347 $51,736 % paid to Lieber 48% 30% 54% % of Transactions Effected by Lieber 41% 24% 50% ADDITIONAL TAX INFORMATION (See also "Dividends, Distributions and Taxes" in the Prospectus) Each Fund, other than Small Cap, has qualified and intends to continue to qualify, and Small Cap intends to qualify, for and elect the tax treatment applicable to a regulated investment company (a "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 RIC, 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 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 losses 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 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. NET ASSET VALUE The following information supplements that set forth in each 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 a share 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/Articles of Incorporation 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 price. Portfolio bonds are presently valued by a recognized pricing service when such prices are believed to reflect the fair value of the security. Over-the-counter securities not included in the NASDAQ National List for which market quotations are readily available are valued at a price quoted by one or more brokers. If accurate quotations are not available, securities will be valued at fair value determined in good faith by the Board of Trustees/Directors. 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, to the extent applicable, transfer agency fees and the fact that Class Y shares bear no additional distribution 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/Directors 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/Directors 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 promptly after receipt of the information which may be after the ex-dividend date. PURCHASE OF SHARES The following information supplements that set forth in each 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 CDSC (the deferred sales charge alternative"), or without any front-end sales charge, but with a CDSC 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 investments is $1,000; there is no minimum for subsequent investments. The subscriber may use the [Share Purchase Application] available from the Distributor or the Funds 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] [calling 1-800-343-2898] if the shareholder has completed the appropriate portion of the [Share Purchase Application.] Payment for shares purchased by telephone can be made only by Electronic Funds Transfer from a bank account maintained by the shareholder at a bank that is a member of the National Automated Clearing House Association ("ACH"). If a shareholder's telephone purchase request is received before 4:00 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 are not issued for any class of shares of any Fund. All such shares shall remain in the shareholder's account on the records of the Fund. This facilitates later redemption and relieves the shareholder of the responsibility for and inconvenience of lost or stolen certificates. ALTERNATIVE PURCHASE ARRANGEMENTS As described below, each Fund issues four classes of shares: Class A, B, C and Y shares. 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) Class A, Class B and Class C shares are subject to a Rule 12b-1 distribution fee; (II) 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; (III) Class B shares and Class C shares each bear the expense of a higher Rule 12b-1 distribution services fee than Class A shares; (IV) with the exception of Class Y shares, each Class of each Fund has exclusive voting rights with respect to (a) the provisions of its Plan and (b) other matters for which separate Class voting is appropriate under applicable law; and (V) 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 fee and CDSCs on Class B shares prior to conversion, or the accumulated distribution services fee on Class C shares, would be less than the front-end sales charge and accumulated distribution services fee on Class A shares purchased at the same time, and to what extent such differential would be offset by the higher return of Class A shares. Class B and Class C shares will normally not be suitable for the investor who qualifies to purchase Class A shares at the lowest applicable sales charge. For this reason, the Distributor will reject any order (except orders for Class B shares from certain retirement plans) for more than $250,000 for Class B shares. Class A shares are subject to a lower distribution services 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 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 fees and, in the case of Class B shares, being subject to a CDSC for a six-year period. For example, based on current fees and expenses, an investor subject to the 4.75% front-end sales charge imposed by the Funds would have to hold his or her investment approximately seven years from the month of purchase for the Class B and Class C distribution services 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 fees on the investment, fluctuations in net asset value or the effect of different performance assumptions. Those investors who prefer to have all of their funds invested initially but may not wish to retain Fund shares for the six year period during which Class B shares are subject to a CDSC may find it more advantageous to purchase Class C shares. With respect to each Fund, the Trustees/Directors 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/Directors, pursuant to their fiduciary duties under the 1940 Act and state laws, will seek to ensure that no such conflict arises. FRONT-END SALES CHARGE ALTERNATIVE--CLASS A SHARES 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. Per Share Sales Offering Price Net Asset Value Charge Date Per Share --------------- ---------------- ---------- -------------- Evergreen $17.64 $ .88 9/30/96 $18.52 Aggressive $21.04 $1.05 9/30/96 $22.09 U.S. Real Estate $12.49 $ .62 9/30/96 $13.11 Limited Market $17.31 $ .86 9/30/96 $18.17 Prior to January 3, 1995, shares of the Funds then offering shares were offered exclusively on a no-load basis and, accordingly, no underwriting commissions were paid in respect of sales of shares of the Funds or retained by the Distributor. In addition, since Class B and Class C shares were not offered prior to January 3, 1995, CDSCs have been paid to the Distributor with respect to Class B or Class C shares only since January 3, 1995. The following commissions were paid and amounts retained on behalf of each Fund for the fiscal year ended September 30, 1996 and on behalf of Evergreen, U.S. Real Estate and Limited Market for the period from January 3, 1995 through September 30, 1995, and on behalf of Aggressive for the period from July 1, 1995 through September 30, 1995: Fiscal Year Ended Period From EVERGREEN 9/30/96 1/3/95 - 9/30/95 - ---------------------------- ------------------ -------------- Commissions Received $1,462,012 $586,701 Commissions Retained $ 157,233 $ 72,923 Fiscal Year Ended Period From AGGRESSIVE 9/30/96 7/1/95 - 9/30/95 - ---------------------------- ----------------- ---------------- Commissions Received $185,835 $70,327 Commissions Retained $ 22,742 $ 8,909 Fiscal Year Ended Period From U.S. REAL ESTATE 9/30/96 1/3/95 - 9/30/95 - ---------------------------- ------------------ -------------- Commissions Received $4,724 $118 Commissions Retained $ 543 $ 13 Fiscal Year Ended Period From LIMITED MARKET 9/30/96 1/3/95 - 9/30/95 - ---------------------------- ------------------ -------------- Commissions Received $2,963 $3,418 Commissions Retained $ 188 $ 495 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. CONCURRENT PURCHASES. Certain persons may qualify for the sales charge reductions by combining purchases of shares of one or more of the Evergreen Keystone mutual funds other than money market funds into a single "purchase", if the resulting "purchase" totals at least $100,000. The term "purchase" refers to: (i) a single purchase by an individual, or to concurrent purchases, which in the aggregate are at least equal to the prescribed amounts, by an individual, his or her spouse and their children under the age of 21 years purchasing shares for his, her or their own account(s); (ii) a single purchase by a trustee or other fiduciary purchasing shares for a single trust, estate or single fiduciary account although more than one beneficiary is involved; or (iii) a single purchase for the employee benefit plans of a single employer. The term "purchase" also includes purchases by any "company", as the term is defined in the 1940 Act, but does not include purchases by any such company which has not been in existence for at least six months or which has no purpose other than the purchase of shares of a Fund or shares of other registered investment companies at a discount. The term "purchase" does not include purchases by any group of individuals whose sole organizational nexus is that the participants therein are credit card holders of a company, policy holders of an insurance company, customers of either a bank or broker-dealer or clients of an investment adviser. A "purchase" may also include shares, purchased at the same time through a single selected dealer or agent, of any Evergreen Keystone mutual fund. Prospectuses for the Evergreen Keystone 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 SAI. RIGHTS OF ACCUMULATION. An investor's purchase of additional Class A shares of a Fund may qualify for a Right of Accumulation. The applicable sales charge will be based on the total of: (the investor's current purchase; (the net asset value (at the close of business on the previous day) of (a) all Class A, Class B and Class C shares of the Fund held by the investor and (b) all such shares of any other Evergreen Keystone mutual fund held by the investor; and (iii) the net asset value of all shares described in paragraph (ii) owned by another shareholder eligible to combine his or her purchase with that of the investor into a single "purchase" (see above). For example, if an investor owned Class A, Class B or Class C shares of an Evergreen Keystone 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, in the case of the Funds 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 Concurrent Purchases or to obtain the Rights of Accumulation 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. LETTER OF INTENT. Class A investors may also obtain the reduced sales charges shown in the Prospectus by means of a written Letter of Intent, which expresses the investor's intention to invest not less than $100,000 within a period of 13 months in Class A shares (or Class A, Class B and/or Class C shares) of the Fund or any other Evergreen Keystone mutual fund. Each purchase of shares under a Letter of Intent 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 Letter of Intent. At the investor's option, a Letter of Intent may include purchases of Class A, Class B or Class C shares of the Fund or any other Evergreen Keystone mutual fund made not more than 90 days prior to the date that the investor signs a Letter of Intent; however, the 13-month period during which the Letter of Intent is in effect will begin on the date of the earliest purchase to be included. Investors qualifying for the Concurrent Privileges described above may purchase shares of the Evergreen Keystone mutual funds under a single Letter of Intent. For example, if at the time an investor signs a Letter of Intent to invest at least $100,000 in Class A shares of the Fund, the investor and the investor's spouse each purchase shares of the Fund worth $20,000 (for a total of $40,000), it will only be necessary to invest a total of $60,000 during the following 13 months in shares of the Fund or any other Evergreen Keystone mutual fund, to qualify for the 3.75% sales charge applicable to purchases in the Funds and on the total amount being invested (the sales charge applicable to an investment of $100,000). The Letter of Intent is not a binding obligation upon the investor to purchase the full amount indicated. The minimum initial investment under a Letter of Intent 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 Letter of Intent and qualifies for a further reduced sales charge, the sales charge will be adjusted for the entire amount purchased at the end of the 13-month period. The difference in sales charge will be used to purchase additional shares of the Fund subject to the rate of sales charge applicable to the actual amount of the aggregate purchases. Investors wishing to enter into a Letter of Intent in conjunction with their initial investment in Class A shares of the Fund should complete the appropriate portion of the [Share Purchase Application] while current Class A shareholders desiring to do so can obtain a form of Letter of Intent by contacting a Fund at the address or telephone number shown on the cover of this Statement of Additional Information. INVESTMENTS THROUGH EMPLOYEE BENEFIT AND SAVINGS PLANS. Certain qualified and non-qualified benefit and savings plans may make shares of the Evergreen Keystone 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 record keeping services to plans which make shares of the Evergreen Keystone 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 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 SAI. 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/Directors of the Trusts or Limited Market; 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 Adviser, the Distributor and their affiliates; (iv) persons participating in a fee-based program, sponsored and maintained by a registered broker-dealer and approved by the Distributor, pursuant to which such persons pay an asset-based fee to such broker-dealer, or its affiliate or agent, for service in the nature of investment advisory or administrative services. These provisions are intended to provide additional job-related incentives to persons who serve the Funds or work for companies associated with the Funds and selected dealers and agents of the Funds. Since these persons are in a position to have a basic understanding of the nature of an investment company as well as a general familiarity with the Fund, sales to these persons, as compared to sales in the normal channels of distribution, require substantially less sales effort. Similarly, these provisions extend the privilege of purchasing shares at net asset value to certain classes of institutional investors who, because of their investment sophistication, can be expected to require significantly less than normal sales effort on the part of the Funds and the Distributor. DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES Investors choosing the deferred sales charge alternative purchase Class B shares at the public offering price equal to the net asset value per share of the Class B shares on the date of purchase without the imposition of a sales charge at the time of purchase. The Class B shares are sold without a front-end sales charge so that the full amount of the investor's purchase payment is invested in the Fund initially. Proceeds from the CDSC 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 CDSC and the distribution services 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 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. CDSC. Class B shares which are redeemed within six years after the month of purchase will be subject to a CDSC 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 CDSC will be assessed on shares derived from reinvestment of dividends or capital gains distributions. The amount of the CDSC, 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 CDSC applicable to a redemption, it will be assumed that the redemption is first of any Class A shares or Class C shares in the shareholder's Fund account, second of Class B shares held for over seven years or Class B shares acquired pursuant to reinvestment of dividends or distributions and third of Class B shares held longest during the seven-year period. To illustrate, assume that an investor purchased 100 Class B shares at $10 per share (at a cost of $1,000) and in the second year after the month of 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 the month of purchase for a CDSC of $16). The CDSC 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 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. 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 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 for an indefinite period which may extend beyond the period ending seven years after the end of the calendar month in which the shareholder's purchase order was accepted. LEVEL-LOAD ALTERNATIVE--CLASS C SHARES Investors choosing the level-load sales charge alternative purchase Class C shares at the public offering price equal to the net asset value per share of the Class C shares on the date of purchase without the imposition of a front-end sales charge. However, you will pay a 1.0% CDSC if you redeem shares during the month of purchase and the 12-month period following the month of purchase. No charge is imposed in connection with redemptions made more than one year from the month 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 CDSC 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 enables the Fund to sell Class C shares without either a front-end load or CDSC. 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 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 EAMC, (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 sales charge or CDSC. GENERAL INFORMATION ABOUT THE FUNDS (See also "Other Information - General Information" in each Fund's Prospectus) CAPITALIZATION AND ORGANIZATION Limited Market is a Maryland corporation. Evergreen, Aggressive and Small Cap are separate series of Evergreen Trust, a Massachusetts business trust. Evergreen U.S. Real Estate Equity Fund is a series of Evergreen Equity Trust, a Massachusetts business Trust. Evergreen Aggressive Growth Fund, which is a series of Evergreen Trust, acquired substantially all of the assets of ABT Emerging Growth Fund (the "ABT Fund") on June 30, 1995. The above-named Trusts are individually referred to in this Statement of Additional Information as the "Trust" and collectively as the "Trusts". Each Trust is governed by a board of trustees. Unless otherwise stated, references to the "Board of Trustees" or "Trustees" in this Statement of Additional Information refer to the Trustees of all the Trusts. Evergreen, Aggressive and Small Cap may issue an unlimited number of shares of beneficial interest with a $0.001 PAR VALUE. U.S. Real Estate may issue an unlimited number of shares of beneficial interest with a $0.001 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. The authorized capital stock of Limited Market consists of 25,000,000 shares of common stock having a par value of $0.10 per share. Each share of Limited Market is entitled to one vote and to participate equally in dividends and distributions declared by Limited Market and, on liquidation, to its proportionate share of the net assets remaining after satisfaction of outstanding liabilities (including fractional shares on a proportional basis). All shares of Limited Market when issued will be fully paid and non-assessable and have no preemptive, conversion or exchange rights. Fractional shares have proportionally the same rights, including voting rights, as are provided for a full share. The rights of the holders of shares of common stock may not be modified except by vote of the holders of a majority of the outstanding shares. 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. Under the Bylaws of Limited Market, each Director will continue in office until such time as less than a majority of the Directors then holding office have been elected by the shareholders or upon the occurrence of any of the conditions described under Section 16 of the 1940 Act. As a result, normally no annual or regular meetings of shareholders will be held, unless otherwise required by the Bylaws 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/Directors can elect 100% of the Trustees/Directors 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/Directors. The Trustees/Directors of each Trust and Limited Market 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 or Limited Market with different investment objectives, policies or restrictions, additional series of shares may be created by one or more of the Trusts or Limited Market. Any issuance of shares of another series or class would be governed by the 1940 Act and the law of either the Commonwealth of Massachusetts or the State of Maryland. If shares of another series of a Trust or Limited Market 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/Directors, that affected all portfolios in substantially the same manner. As to matters affecting each portfolio differently, such as approval of the Investment Advisory Agreement and changes in investment policy, shares of each portfolio would vote separately. In addition any Fund may, in the future, create additional classes of shares which represent an interest in the same investment portfolio. Except for the different distribution related an other specific costs borne by such additional classes, they will have the same voting and other rights described for the existing classes of each Fund Procedures for calling a shareholder meeting for the removal of the Trustees/Directors of each Trust or Limited Market, similar to those set forth in Section 16(c) of the 1940 Act will be available to shareholders of each Fund. The rights of the holders of shares of a series of a Trust or Limited Market Fund may not be modified except by the vote of a majority of the outstanding shares of such series. An order has been received from the Securities and Exchange Commission permitting the issuance and sale of multiple classes of shares representing interests in each Fund. In the event a Fund were to issue additional Classes of shares other than those described herein, no further relief from the Securities and Exchange Commission would be required. DISTRIBUTOR Evergreen Keystone Distributor, Inc., 125 West 55th Street, New York, New York 10019, 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 Agreement between each Fund and the Distributor, each Fund has agreed to indemnify the Distributor, in the absence of its willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations thereunder, against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended. COUNSEL Sullivan & Worcester LLP, Washington, D.C., serves as counsel to the Funds. INDEPENDENT AUDITORS Price Waterhouse LLP has been selected to be the independent auditors of the Funds (except Small Cap). KPMG Peat Marwick LLP has been selected to be the independent auditors of Small Cap. 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 Securities and Exchange Commission, the average annual compounded rate of return over the period that would equate an assumed initial amount invested to the value of such investment at the end of the period. For purposes of computing total return, income dividends and capital gains distributions paid on shares of the Fund are assumed to have been reinvested when paid and the maximum sales charge applicable to purchases of Fund shares is assumed to have been paid. The Fund will include performance data for Class A, Class B, Class C and Class Y shares in any advertisement or information including performance data of the Fund. With respect to Evergreen, U.S. Real Estate and Limited Market, the shares of each Fund outstanding prior to January 3, 1995 have been reclassified as Class Y shares. With respect to Aggressive, the Fund is the successor of the the ABT Emerging Growth Fund and the information presented is based on the ABT Emerging Growth Fund's Class A shares, the only outstanding class until June 30, 1995. 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 or period since inception is set forth in the table below. 1 Year 5 Years 10 Years Ended Ended Ended 9/30/96 9/30/96 9/30/96 --------- -------- ---------- EVERGREEN Class A 12.46% 12.96% 11.03% Class B 12.29% 13.57% 11.45% Class C 16.29% 13.81% 11.45% Class Y 18.43% 14.20% 11.63% LIMITED MARKET Class A (7.51%) 5.45% 8.64% Class B (8.31%) 5.91% 9.02% Class C (4.52%) 6.21% 9.03% Class Y (2.73%) 6.53% 9.19% AGGRESSIVE Class A 19.65% 17.51% 14.77% Class B 19.94% 18.30% 15.26% Class C 24.11% 18.48% 15.25% Class Y 25.84% 18.72% 15.36% 1 Year Period From 9/1/93 Ended (inception) to 9/30/96 12/31/96 --------- ------------------ U.S. REAL ESTATE Class A 7.75% 8.33% Class B 7.49% 8.89% Class C 11.49% 9.82% Class Y 13.57% 10.26% Except for the one year ended September 30, 1996, the performance numbers for Evergreen, U.S. Real Estate and Limited Market 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 CDSC. Except for the one year ended September 30, 1996, the performance numbers for the Class B, Class C and Class Y shares of Aggressive are hypothetical numbers based upon the performance for the Class A shares of ABT Emerging Growth Fund, which is the predecessor to Aggressive for accounting purposes as adjusted for any applicable CDSC. 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 Securities & Exchange Commission yield formula) for a given 30-day or one month period, net of expenses, by the average number of shares entitled to receive distributions during the period, dividing this figure by the Fund's net asset value per share at the end of the period and annualizing the result (assuming compounding of income) in order to arrive at an annual percentage rate. The formula for calculating yield is as follows: YIELD = 2[(a-b)/(cd)+1)6-1] Where a = Interest earned during the period b = Expenses accrued for the period (net of reimbursements) c = The average daily number of shares outstanding during the period that were entitled to receive dividends d = The maximum offering price per share on the last day of the period Income is calculated for purposes of yield quotations in accordance with standardized methods applicable to all stock and bond funds. Gains and losses generally are excluded from the calculation. Income calculated for purposes of determining a Fund's yield differs from income as determined for other accounting purposes. Because of the different accounting methods used, and because of the compounding assumed in yield calculations, the yields quoted for a Fund may differ from the rate of distributions a Fund paid over the same period, or the net investment income reported in a Fund's financial statements. Yield information is useful in reviewing a Fund's performance, but because yields fluctuate, such information cannot necessarily be used to compare an investment in a Fund's shares with bank deposits, savings accounts and similar investment alternatives which often provide an agreed or guaranteed fixed yield for a stated period of time. Shareholders should remember that yield is a function of the kind and quality of the instruments in the Funds' investment portfolios, portfolio maturity, operating expenses and market conditions. It should be recognized that in periods of declining interest rates the yields will tend to be somewhat higher than prevailing market rates, and in periods of rising interest rates the yields will tend to be somewhat lower. Also, when interest rates are falling, the inflow of net new money to a Fund from the continuous sale of its shares will likely be invested in instruments producing lower yields than the balance of the Fund's investments, thereby reducing the current yield of the Fund. In periods of rising interest rates, the opposite can be expected to occur. The yield of the following Funds for the thirty-day period ended October 31, 1996 for each Class of shares offered by the Funds is set forth in the table below: EVERGREEN AGGRESSIVE U.S. REAL ESTATE LIMITED MARKET ------------ ---------- ---------------- -------------- Class A 0.21% -0.78% 1.68% -0.48% Class B -0.47% -1.51% 1.04% -1.21% Class C -0.47% -1.51% 1.02% -1.21% Class Y 0.45% -0.59% 1.99% -0.25% NON-STANDARDIZED PERFORMANCE In addition to the performance information described above, a Fund may provide total return information for designated periods, such as for the most recent six months or most recent twelve months. This total return information is computed as described under "Total Return" above except that no annualization is made. GENERAL From time to time, a Fund may quote its performance in advertising and other types of literature as compared to the performance of the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, Russell 2000 Index, or any other commonly quoted index of common stock prices. The Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average and the Russell 2000 Index are unmanaged indices of selected common stock prices. A Fund's performance may also be compared to those of other mutual funds having similar objectives. This comparative performance would be expressed as a ranking prepared by Lipper Analytical Services, Inc. or similar independent services monitoring mutual fund performance. A Fund's performance will be calculated by assuming, to the extent applicable, reinvestment of all capital gains distributions and income dividends paid. Any such comparisons may 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 inquiry 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 SAI. This SAI does not contain all the information set forth in the Registration Statement filed by the Trusts and Limited Market with the Securities and Exchange Commission under the Securities Act of 1933. Copies of the Registration Statement may be obtained at a reasonable charge from the Securities and Exchange Commission or may be examined, without charge, at the offices of the Securities and Exchange Commission in Washington, D.C. FINANCIAL STATEMENTS Each Fund's financial statements (except Small Cap Fund) appearing in their most current fiscal year Annual Report to shareholders and the report thereon of the independent auditors appearing thereon of, Price Waterhouse LLP; Tait, Weller & Baker LLP, and Ernst & Young LLP are incorporated by reference in the SAI . The Annual Reports to Shareholders for each Fund, which contain the referenced statements, are available upon request and without charge. Attached are the audited statement of assets and liabilities and the reports thereon of KPMG Peat Marwick LLP for Small Cap as of March 18, 1997. APPENDIX "A" DESCRIPTION OF BOND RATINGS Standard & Poor's Ratings Group. A Standard & Poor's corporate 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. 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 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 issues. The ratings measure the credit worthiness of the obligor but do not take into account currency exchange and related uncertainties. Bond Investment Quality Standards: Under present commercial bank regulations issued by the Comptroller of the Currency, bonds rated in the top four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings) are generally regarded as eligible for bank investment. In addition, the Legal Investment Laws of various states may impose certain rating or other standards for obligations eligible for investment by savings banks, trust companies, insurance companies and fiduciaries generally. Moody's Investors Service Inc. A brief description of the applicable Moody's Investors Service Inc.'s rating symbols and their meanings follows: Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge". Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa - Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuations of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A - Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but 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. Duff & Phelps, Inc.: AAA-- highest credit quality, with negligible risk factors; AA -- high credit quality, with strong protection factors and modest risk, which may vary very slightly from time to time because of economic conditions; A-- average credit quality with adequate protection factors, but with greater and more variable risk factors in periods of economic stress. The indicators "+" and "-" to the AA and A categories indicate the relative position of a credit within those rating categories. Fitch Investors Service LLP: AAA -- highest credit quality, with an exceptionally strong ability to pay interest and repay principal; AA -- very high credit quality, with very strong ability to pay interest and repay principal; A -- high credit quality, considered strong as regards principal and interest protection, but may be more vulnerable to adverse changes in economic conditions and circumstances. The indicators "+" and "-" to the AA, A and BBB categories indicate the relative position of credit within those rating categories. DESCRIPTION OF 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 Group: "A" is the highest commercial paper rating category utilized by Standard & Poor's Ratings Group which uses the numbers 1+, 1, 2 and 3 to denote relative strength within its "A" classification. Duff & Phelps, Inc.: Duff 1 is the highest commercial paper rating category utilized by Duff & Phelps which uses + or - to denote relative strength within this classifica-tion. Duff 2 represents good certainty of timely payment, with minimal risk factors. Duff 3 represents satisfactory protection factors, with risk factors larger and subject to more variation. Fitch Investors Service LLP: F-1+ -- denotes exceptionally strong credit quality given to issues regarded as having strongest degree of assurance for timely payment; F-1 -- very strong, with only slightly less degree of assurance for timely payment than F-1+; F-2 -- good credit quality, carrying a satisfactory degree of assurance for timely payment. EVERGREEN SMALL CAP VALUE FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 18, 1997 Assets: Cash $40 Deferred organizational expenses 16,000 ------ Total assets 16,040 ====== Liabilities: Organizational expenses payable 16,000 ------ Net assets $40 ====== Net assets comprised of: Paid-in capital $40 ------ Total net assets $40 ====== Net asset value per share: Class A Shares Net assets of $10 divided by 1 share outstanding $10.00 Offering price per share ($10.00 / 0.09525) based on sales charge of 4.75% of offering price at March 18, 1997) $10.50 Class B Shares Net assets of $10 divided by 1 share outstanding $10.00 Class C Shares Net assets of $10 divided by 1 share outstanding $10.00 Class Y Shares Net assets of $10 divided by 1 share outstanding $10.00 See accompanying notes to the financial statements. EVERGREEN SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS March 18, 1997 Note 1 - Organization Evergreen Small Cap Value Fund ("the Fund") is a newly organized separate diversified investment series of Evergreen Trust (the "Trust"), a Massachusetts business trust. The Trust is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management company. The Fund has had no operations other than the sale of four shares of beneficial interest. The Fund currently offers four classes of shares. Class A shares are offered at a public offering price which includes a maximum sales charge of 4.75% payable at the time of purchase. Class B shares are sold subject to a contingent deferred sales charge that is payable upon redemption and decreases depending on how long shares have been held. Class B shares that have been outstanding for seven years after the month of purchase will automatically convert to Class A shares. Class C shares are sold subject to a contingent deferred sales charge payable on shares redeemed during the month of purchase and the twelve-month period following the month of purchase. Class Y shares are offered at net asset value without a front-end or back-end sales charge. Note 2 - Investment Advisory and Administration Agreements The Management of the Fund is supervised by the Trustees of the Trust. The Fund has entered into an investment advisory and management agreement with Keystone Investment Management Company ("Keystone"), who will serve as its investment adviser. Keystone is a wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB"). In consideration of Keystone performing its obligations, the Fund will pay to Keystone an investment advisory fee, accrued daily and payable monthly, at an annual rate of 0.95% of its average daily net assets. The Fund has entered into an administrative services agreement with Evergreen Keystone Investment Services ("EKIS") to provide administrative services and to supervise the Fund's daily business affairs. The Fund will pay EKIS an administrative fee, accrued daily and payable monthly, at a rate based on the aggregate average daily net assets of all of the mutual funds administered by EKIS for which FUNB affiliates serve as investment advisers. The fee will start at 0.05% per annum and decline as net assets increase to 0.01% per annum. BISYS Fund Services, an affiliate of Evergreen Keystone Distributor, Inc., distributor for the Evergreen Keystone group of mutual funds, serves as sub-administrator to the Funds and is entitled to receive a fee from each fund calculated on the average daily net assets of the Fund at a rate based on the aggregate average daily net assets of the mutual funds administered by EKIS for which FUNB affiliates also serve as investment advisers. The fee will be calculated daily and payable monthly and will start at 0.01% per annum and decline, as aggregate average daily net assets of such funds increase, to 0.004% per annum. Note 3- Distribution Plans The Fund bears some of its costs of selling its shares under Distribution Plans adopted by its Class A, B and C shares pursuant to Rule 12b-1 under the Act. The Class A Distribution Plan provides for payments, which are currently limited to 0.25% annually of the average daily net asset value of Class A shares, to pay expenses of the distribution of Class A shares. The Class B and Class C Distribution Plans provide for payments at an annual rate of up to 1.00% of the average daily net asset value of Class B and Class C shares, of which 0.75% may be used to pay distribution expenses and 0.25% may be used to pay shareholder service fees. Note 4- Organizational Costs FUNB has agreed to advance all of the costs incurred and to be incurred in connection with the organization and initial registration of the Fund. The Fund has agreed to reimburse FUNB for such costs. These costs have been deferred and will be amortized by the Fund over a period not to exceed 60 months from the date the Fund commences operations. INDEPENDENT AUDITORS' REPORT The Board of Trustees and Shareholder Evergreen Small Cap Value Fund We have audited the statement of assets and liabilities of Evergreen Small Cap Value Fund (a fund within the Evergreen Trust) as of March 18, 1997. This financial statement is the responsibility of management of Evergreen Small Cap Value Fund. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of assets and liabilities is free of material misstatement. An audit of a statement of assets and liabilities includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of assets and liabilities. An audit of a statement of assets and liabilities also includes assessing the accounting principle used and significant estimates made by management, as well as evaluating the overall statement of assets and liabilities presentation. We believe that our audit of the statement of assets and liabilities provides a reasonable basis for our opinion. In our opinion, the statement of assets and liabilities referred to above presents fairly, in all material respects, the financial position of Evergreen Small Cap Value Fund at March 18, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Boston, Massachusetts March 18, 1997 THE EVERGREEN TRUST PART C. OTHER INFORMATION Item 24(a). Financial Statements The following financial statements are included in Part A of the Registration Statement: Financial Highlights Evergreen Fund Class A Shares Period January 3, 1995, through September 30, 1995, and the year ended September 30, 1996. Class B Shares Period January 3, 1995, through September 30, 1995, and the year ended September 30, 1996. Class C Shares Period January 3, 1995, through September 30, 1995, and the year ended September 30, 1996. Class Y Shares For each of the years in the ten-year period ended September 30, 1996 Evergreen Aggressive Growth Fund Class A Shares Year ended December 31, 1987; ten months ended October 31, 1988; six years ended October 31, 1994; eleven months ended September 30, 1995; and year ended September 30, 1996 Class B Shares For the period July 7, 1995, through September 30, 1995 and the year ended September 30, 1996 Class C Shares Period August 3, 1995, through September 30, 1995 and the year ended September 30, 1996 Class Y Shares For the period July 7, 1995, through September 30, 1995 and the year ended September 30, 1996 The audited Financial Statements listed below are incorporated by reference to Registrant's Annual Report as filed with the Securities and Exchange Commission: Evergreen Fund Schedule of Investments September 30, 1996 Statement of Assets and Liabilities September 30, 1996 Statement of Operations Year ended September 30, 1996 Statements of Changes in Net Assets For each of the years in the two-year period ended September 30, 1996 Evergreen Aggressive Growth Fund Schedule of Investments September 30, 1996 Statement of Assets and Liabilities September 30, 1996 Statement of Operations Year ended September 30, 1996 Statements of Changes in Net Assets For eleven months ended September 30, 1995 and the year ended period ended September 30, 1996 Evergreen Fund and Evergreen Aggressive Growth Fund Notes to Financial Statements Independent Auditors' Report Evergreen Small Cap Value Fund Statement of Assets and Liabilities March 18, 1997 Notes to Financial Statements Independent Auditors' Report Item 24(b). Exhibits No. 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 Not Applicable 4 Instruments Defining Rights of Shareholders** 5(A) Evergreen Fund Investment Advisory Agreement** 5(B) Evergreen Fund Investment Subadvisory Agreement** 5(C) Evergreen Aggressive Growth Fund Investment Advisory Agreement** 5 (D) Evergreen Aggressive Growth Fund Investment Subadvisory Agreement** 5 (E) Form of Evergreen Small Cap Value Fund Investment Management and Advisory Agreement+ 6 (A) Distribution Agreements for Class A, B and C Shares of Evergreen Fund and Evergreen Aggressive Growth Fund** 6 (B) Distribution Agreement for Class A, B and C Shares of Evergreen Small Cap Value Fund+ 6 (C) Form of Dealer Agreement+ 7 Deferred Compensation Plan+ 8 Custodian Agreement** 9 To be Filed by Amendment. 10 Opinion and Consent of Counsel+ 11(A) Consent of Price Waterhouse, independent auditors+ 11(B) Consent of KPMG Peat Marwick LLP, independent auditors+ 12 Not Applicable 13 Not Applicable 14 To be Filed by Amendment 15(A) Form of Rule 12b-1 Distribution Plan** 15(B) Rule 12b-1 Distribution Plan for the Evergreen Small Cap Value Fund+ 16 To be Filed by Amendment 17 Financial Data Schedules** 18 Multiple Class Plan for the Evergreen Keystone Fund Group+ 19 Powers of Attorney+ * Incorporated by reference to the Annual Report to Shareholders for the fiscal year ended September 30, 1996 which has been previously filed with the Commission and by reference to the Annual Report of Registrant on form NSAR for the aforementioned period. ** Incorporated by reference to Registrant's previous filings on Form N-1A. *** Incorporated by reference to Registrant's Post-Effective Amendment No. 32 previously filed on November __, 1996. + Filed herewith. Item 25. Persons Controlled by or Under Common Control with Registrant None - -------------------------- Item 26. Number of Holders of Securities (as of February 28, 1997) (1) (2) Number of Record Title of Class Shareholders Evergreen Fund: Class Y Shares of Beneficial Interest ($0.001 par value) 26,451 Class A Shares of Beneficial Interest ($0.001 par value) 20,412 Class B Shares of Beneficial Interest ($0.001 par value) 47,745 Class C Shares of Beneficial Interest ($0.001 par value) 727 Evergreen Aggressive Growth Fund: Class Y Shares of Beneficial Interest ($0.001 par value) 823 Class A Shares of Beneficial Interest ($0.001 par value) 8,840 Class B Shares of Beneficial Interest ($0.001 par value) 4,129 Class C Shares of Beneficial Interest ($0.001 par value) 173 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. Evergreen Asset Management Corp. ("Evergreen Asset"), the investment adviser to Registrant's Evergreen Fund series, and Lieber and Company, the sub-adviser to Registrant's Evergreen Fund series also acts as such to one or more of the separate investment series offered by 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 and Evergreen Foundation Trust and Evergreen Variable Trust, all registered investment companies. Stephen A. Lieber, Chairman and Co-CEO, Theodore J. Israel, Jr., Director and Executive Vice President and Nola Maddox Falcone, Director, President and Co-CEO, are the principal executive officers and directors of Evergreen Asset and Lieber and Company, and 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. B. The Capital Management Group of First Union National Bank of North Carlolina acts as investment adviser to the Evergreen Aggressive Growth Fund. The Directors and principal executive officers of FUNB, are set forth in the following table: 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. For a description of the other business of First Union National Bank of North Carolina ("FUNB-NC"), which serves as investment adviser to Registrant's Evergreen Aggressive Growth Fund series, see the section entitled "Investment Advisers" in Part A. C. Keystone Investment Management Company acts as investment adviser to Evergreen Small Cap Value Fund. The following table lists the names of the various officers and directors of Evergreen Small Cap Value Fund's investment adfviser, Keystone Investment Management Company, and their positions. For each named individual, the table lists, for at least two years, (i) any other organizations (for Keystone Investment Management Company, excluding investment advisory clients) with which the officer and/or director has had or has substantial involvement; and (ii) positions held with such organizations. LIST OF OFFICERS AND DIRECTORS OF KEYSTONE INVESTMENT MANAGEMENT COMPANY
Position with Keystone Investment Name Management Company Other Business Affiliations - ---- ------------------ --------------------------- Albert H. Chairman of Senior Vice President Elfner, III the Board, First Union Keystone, Inc. Chief Executive Keystone Asset Corporation Officer President and Director: Keystone Trust Company Director or Trustee: Evergreen Keystone Investment Services, Inc Evergreen Keystone Service Company Boston Children's Services Associates Middlesex School Middlebury College Formerly: Chairman of the Board, Chief Executive Officer, President and Director: Keystone Management, Inc. Keystone Software, Inc. Keystone Capital Corporation Trustee or Director: Neworld Bank Robert Van Partners, Inc. Fiduciary Investment Company, Inc. Formerly Chairman of the Board and Director: Keystone Fixed Income Advisers, Inc. Keystone Institutional Company, Inc. Philip M. Byrne Senior Vice Formerly: President President and Director: Keystone Institutional Company, Inc. Formerly Senior Vice President: Keystone Investments, Inc. Herbert L. Senior Vice None Bishop, Jr. President Donald C. Dates Senior Vice None President Gilman Gunn Senior Vice None President Edward F. Senior Vice Formerly Senior Vice President, Godfrey President, Chief Financial Officer and Treasurer: Chief Financial First Union Keystone, Inc. Officer and Treasurer Evergreen Keystone Investment Services, Inc. Formerly: Treasurer: Keystone Institutional Company, Inc. Keystone Management, Inc. Keystone Software, Inc. Fiduciary Investment Company, Inc. Treasurer and Director: Hartwell Keystone Advisers, Inc. Rosemary D. Senior Vice Van Antwerp President, General Counsel Senior Vice President: and Secretary Evergreen Keystone Service Company Senior Vice President and Secretary: Evergreen Keystone Investment Services, Inc. Formerly: Senior Vice President, General Counsel and Secretary: Keystone Investments, Inc. Senior Vice President and General Counsel: Keystone Institutional Company, Inc. Senior Vice President, General Counsel and Director: Fiduciary Investment Company, Inc. Senior Vice President, General Counsel, Director and Secretary: Keystone Management, Inc. Keystone Software, Inc. Senior Vice President and Secretary: Hartwell Keystone Advisers, Inc. Vice President and Secretary: Keystone Fixed Income Advisers, Inc. J. Kevin Kenely Vice President Vice President: Evergreen Keystone Investment Services, Inc. Formerly: Controller Keystone Investments, Inc. Keystone Investment Management Company Keystone Investment Distributors Company Keystone Institutional Company, Inc. Keystone Management, Inc. Keystone Software, Inc. Fiduciary Investment Company, Inc. Vice President: Keystone Institutional Company, Inc. Keystone Management, Inc. Keystone Software, Inc. Fiduciary Investment Company, Inc. Keystone Investments, Inc. John D. Rogol Vice President Vice President and Controller: Evergreen Keystone Investment Services, Inc. Treasurer and Vice President: Evergreen Keystone Service Company Controller: Keystone Asset Corporation Formerly: Controller: Keystone Institutional Company, Inc. Keystone Management, Inc. Keystone Software, Inc. Fiduciary Investment Company, Inc. Formerly Vice President and Controller: Keystone Investments, Inc. John Addeo Vice President None Andrew Baldassarre Vice President None David Benhaim Vice President None Donald Bisson Vice President None Francis X. Claro Vice President None Kristine R. Vice President None Cloyes Christopher P. Senior Vice None Conkey President J. Gary Craven Senior Vice None President Richard Cryan Senior Vice None President Maureen E. Senior Vice None Cullinane President Betsy Hutchings Sr. Vice President None Walter T. Senior Vice None McCormick President George F. Wilkins Senior Vice None President George E. Dlugos Vice President None Antonio T. Docal Vice President None Dana E. Erikson Vice President None George J. Kimball Vice President None JoAnn L. Lyndon Vice President None John C. Vice President None Madden, Jr. Eleanor H. Marsh Vice President None James D. Medvedeff Vice President None Stanley M. Niksa Vice President None Jonathan A. Noonan Vice President None Robert E. O'Brien Vice President None Margery C. Parker Vice President None Joyce W. Petkovich Vice President None Daniel A. Rabasco Vice President None Harlen R. Sanderling Vice President None Kathy K. Wang Vice President None Judith A. Warners Vice President None Peter Willis Vice President None Richard A. Wisentaner Vice President None Cheryle E. Womble Vice President None Walter Zagrobski Vice President None
All of the officers are located at Keystone Investment Management Company, 200 Berkeley Street, Boston, Massachusetts 02116. Item 29. Principal Underwriters Evergreen Keystone Distributor, Inc. The Director and principal executive officers are: Director Michael C. Petrycki Officers Robert A. Hering President Michael C. Petrycki Vice President Lawrence Wagner VP, Chief Financial Officer Steven D. Blecher VP, Treasurer, Secretary Elizabeth Q. Solazzo 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 Keystone Quality Bond Fund (B-1) Keystone Diversified Bond Fund (B-2) Keystone High Income Bond Fund (B-4) Keystone Balanced Fund (K-1) Keystone Strategic Growth Fund (K-2) Keystone Growth and Income Fund (S-1) Keystone Mid-Cap Growth Fund (S-3) Keystone Small Company Growth Fund (S-4) Keystone Balanced Fund II Keystone Capital Preservation and Income Fund Keystone Fund for Total Return Keystone Fund of the Americas Keystone Global Opportunities Fund Keystone Global Resources and Development Fund Keystone Government Securities Fund Keystone America Hartwell Emerging Growth Fund, Inc. Keystone Institutional Adjustable Rate Fund Keystone Institutional Trust Keystone Institutional Small Capitalization Growth Fund Keystone Intermediate Term Bond Fund Keystone International Fund Inc. Keystone Liquid Trust Keystone Omega Fund Keystone Precious Metals Holdings, Inc. Keystone Small Company Growth Fund II Keystone State Tax Free Fund Keystone New York Tax Free Fund Keystone Pennsylvania Tax Free Fund Keystone Massachusetts Tax Free Fund Keystone Florida Tax Free Fund Keystone State Tax Free Fund - Series II Keystone Missouri Tax Free Fund Keystone California Tax Free Fund Keystone Strategic Income Fund Keystone Tax Free Fund Keystone Tax Free Income Fund Item 30. Location of Accounts and Records Accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are maintained at the offices of the Registrant's Custodian, State Street Bank and Trust Company, 2 Heritage Drive, North Quincy, Massachusetts 02171, the offices of Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York 10577 or the offices of First Union Keystone, Inc. 200 Berkeley Street, Boston, Massachusetts 02116. 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. 33 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 19th day of March, 1997. EVERGREEN TRUST /s/ John J. Pileggi by----------------------------- John J. Pileggi, President Pursuant to the requirements of the Securities Act of 1933, as amended, this Post-Effective Amendment No. 33 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 March 19, 1997 John J. Pileggi Treasurer /s/ Laurence B. Ashkin - ----------------------- Trustee March 19, 1997 Laurence B. Ashkin by James P. Wallin Attorney - In - Fact /s/Foster Bam - ----------------------- Trustee March 19, 1997 Foster Bam by James P. Wallin Attorney - In - Fact /s/James S. Howell - ----------------------- Trustee March 19, 1997 James S. Howell by James P. Wallin Attorney - In - Fact /s/Gerald M. McDonnell - ----------------------- Trustee March 19, 1997 Gerald M. McDonnell by James P. Wallin Attorney - In - Fact /s/Thomas L. McVerry - ----------------------- Trustee March 19, 1997 Thomas L. McVerry by James P. Wallin Attorney - In - Fact /s/William Walt Pettit - ----------------------- Trustee March 19, 1997 William Walt Pettit by James P. Wallin Attorney - In - Fact /s/Russell A. Salton, III, M.D - ------------------------------ Trustee March 19, 1997 Russell A. Salton, III, M.D by James P. Wallin Attorney - In - Fact /s/Michael S. Scofield - ----------------------- Trustee March 19, 1997 Michael S. Scofield by James P. Wallin Attorney - In - Fact INDEX TO EXHIBITS Exhibit Number Description Page 5(E) Form of Investment Management and Advisory Agreement for Evergreen Small Cap Value Fund 6(B) Distribution Agreement for Class A, B and C Shares of Evergreen Small Cap Value Fund 6(C) Form of Dealer Agreement 7 Deferred Compensation Plan 10 Consent and Opinion of Counsel 11 Consents of Independent Auditors 15(B) Rule 12b-1 Distribution Plans for the Evergreen Small Cap Value Fund 18 Multiple Class Plan for the Evergreen Keystone Fund Group 19 Powers of Attorney Other Exhibits EX-99.5E 2 FORM OF ADVISORY AND MANAGEMENT AGREEMENT FORM OF INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AGREEMENT made the ___ day of ___________, 1997, by and between EVERGREEN SMALL CAP VALUE FUND, a Massachusetts business trust (the "Fund"), and KEYSTONE INVESTMENT MANAGEMENT COMPANY, a Delaware corporation (the "Adviser"). WHEREAS, the Fund and the Adviser wish to enter into an Agreement setting forth the terms on which the Adviser will perform certain services for the Fund. THEREFORE, in consideration of the promises and the mutual agreements hereinafter contained, the Fund and the Adviser agree as follows: 1. The Fund hereby employs the Adviser to manage and administer the operation of the Fund, to supervise the provision of services to the Fund by others, and to manage the investment and reinvestment of the assets of the Fund in conformity with the Fund's investment objectives and restrictions as may be set forth from time to time in the Fund's then current prospectus and statement of additional information, if any, and other governing documents, all subject to the supervision of the Board of Trustees of the Fund, for the period and on the terms set forth in this Agreement. The Adviser hereby accepts such employment and agrees during such period, at its own expense, to render the services and to assume the obligations set forth herein, for the compensation provided herein. The Adviser shall for all purposes herein be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund. 2. The Adviser shall place all orders for the purchase and sale of portfolio securities for the account of the Fund with broker-dealers selected by the Adviser. In executing portfolio transactions and selecting broker- dealers, the Adviser will use its best efforts to seek best execution on behalf of the Fund. In assessing the best execution available for any transaction, the Adviser shall consider all factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker- dealer, and the reasonableness of the commission, if any (all for the specific transaction and on a continuing basis). In evaluating the best execution available, and in selecting the broker-dealer to execute a particular transaction, the Adviser may also consider the brokerage and research services (as those terms are used in Section 28(e) of the Securities Exchange Act of 1934 (the "1934 Act") provided to the Fund and/or other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. The Adviser is authorized to pay a broker-dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Fund which is in excess of the amount of commission another broker-dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker- dealer viewed in terms of that particular transaction or in terms of all of the accounts over which investment discretion is so exercised. 3. The Adviser, at its own expense, shall furnish to the Fund office space in the offices of the Adviser or in such other place as may be agreed upon by the parties from time to time, all necessary office facilities, equipment and personnel in connection with its services hereunder, and shall arrange, if desired by the Fund, for members of the Adviser's organization to serve without salaries from the Fund as officers or, as may be agreed from time to time, as agents of the Fund. The Adviser assumes and shall pay or reimburse the Fund for: (1) the compensation (if any) of the Trustees of the Fund who are affiliated with the Adviser or with its affiliates, or with any adviser retained by the Adviser, and of all officers of the Fund as such, and (2) all expenses of the Adviser incurred in connection with its services hereunder. The Fund assumes and shall pay all other expenses of the Fund, including, without limitation: (1) all charges and expenses of any custodian or depository appointed by the Fund for the safekeeping of its cash, securities and other property; (2) all charges and expenses for bookkeeping and auditors; (3) all charges and expenses of any transfer agents and registrars appointed by the Fund; (4) all fees of all Trustees of the Fund who are not affiliated with the Adviser or any of its affiliates, or with any adviser retained by the Adviser; (5) all brokers' fees, expenses and commissions and issue and transfer taxes chargeable to the Fund in connection with transactions involving securities and other property to which the Fund is a party; (6) all costs and expenses of distribution of its shares incurred pursuant to a Plan of Distribution adopted under Rule 12b-1 under the Investment Company Act of 1940 ("1940 Act"); (7) all taxes and trust fees payable by the Fund to Federal, state or other governmental agencies; (8) all costs of certificates representing shares of the Fund; (9) all fees and expenses involved in registering and maintaining registrations of the Fund and of its shares with the Securities and Exchange Commission (the "Commission") and registering or qualifying its shares under state or other securities laws, including, without limitation, the preparation and printing of registration statements, prospectuses and statements of additional information for filing with the Commission and other authorities; (10) expenses of preparing, printing and mailing prospectuses and statements of additional information to shareholders of the Fund; (11) all expenses of shareholders' and Trustees' meetings and of preparing, printing and mailing notices, reports and proxy materials to shareholders of the Fund; (12) all charges and expenses of legal counsel for the Fund and for Trustees of the Fund in connection with legal matters relating to the Fund, including, without limitation, legal services rendered in connection with the Fund's existence, trust and financial structure and relations with its shareholders, registrations and qualifications of securities under Federal, state and other laws, issues of securities, expenses which the Fund has herein assumed, whether customary or not, and extraordinary matters, including, without limitation, any litigation involving the Fund, its Trustees, officers, employees or agents; (13) all charges and expenses of filing annual and other reports with the Commission and other authorities; and (14) all extraordinary expenses and charges of the Fund. In the event that the Adviser provides any of these services or pays any of these expenses, the Fund will promptly reimburse the Adviser therefor. The services of the Adviser to the Fund hereunder are not to be deemed exclusive, and the Adviser shall be free to render similar services to others. 4. As compensation for the Adviser's services to the Fund during the period of this Agreement, the Fund will pay to the Adviser a fee at the annual rate of 0.95% of the aggregate net asset value of the shares of the fund, computed as of the close of business on each business day. A pro rata portion of the Fund's fee shall be payable in arrears at the end of each day or calendar month as the Adviser may from time to time specify to the Fund. If and when this Agreement terminates, any compensation payable hereunder for the period ending with the date of such termination shall be payable upon such termination. Amounts payable hereunder shall be promptly paid when due. 5. The Adviser may enter into an agreement to retain, at its own expense, a firm or firms ("SubAdviser") to provide the Fund all of the services to be provided by the Adviser hereunder, if such agreement is approved as required by law. Such agreement may delegate to such SubAdviser all of Adviser's rights, obligations and duties hereunder. 6. The Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the performance of this Agreement, except a loss resulting from the Adviser's willful misfeasance, bad faith, gross negligence or from reckless disregard by it of its obligations and duties under this Agreement. Any person, even though also an officer, Director, partner, employee, or agent of the Adviser, who may be or become an officer, Trustee, employee or agent of the Fund, shall be deemed, when rendering services to the Fund or acting on any business of the Fund (other than services or business in connection with the Adviser's duties hereunder), to be rendering such services to or acting solely for the Fund and not as an officer, Director, partner, employee, or agent or one under the control or direction of the Adviser even though paid by it. The Fund agrees to indemnify and hold the Adviser harmless from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state and foreign securities and blue sky laws, as amended from time to time) and expenses, including (without limitation) attorneys' fees and disbursements, arising directly or indirectly from any action or thing which the Adviser takes or does or omits to take or do hereunder provided that the Adviser shall not be indemnified against any liability to the Fund or to its shareholders (or any expenses incident to such liability) arising out of a breach of fiduciary duty with respect to the receipt of compensation for services, willful misfeasance, bad faith, or gross negligence on the part of the Adviser in the performance of its duties, or from reckless disregard by it of its obligations and duties under this Agreement. 7. The Fund shall cause its books and accounts to be audited at least once each year by a reputable independent public accountant or organization of public accountants who shall render a report to the Fund. 8. Subject to and in accordance with the Declaration of Trust of the Fund, the Articles of Incorporation of the Adviser and the governing documents of any SubAdviser, it is understood that Trustees, Directors, officers, agents and shareholders of the Fund or any Adviser are or may be interested in the Adviser (or any successor thereof) as Directors and officers of the Adviser or its affiliates, as stockholders of Keystone Investments, Inc. or otherwise; that Directors, officers and agents of the Adviser and its affiliates or stockholders of Keystone Investments, Inc. are or may be interested in the Fund or any Adviser as Trustees, Directors, officers, shareholders or otherwise; that the Adviser (or any such successor) is or may be interested in the Fund or any SubAdviser as shareholder, or otherwise; and that the effect of any such adverse interests shall be governed by said Declaration of Trust of the Fund, Articles of Incorporation of the Adviser and governing documents of any SubAdviser. 9. This Agreement shall continue in effect after December 10, 1998, only so long as (1) such continuance is specifically approved at least annually by the Board of Trustees of the Fund or by a vote of a majority of the outstanding voting securities of the Fund, and (2) such renewal has been approved by the vote of a majority of Trustees of the Fund who are not interested persons, as that term is defined in the 1940 Act, of the Adviser or of the Fund, cast in person at a meeting called for the purpose of voting on such approval. 10. On sixty days' written notice to the Adviser, this Agreement may be terminated at any time without the payment of any penalty by the Board of Trustees of the Fund or by vote of the holders of a majority of the outstanding voting securities of the Fund; and on sixty days' written notice to the Fund, this Agreement may be terminated at any time without the payment of any penalty by the Adviser. This Agreement shall automatically terminate upon its assignment (as that term is defined in the 1940 Act). Any notice under this Agreement shall be given in writing, addressed and delivered, or mailed postage prepaid, to the other party at the main office of such party. 11. This Agreement may be amended at any time by an instrument in writing executed by both parties hereto or their respective successors, provided that with regard to amendments of substance such execution by the Fund shall have been first approved by the vote of the holders of a majority of the outstanding voting securities of the Fund and by the vote of a majority of Trustees of the Fund who are not interested persons (as that term is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or of the Fund, cast in person at a meeting called for the purpose of voting on such approval. A "majority of the outstanding voting securities of the Fund" shall have, for all purposes of this Agreement, the meaning provided therefor in the 1940 Act. 12. Any compensation payable to the Adviser hereunder for any period other than a full year shall be proportionately adjusted. 13. The provisions of this Agreement shall be governed, construed and enforced in accordance with the laws of The Commonwealth of Massachusetts. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written. EVERGREEN SMALL CAP VALUE FUND By: -------------------------------------- Name: Title: KEYSTONE INVESTMENT MANAGEMENT COMPANY By: -------------------------------------- Name: Title: EX-99.6B 3 SMALL CAP VALUE FUND DIST. AGR. DISTRIBUTION AGREEMENT WHEREAS, The Evergreen Trust (the "Trust"), has adopted one or more Plans of Distribution with respect to certain Classes of shares of its separate investment series (each a "Plan", or collectively the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act") which Plans authorize the Trust on behalf of the Funds to enter into agreements regarding the distribution of such Classes of shares (the "Shares") of the separate investment series of the Trust (the "Funds") set forth on Exhibit A; and WHEREAS, the Trust has agreed that Evergreen Keystone Distributor, Inc. (the "Distributor"), a Delaware corporation, shall act as the distributor of the Shares; and WHEREAS, the Distributor agrees to act as distributor of the Shares for the period of this Distribution Agreement (the "Agreement"); NOW, THEREFORE, in consideration of the agreements hereinafter contained, it is agreed as follows: 1. Services as Distributor 1.1. The Distributor agrees to use appropriate efforts to promote each Fund and to solicit orders for the purchase of Shares and will undertake such advertising and promotion as it believes reasonable in connection with such solicitation The services to be performed hereunder by the Distributor are described in more detail in Section 7 hereof. . In the event that the Trust establishes additional investment series with respect to which it desires to retain Evergreen Funds Distributor, Inc. to act as distributor for one or more Classes hereunder, it shall promptly notify the Distributor in writing. If the Distributor is willing to render such services it shall notify the Trust in writing whereupon such portfolio shall become a Fund and its designated Classes of shares of beneficial interest shall become Shares hereunder. 1.2. All activities by the Distributor and its agents and employees as the distributor of Shares shall comply with all applicable laws, rules and regulations, including, without limitation, all rules and regulations made or adopted pursuant to the 1940 Act by the Securities and Exchange Commission (the "Commission") or any securities association registered under the Securities Exchange Act of 1934, as amended. 1.3 In selling the Shares, the Distributor shall use its best efforts in all respects duly to conform with the requirements of all Federal and state laws relating to the sale of such securities. Neither the Distributor, any selected dealer or any other person is authorized by the Trust to give any information or to make any representations, other than those contained in the Trust's registration statement (the "Registration Statement") or related Fund prospectus and statement of additional information ("Prospectus and Statement of Additional Information") and any sales literature specifically approved by the Trust. 1.4 The Distributor shall adopt and follow procedures, as approved by the officers of the Trust, for the confirmation of sales to investors and selected dealers, the collection of amounts payable by investors and selected dealers on such sales, and the cancellation of unsettled transactions, as may be necessary to comply with the requirements of the National Association of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to time exist. 1.5. The Distributor will transmit any orders received by it for purchase or redemption of Shares to the transfer agent and custodian for the applicable Fund. 1.6. Whenever in their judgment such action is warranted by unusual market, economic or political conditions, or by abnormal circumstances of any kind, the Trust's officers may decline to accept any orders for, or make any sales of Shares until such time as those officers deem it advisable to accept such orders and to make such sales. 1.7. The Distributor will act only on its own behalf as principal if it chooses to enter into selling agreements with selected dealers or others. The Distributor shall offer and sell Shares only to such selected dealers as are members, in good standing, of the NASD. 1.8 The Distributor agrees to adopt compliance standards, in a form satisfactory to the Trust, governing the operation of the multiple class distribution system under which Shares are offered. 2. Duties of the Trust. 2.1. The Trust agrees at its own expense to execute any and all documents and to furnish, at its own expense, any and all information and otherwise to take all actions that may be reasonably necessary in connection with the qualification of Shares for sale in such states as the Trust and the Distributor may designate. 2.2. The Trust shall furnish from time to time, for use in connection with the sale of Shares such information with respect to the Funds and the Shares as the Distributor may reasonably request; and the Trust warrants that any such information shall be true and correct. Upon request, the Trust shall also provide or cause to be provided to the Distributor: (a) unaudited semi-annual statements of each Fund's books and accounts, (b) quarterly earnings statements of each Fund, (c) a monthly itemized list of the securities in each Fund, (d) monthly balance sheets as soon as practicable after the end of each month, and (e) from time to time such additional. information regarding each Fund's financial condition as the Distributor may reasonably request. 3. Representations of the Trust. 3.1. The Trust represents to the Distributor that it is registered under the 1940 Act and that the Shares of each of the Funds have been registered under the Securities Act of 1933, as amended (the "Securities Act"). The Trust will file such amendments to its Registration Statement as may be required and will use its best efforts to ensure that such Registration Statement remains accurate. 4. Indemnification. 4.1. The Trust shall indemnify and hold harmless the Distributor and each person, if any, who controls the Distributor within the meaning of Section 15 of the Securities Act against any loss, liability, claim, damage or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damage or expense and reasonable counsel fees incurred in connection therewith), which the Distributor or such controlling person may incur under the Securities Act or under common law or otherwise, arising out of or based upon any untrue statement, or alleged untrue statement, of a material fact contained in the Registration Statement, as from time to time amended or supplemented, any prospectus or annual or interim report to shareholders of the Trust, or arising out of or based upon any omission, or alleged omission, to state a material fact requires to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon, and in conformity with, information furnished to the Trust in connection therewith by or on behalf of the Distributor; provided, however, that in no case (i) is the indemnity of the Trust in favor of the Distributor and any such controlling persons to be deemed to protect such Distributor or any such controlling persons thereof against any liability to the Trust or its security holders to which the Distributor or any such controlling persons would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their obligations and duties under this Agreement; or (ii) is the Trust to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Distributor or any such controlling persons, unless the Distributor or such controlling persons, as the case maybe, shall have notified the Trust in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon the Distributor or such controlling persons (or after the Distributor or such controlling persons shall have received notice of such service on any designated agent), but failure to notify the Trust of any such claim shall not relieve it from any liability which it may have to the person against whom such action is brought otherwise than on account of its indemnity agreement contained in this paragraph. The Trust will be entitled to participate at its own expense in the defense, or, if it so elects, to assume the defense of any suit brought to enforce any such liability, but if the Trust elects to assume the defense, such defense shall be conducted by counsel chosen by it and satisfactory to the Distributor or such controlling person or persons, defendant or defendants in the suit. In the event the Trust elects to assume the defense of any such suit and retain such counsel, the Distributor or such controlling person or persons, defendant or defendants in the suit, shall bear the fees and expenses of any additional counsel retained by them, but, in case the Trust does not elect to assume the defense of any such suit, it will reimburse the Distributor or such controlling person or persons, defendant or- defendants in the suit, for the reasonable fees and expenses of any counsel retained by them. The Trust shall promptly notify the Distributor of the commencement of any litigation or proceed against it or any of its officers or directors in connection with the issuance or sale of any of the shares. 4.2. The Distributor shall indemnify and hold harmless the Trust and each of its directors and officers and each person, if any, who controls the Trust against any loss, liability, claim, damage or expense described in the foregoing indemnity contained in paragraph 4.1, but only with respect to statements or omissions made in reliance upon, and in conformity with, information furnished to the Trust in writing by or on behalf of the Distributor for use in connection with the Registration Statement, as from time to time amended, or the annual or interim reports to shareholders. In case any action shall be brought against the Trust or any persons so indemnified, in respect of which indemnity may be sought against the Distributor, the Distributor shall have the rights and duties given to the Trust, and the Trust and each person so indemnified shall have the rights and duties given to the Distributor by the provisions of paragraph 4.1. 5. Offering of Shares. 5.1. None of the Shares shall be offered by either the Distributor or the Trust under any of the provisions of this Agreement, and no orders for the purchase or sale of Shares hereunder shall be accepted by the Trust, if and so long as the effectiveness of the registration statement then in effect or any necessary amendments thereto shall be suspended under any of the provisions of the Securities Act or if and so long as a current prospectus and statement of additional information as required by Section 10(b) (2) of the Securities Act, as amended, is not on file with the Commission; provided, however, that nothing contained in this paragraph 5.1 shall in any way restrict or have any application to or bearing upon the Trust's obligation to repurchase Shares from any shareholder in accordance with the provisions of the prospectus of each Fund or the Trust's prospectus or Declaration of Trust. 6. Amendments to Registration Statement and Other Material Events. 6.1. The Trust agrees to advise the Distributor as soon as reasonably practical by a notice in writing delivered to the Distributor: (a) of any request or action taken by the Commission which is material to the Distributor's obligations hereunder or (b) any material fact of which the Trust becomes aware which affects the Distributor's obligations hereunder. For purposes of this section, informal requests by or acts of the Staff of the Commission shall not be deemed actions of or requests by the Commission. 7. Compensation of Distributor. 7.1. (a) As promptly as possible after the first Business Day (as defined in the Prospectus) of each month this Agreement is in effect, the Trust shall compensate the Distributor for its distribution services rendered during the previous month (but not prior to the Commencement Date); by making payment to the Distributor in the amounts set forth on Exhibit A annexed hereto with respect to each Class of Shares of each Fund to which this Agreement is applicable. The compensation by the Trust of the Distributor is authorized pursuant to the Plan or Plans adopted by the Trust pursuant to Rule 12b-l under the 1940 Act. (b) Under this Agreement, the Distributor shall: (i) make payments to securities dealers and others engaged in the sale of Shares; (ii) make payments of principal and interest in connection with the financing of commission payments made by the Distributor in connection with the sale of Shares (iii) incur the expense of obtaining such support services, telephone facilities and shareholder services as may reasonably be required in connection with its duties hereunder; (iv) formulate and implement marketing and promotional activities, including, but not limited to, direct mail promotions and television, radio, newspaper, magazine and other mass media advertising; (v) prepare, print and distribute sales literature; (vi) prepare, print and distribute Prospectuses of the Funds and reports for recipients other than existing shareholders of the Funds; and (vii) provide to the Trust such information, analyses and opinions with respect to marketing and promotional activities as the Trust may, from time to time, reasonably request. (c) The Distributor shall prepare and deliver reports to the Treasurer of the Trust on a regular, at least monthly, basis, showing the distribution expenditures incurred by the Distributor in connection with its services rendered pursuant to this Agreement and the Plan and the purposes therefor, as well as any supplemental reports as the Trustees, from time to time, may reasonably request. (d) The Distributor may retain as a sales charge the difference between the current offering price of Shares, as set forth in the current prospectus for each Fund, and net asset value, less any reallowance that is payable in accordance with the sales charge schedule in effect at any given time with respect to the Shares. (e) The Distributor may retain any contingent deferred sales charge ("CDSCs") payable with respect to the redemption of any Shares, provided however, that any CDSCs received by the Distributor shall first be applied by the Distributor or its assignee to any outstanding amounts payable or which may in the future be payable by the Distributor or its assignee under financing arrangements entered into in connection with the payment of commissions on the sale of Shares. (f) The Distributor may sell, assign, pledge or hypothecate its rights to receive compensation hereunder. The Trust acknowledges that, in connection with the financing of commission payments made by the Distributor in connection with the sale of Shares, the Distributor may sell and assign, and/or has sold and assigned, to Mutual Fund Funding 1994-1 the Distributor's interest in certain items of compensation payable to the Distributor hereunder, and that Mutual Fund Funding 1994-1 in turn may pledge or assign, and/or has assigned, such interest to First Union Corporation as lender to secure such financing. It is understood that an assignee may not further sell, assign, pledge, or hypothecate its right to receive such reimbursement unless such sale, assignment, pledge or hypothecation has been approved by the vote of the Board of the Trust, including a majority of the Disinterested Trustees, cast in person at a meeting called for the purpose of voting on such approval. (g) In addition to the foregoing, and in respect of its services hereunder and for similar services rendered to other investment companies for which Evergreen Asset Management Corp. (the "Investment Adviser") serves as investment adviser, the Investment Adviser may pay to the Distributor an additional fee to be paid in such amount and manner as the Investment Adviser and Distributor may agree from time to time. 8. Confidentiality, Non-Exclusive Agency. 8.1. The Distributor agrees on behalf of itself and its employees to treat confidentially and as proprietary information of the Trust all records and other information relative to the Funds and its prior, present or potential shareholders, and not to use such records and information for any purpose other than performance of its responsibilities and to obtain approval in writing by the Trust, which approval shall not be unreasonably withheld and may not be withheld where the Distributor may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Trust. 8.2. Nothing contained in this Agreement shall prevent the Distributor, or any affiliated person of the Distributor, from performing services similar to those to be performed hereunder for any other person, firm, or corporation or for its or their own accounts or for the accounts of others. 9. Term. 9.1. This Agreement shall continue until June 30, 1995 and thereafter for successive annual periods, provided such continuance is specifically approved at least annually by (i) a vote of the majority of the Trustees of the Trust and (ii) a vote of the majority of those Trustees of the Trust who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan, in this Agreement or any agreement related to the Plan (the "Independent Trustees") by vote cast in person at a meeting called for the purpose of voting on such approval. This Agreement is terminable at any time, with respect to the Trust, without penalty, (a) on not less than 60 days' written notice by vote of a majority of the Independent Trustees, or by vote of the holders of a majority of the outstanding voting securities of the Trust, or (b) upon not less than 60 days' written notice by the Distributor. This Agreement may remain in effect with respect to a Fund even if it has been terminated in accordance with this paragraph with respect to one or more other Funds of the Trust. This Agreement will also terminate automatically in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities", "interested persons", and "assignment" shall have the same meaning as such terms have in the 1940 Act.) 10. Miscellaneous. 10.1. This Agreement shall be governed by the laws of the State of New York. 10.2. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their constructions or effect. 10.3 The obligations of the Trust hereunder are not personally binding upon, nor shall resort be had to the private property of, any of the Trustees, shareholders, officers, employees or agents of the Trust and only the Trust's property shall be bound. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the 1st day of January, 1997. EVERGREEN KEYSTONE DISTRIBUTOR, INC. EVERGREEN TRUST By: /s/ David Huber By: /s/ John J. Pileggi Title: David Huber, Vice President Title: John J. Pileggi, President EXHIBIT A To Distribution Agreement between Evergreen Funds Distributor, Inc. and EVERGREEN TRUST FUNDS AND CLASSES COVERED BY THIS AGREEMENT: Evergreen Fund CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Y SHARES Evergreen Aggressive Growth Fund CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Y SHARES Evergreen Small Cap Value Fund CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Y SHARES Distribution Fees 1. During the term of this Agreement, the Trust will pay to the Distributor a quarterly fee with respect to each of the Funds and Classes of Shares thereof listed above. This fee will be computed at the annual rate of .25 of 1% of the average net asset value on an annual basis of Class A Shares of each Fund; and .75 of 1% of the average net asset value on an annual basis of Class B and Class C Shares of each Fund. 2. For the quarterly period in which the Agreement becomes effective or terminates, there shall be an appropriate proration of any fee payable on the basis of the number of days that the Agreement is in effect during the quarter. IN WITNESS WHEREOF, the parties hereto have caused this Exhibit A to the Distribution Agreement between the parties dated January 1, 1997, to be executed by their officers designated below as of the 1st day of January, 1997. EVERGREEN KEYSTONE DISTRIBUTOR, INC. EVERGREEN TRUST By: /s/ David Huber By: /s/ John J. Pileggi Title: David Huber, Vice President Title: John J. Pileggi, President EX-99.6C 4 FORM OF DEALER AGREEMENT - --------------------- EVERGREEN KEYSTONE - --------------------- [logo] FUNDS [logo] - --------------------- EVERGREEN KEYSTONE DISTRIBUTOR, INC. 230 PARK AVENUE NEW YORK, NEW YORK 10169 December 12, 1996 Effective January 1, 1997 To Whom It May Concern: You currently have a dealer agreement ("Agreement") with Evergreen Keystone Distributor, Inc. ("Company"). Effective January 1, 1997 the Agreement is amended and restated in its entirety as set forth below. The Company, principal underwriter, invites you to participate in the distribution of shares, including separate classes of shares, ("Shares") of the Keystone Fund Family, the Keystone America Fund Family, the Evergreen Fund Family and to the extent applicable their separate investment series (collectively "Funds" and each individually a "Fund") designated by us which are currently or hereafter underwritten by the Company, subject to the following terms: 1. You will offer and sell Shares of the Funds at the public offering price with respect to the applicable class described in the then current prospectus and/or statement of additional information ("Prospectus") of the Fund whose Shares you offer. You will offer Shares only on a forward pricing basis, i.e. orders for the purchase, repurchase or exchange of Shares accepted by you prior to the close of the New York Stock Exchange and placed with us the same day prior to the close of our business day, 5:00 p.m. Eastern Time, shall be confirmed at the closing price for that business day. You agree to place orders for Shares only with us and at such closing price. In the event of a difference between verbal and written price confirmation, the written confirmations shall be considered final. Prices of a Fund's Shares are computed by and are subject to withdrawal by each Fund in accordance with its Prospectus. You agree to place orders with us only through your central order department unless we accept your written Power of Attorney authorizing others to place orders on your behalf. This Agreement on your part runs to us and the respective Fund and is for the benefit and enforceable by each. 2. In the distribution and sale of Shares, you shall not have authority to act as agent for the Fund, the Company or any other dealer in any respect in such transactions. All orders are subject to acceptance by us and become effective only upon confirmation by us. The Company reserves the unqualified right not to accept any specific order for the purchase or exchange of Shares. 3. In addition to the distribution services provided by you with respect to a Fund you may be asked to render administrative, account maintenance and other services as necessary or desirable for shareholders of such Fund ("Shareholder Services"). 4. Notwithstanding anything else contained in this Agreement or in any other agreement between us, the Company hereby acknowledges and agrees that any information received from you concerning your customer in the course of this arrangement is confidential. Except as requested by the customer or as required by law and except for the respective Fund, its officers, directors, employees, agents or service providers, the Company will not provide nor permit access to such information by any person or entity, including any First Union Corporation bank or First Union Brokerage Services, Inc. 5. So long as this Agreement remains in effect, we will pay you commissions on sales of Shares of the Funds and service fees for Shareholder Services, in accordance with the Schedule of Commissions and Service Fees ("Schedule") attached hereto and made a part hereof, which Schedule may be modified from time to time or rescinded by us, in either case without prior notice. You have no vested right to receive any continuing service fees, other fees, or other commissions which we may elect to pay to you from time to time on Shares previously sold by you or by any person who is not a broker or dealer actually engaged in the investment banking or securities business. You will receive commissions in accordance with the attached Schedule on all purchase transactions in shareholder accounts (excluding reinvestment of income dividends and capital gains distributions) for which you are designated as Dealer of Record except where we determine that any such purchase was made with the proceeds of a redemption or repurchase of Shares of the same Fund or another Fund, whether or not the transaction constitutes the exercise of the exchange privilege. Commissions will be paid to you twice a month. You will receive service fees for shareholder accounts for which you are designated Dealer of Record as provided in the Schedule. You hereby represent that receipt of such service fees by you will be disclosed to your customers. You hereby authorize us to act as your agent in connection with all transactions in shareholder accounts in which you are designated as Dealer of Record. All designations of Dealer of Record and all authorizations of the Company to act as your agent shall cease upon the termination of this Agreement or upon the shareholder's instruction to transfer his or her account to another Dealer of Record. 6. Payment for all Shares purchased from us shall be made to the Company and shall be received by the Company within three business days after the acceptance of your order or such shorter time as may be required by law. If such payment is not received by us, we reserve the right, without prior notice, forthwith to cancel the sale, or, at our option, to sell such Shares back to the respective Fund in which case we may hold you responsible for any loss, including loss of profit, suffered by us or by such Fund resulting from your failure to make payment as aforesaid. 7. You agree to purchase Shares of the Funds only from us or from your customers. If you purchase Shares from us, you agree that all such purchases shall be made only to cover orders already received by you from your customers, or for your own bonafide investment without a view to resale. If you purchase Shares from your customers, you agree to pay such customers the applicable net asset value per Share less any contingent deferred sales charge ("CDSC") that would be applicable under the Prospectus ("repurchase price"). 8. You will sell Shares only (a) to your customers at the prices described in paragraph 2 above; or (b) to us as agent for a Fund at the repurchase price. In such a sale to us, you may act either as principal for your own account or as agent for your customer. If you act as principal for your own account in purchasing Shares for resale to us, you agree to pay your customer not less nor more than the repurchase price which you receive from us. If you act as agent for your customer in selling Shares to us, you agree not to charge your customer more than a fair commission for handling the transaction. You shall not withhold placing with us orders received from your customers so as to profit yourself as a result of such withholding. 10. We will not accept from you any conditional orders for Shares. 11. If any Shares sold to you under the terms of this Agreement are repurchased by a Fund, or are tendered for redemption, within seven business days after the date of our confirmation of the original purchase by you, it is agreed that you shall forfeit your right to any commissions on such sales even though the shareholder may be charged a CDSC by the Fund. We will notify you of any such repurchase or redemption within the next ten business days after the date on which the certificate or written request for redemption is delivered to us or to the Fund, and you shall forthwith refund to us the full amount of any commission you received on such sale. We agree, in the event of any such repurchase or redemption, to refund to the Fund any commission we retained on such sale and, upon receipt from you of the commissions paid to you, to pay such commissions forthwith to the Fund. 12. Shares sold to you hereunder shall not be issued until payment has been received by the Fund concerned. If transfer instructions are not received from you within 15 days after our acceptance of your order, the Company reserves the right to instruct the transfer agent for the Fund concerned to register Shares sold to you in your name and notify you of such. You agree to hold harmless and indemnify the Company, the Fund and its transfer agent for any loss or expense resulting from such registration. 13. You agree to comply with any compliance standards that may be furnished to you by us regarding when each class of Shares of a Fund may appropriately be sold to particular customers. 14. No person is authorized to make any representations concerning Shares of a Fund except those contained in the Prospectus and in sales literature issued by us supplemental to such Prospectus. In purchasing Shares from us you shall rely solely on the representations contained in the appropriate Prospectus and in such sales literature. We will furnish additional copies of such Prospectuses and sales literature and other releases and information issued by us in reasonable quantities upon request. You agree that you will in all respects duly conform with all laws and regulations applicable to the sales of Shares of the Funds and will indemnify and hold harmless the Funds, their directors and trustees and the Company from any damage or expenses on account of any wrongful act by you, your representatives, agents or sub-agents in connection with any orders or solicitation or orders of Shares of the Funds by you, your representatives, agents or sub-agents. 15. Each party hereto represents that it is (1) a member of the National Association of Securities Dealers, Inc., and agrees to notify the other should it cease to be a member of such Association and agrees to the automatic termination of this Agreement at that time or (2) excluded from the definition of broker-dealer under the Securities Exchange Act of 1934. It is further agreed that all rules or regulations of the Association now in effect or hereafter adopted, including its Business Conduct Rule 2830(d), which are binding upon underwriters and dealers in the distribution of the securities of open-end investment companies, shall be deemed to be a part of this Agreement to the same extent as if set forth in full herein. 16. You will not offer the Funds for sale in any State where they are not qualified for sale under the blue sky laws and regulations of such State or where you are not qualified to act as a dealer except for States in which they are exempt from qualification. 17. This Agreement supersedes and cancels any prior agreement with respect to the sales of Shares of any of the Funds underwritten by the Company. The Agreement may be amended by us at any time upon written notice to you. 18. This amendment to the Agreement shall be effective on January 1, 1997 and all sales hereunder are to be made, and title to Shares of the Funds shall pass in The Commonwealth of Massachusetts. This Agreement shall be interpreted in accordance with the laws of The Commonwealth of Massachusetts. 19. All communications to the Company should be sent to the above address. Any notice to you shall be duly given if mailed or telegraphed to you at the addressed specified by you. 20. Either part may terminate this Agreement at any time by written notice to the other party. - --------------------------- EVERGREEN KEYSTONE DISTRIBUTOR, INC. Dealer or Broker Name - --------------------------- /s/ Robert A. Hering Address ROBERT A. HERING, President - --------------------- EVERGREEN KEYSTONE - --------------------- [logo] FUNDS [logo] - --------------------- EVERGREEN KEYSTONE DISTRIBUTOR, INC. ROBERT A. HERING 230 PARK AVENUE President NEW YORK, NEW YORK 10169 December 12, 1996 Effective January 1, 1997 Dear Financial Professional: This Schedule of Commissions and Service Fees ("Schedule") supersedes any previous Schedules, is hereby made part of our dealer agreement ("Agreement") with you effective January 1, 1997 and will remain in effect until modified or rescinded by us. Capitalized terms used in this Schedule and not defined herein have the same meaning as such terms have in the Agreement. All commission rates and service fee rates set forth in this Schedule may be modified by us from time to time without prior notice. I. KEYSTONE FUNDS KEYSTONE QUALITY BOND FUND (B-1) KEYSTONE MID-CAP GROWTH FUND (S-3) KEYSTONE DIVERSIFIED BOND FUND (B-2) KEYSTONE SMALL COMPANY GROWTH FUND (S-4) KEYSTONE HIGH INCOME BOND FUND (B-4) KEYSTONE INTERNATIONAL FUND INC. KEYSTONE BALANCED FUND (K-1) KEYSTONE PRECIOUS METALS HOLDINGS, INC. KEYSTONE STRATEGIC GROWTH FUND (K-2) KEYSTONE TAX FREE FUND KEYSTONE GROWTH AND INCOME FUND (S-1) (COLLECTIVELY "KEYSTONE FUNDS") 1. COMMISSIONS FOR THE KEYSTONE FUNDS (OTHER THAN KEYSTONE PRECIOUS METALS HOLDINGS, INC.) Except as otherwise provided in our Agreement, we will pay you commissions on your sales of Shares of such Keystone Funds rtds d such er tv amrr rdKeystone Fundat the rate of 4.0% of the aggregate public offering price of such Shares as described in the Fund's Prospectus ("Offering Price") when sold in an eligible sale. 2. COMMISSIONS FOR KEYSTONE PRECIOUS METALS HOLDINGS, INC. Except as otherwise provided for in our Agreement, we will pay you commissions on your sale of Shares of Keystone Precious Metals Holdings, Inc. as the rate of the Offering Price when sold in an eligible sale as follows: AMOUNT OF PURCHASE COMMISSION AMOUNT OF PURCHASE COMMISSION Less than $100,000 4% $250,000-$499,999 1% $100,000-$249,999 2% $500,000 and above 0.5% 3. SERVICE FEES We will pay you service fees based on the aggregate net asset value of Shares of the Keystone Funds (other than Keystone Precious Metals Holdings, Inc.) you have sold on or after June 1, 1983 and of Keystone Precious Metals Holdings, Inc. you have sold on or after November 19, 1984, which remain issued and outstanding on the books of such Funds on the fifteenth day of the third month of each calendar quarter (March 15, June 15, September 15 and December 15, each hereinafter a "Service Fee Record Date") and which are registered in the names of customers for whom you are dealer of record ("Eligible Shares"). Such service fees will be calculated quarterly at the rate of 0.0625% per quarter of the aggregate net asset value of all such Eligible Shares (approximately 0.25% annually) on the Service Fee Record Date; provided, however, that in any calendar quarter in which service fees earned by you on Eligible Shares of all Funds (except Keystone Liquid Trust Class A Shares) are less than $50.00 in the aggregate, no service fees will be paid to you nor will such amounts be carried over for payment in a future quarter. Service fees will be payable within five business days after the Service Fee Record Date. Service fees will only be paid by us to the extent that such amounts have been paid to us by the Funds. 4. PROMOTIONAL INCENTIVES We may, from time to time, provide promotional incentives, including reallowance and/or payment of additional commissions to certain dealers. Such incentives may, at our discretion, be limited to dealers who allow their individual selling representatives to participate in such additional commissions.
II. KEYSTONE AMERICA FUNDS AND EVERGREEN FUNDS KEYSTONE AMERICA FUNDS KEYSTONE GOVERNMENT SECURITIES FUND KEYSTONE OMEGA FUND KEYSTONE STATE TAX FREE FUND KEYSTONE SMALL COMPANY GROWTH FUND - II KEYSTONE STATE TAX FREE FUND - SERIES II KEYSTONE FUND FOR TOTAL RETURN KEYSTONE STRATEGIC INCOME FUND KEYSTONE BALANCED FUND - II KEYSTONE TAX FREE INCOME FUND (COLLECTIVELY "KEYSTONE EQUITY AND LONG TERM INCOME FUNDS") KEYSTONE WORLD BOND FUND KEYSTONE CAPITAL PRESERVATION AND INCOME FUND KEYSTONE FUND OF THE AMERICAS KEYSTONE INTERMEDIATE TERM BOND FUND KEYSTONE GLOBAL OPPORTUNITIES FUND (COLLECTIVELY "KEYSTONE INTERMEDIATE INCOME FUNDS") KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC. KEYSTONE LIQUID TRUST KEYSTONE GLOBAL RESOURCES AND DEVELOPMENT FUND EVERGREEN FUNDS EVERGREEN U.S. GOVERNMENT FUND EVERGREEN AMERICAN RETIREMENT FUND EVERGREEN HIGH GRADE TAX FREE FUND EVERGREEN FOUNDATION FUND EVERGREEN FLORIDA MUNICIPAL BOND FUND EVERGREEN TAX STRATEGIC FOUNDATION FUND EVERGREEN GEORGIA MUNICIPAL BOND FUND EVERGREEN UTILITY FUND EVERGREEN NEW JERSEY MUNICIPAL BOND FUND EVERGREEN TOTAL RETURN FUND EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND EVERGREEN SMALL CAP EQUITY INCOME FUND EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND (COLLECTIVELY "EVERGREEN EQUITY AND LONG TERM INCOME FUNDS") EVERGREEN VIRGINIA MUNICIPAL BOND FUND EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND EVERGREEN MONEY MARKET FUND EVERGREEN FUND EVERGREEN TAX EXEMPT MONEY MARKET FUND EVERGREEN U.S. REAL ESTATE EQUITY FUND EVERGREEN TREASURY MONEY MARKET FUND EVERGREEN LIMITED MARKET FUND EVERGREEN PENNSYLVANIA TAX FREE MONEY MARKET FUND EVERGREEN AGGRESSIVE GROWTH FUND (COLLECTIVELY "EVERGREEN MONEY MARKET FUNDS") EVERGREEN INTERNATIONAL EQUITY FUND EVERGREEN SHORT-INTERMEDIATE BOND FUND EVERGREEN GLOBAL LEADERS FUND EVERGREEN INTERMEDIATE-TERM BOND FUND EVERGREEN EMERGING MARKETS FUND EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND EVERGREEN GLOBAL REAL ESTATE EQUITY FUND EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND EVERGREEN BALANCED FUND EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA EVERGREEN GROWTH & INCOME FUND (COLLECTIVELY "EVERGREEN INTERMEDIATE INCOME AND EVERGREEN VALUE FUND MONEY MARKET FUNDS")
A. CLASS A SHARES 1. COMMISSIONS Except as otherwise provided in our Agreement, in paragraph 2 below or in connection with certain types of purchases at net asset value which are described in the Prospectuses for the Keystone America Funds and the Evergreen Funds, we will pay you commissions on your sales of Shares of such Funds in accordance with the following sales charge schedules* on sales where we receive a commission from the shareholder: KEYSTONE AMERICA AND EVERGREEN EQUITY AND LONG TERM INCOME FUNDS SALES CHARGE AS COMMISSION AS AMOUNT OF A PERCENTAGE OF A PERCENTAGE OF PURCHASE OFFERING PRICE OFFERING PRICE Less than $50,000 4.75% 4.25% $50,000-$99,999 4.50% 4.25% $100,000-$249,999 3.75% 3.25% $250,000-$499,999 2.50% 2.00% $500,000-$999,999 2.00% 1.75% Over $1,000,000 None See paragraph 2 KEYSTONE AMERICA AND EVERGREEN INTERMEDIATE INCOME FUNDS SALES CHARGE AS COMMISSION AS AMOUNT OF A PERCENTAGE OF A PERCENTAGE OF PURCHASE OFFERING PRICE OFFERING PRICE Less than $50,000 3.25% 2.75% $50,000-$99,999 3.00% 2.75% $100,000-$249,999 2.50% 2.25% $250,000-$499,999 2.00% 1.75% $500,000-$999,999 1.50% 1.25% Over $1,000,000 None See paragraph 2 KEYSTONE LIQUID TRUST AND EVERGREEN MONEY MARKET FUNDS No sales charge for any amount of purchase. 2. COMMISSIONS FOR CERTAIN TYPES OF PURCHASES With respect to (a) purchases of Class A Shares in the amount of $1 million or more and/or (b) purchases of Class A Shares made by a corporate or certain other qualified retirement plan or a non-qualified deferred compensation plan or a Title I tax sheltered annuity or TSA Plan sponsored by an organization having 100 or more eligible employees (a "Qualifying Plan"), (each such purchase a "NAV Purchase"), we will pay you commissions as follows:
a. Purchases described in 2(a) above AMOUNT OF COMMISSION AS A PERCENTAGE PURCHASE OF OFFERING PRICE $1,000,000-$2,999,999 1.00% of the first $2,999,999, plus $3,000,000-$4,999,999 0.50% of the next $2,000,000, plus $5,000,000 0.25% of amounts equal to or over $5,000,000 b. Purchases described in 2(b) above .50% of amount of purchase (subject to recapture upon early redemption)
* These sales charge schedules apply to purchases made at one time or pursuant to Rights of Accumulation or Letters of Intent. Any purchase which is made pursuant to Rights of Accumulation or Letter of Intent is subject to the terms described in the Prospectus(es) for the Fund(s) whose Shares are being purchased. 3. PROMOTIONAL INCENTIVES We may, from time to time, provide promotional incentives, including reallowance and/or payment of up to the entire sales charge to certain dealers. Such incentives may, at our discretion, be limited to dealers who allow their individual selling representatives to participate in such additional commissions. 4. SERVICE FEES FOR EVERGREEN FUNDS (OTHER THAN EVERGREEN MONEY MARKET FUNDS) AND KEYSTONE AMERICA FUNDS (OTHER THAN KEYSTONE STATE TAX FREE FUND, KEYSTONE STATE TAX FREE FUND - SERIES II, KEYSTONE CAPITAL PRESERVATION AND INCOME FUND AND KEYSTONE LIQUID TRUST) a. Keystone America Funds Only. Until March 31, 1997, we will pay you service fees based on the aggregate net asset value of Shares of such Funds you have sold which remain issued and outstanding on the books of such Funds on the fifteenth day of the third month of each calendar quarter (March 15, June 15, September 15 and December 15, each hereinafter a "Service Fee Record Date") and which are registered in the names of customers for whom you are dealer of record ("Eligible Shares"). Such service fees will be calculated quarterly at the rate of 0.0625% per quarter of the aggregate net asset value of all such Eligible Shares (approximately 0.25% annually) on the Service Fee Record Date; provided, however, that in any calendar quarter in which total service fees earned by you on Eligible Shares of all Keystone Funds (except Keystone Liquid Trust Class A Shares) are less than $50.00 in the aggregate, no service fees will be paid to you nor will such amounts be carried over for payment in a future quarter. Service fees will be paid within five days after the Service Fee Record Date. Service fees will only be paid by us to the extent that such amounts have been paid to us by the Funds. b. Evergreen Funds and Keystone America Funds (after March 31, 1997). We will pay you service fees based on the average daily net asset value of Shares of such Funds you have sold which are issued and outstanding on the books of such Funds during each calendar quarter and which are registered in the names of customers for whom you are dealer of record ("Eligible Shares"). Such service fees will be calculated quarterly at the rate of 0.0625% per quarter of the daily average net asset value of all such Eligible Shares (approximately 0.25% annually) during such quarter; provided, however, that in any calendar quarter in which total service fees earned by you on Eligible Shares of all Funds (except Keystone Liquid Trust Class A Shares) are less than $50.00 in the aggregate, no service fees will be paid to you nor will such amounts be carried over for payment in a future quarter. Service fees will be paid by the twentieth day of the month before the end of the respective quarter. Service fees will only be paid by us to the extent that such amounts have been paid to us by the Funds. 5. SERVICE FEES FOR KEYSTONE STATE TAX FREE FUND AND KEYSTONE STATE TAX FREE FUND - SERIES II a. Until March 31, 1997, we will pay you service fees based on the aggregate net asset value of Shares of such Funds you have sold which remain issued and outstanding on the books of the Funds on the fifteenth day of the third month of each calendar quarter (March 15, June 15, September 15 and December 15, each hereinafter a "Service Fee Record Date") and which are registered in the names of customers for whom you are dealer of record ("Eligible Shares"). Such service fees will be calculated quarterly at the rate of 0.0375% per quarter of the aggregate net asset value of all such Eligible Shares (approximately 0.15% annually) on the Service Fee Record Date; provided, however, that in any calendar quarter in which total service fees earned by you on Eligible Shares of all Funds (except Keystone Liquid Trust Class A Shares) are less than $50.00 in the aggregate, no service fees will be paid to you nor will such amounts be carried over for payment in a future quarter. Service fees will be paid within five days after the Service Fee Record Date. Service fees will only be paid by us to the extent that such amounts have been paid to us by the Funds. b. After March 31, 1997 we will pay you service fees calculated as provided in section II (A)(4)(b) except that the quarterly rate will be 0.0375% (approximately 0.15% annually). c. After June 30, 1997, we will pay you service fees calculated as provided in section II (A)(4)(b) above on Shares sold on or after July 1, 1997. 6. SERVICE FEES FOR KEYSTONE CAPITAL PRESERVATION AND INCOME FUND a. Until March 31, 1997, we will pay you service fees calculated as provided in section II (A)(4)(a) except that for Eligible Shares sold after January 1, 1997 the quarterly rate will be 0.025% (approximately 0.10% annually). b. After March 31, 1997 we will pay you service fees calculated as provided in section II (A)(4)(b) except that for Eligible Shares sold after January 1, 1997 the quarterly rate will be 0.025% (approximately 0.10% annually). 7. SERVICE FEES FOR KEYSTONE LIQUID TRUST We will pay you service fees based on the aggregate net asset value of all Shares of such Fund you have sold which remain issued and outstanding on the books on the Fund on the fifteenth day of the third month of each calendar quarter (March 15, June 15, September 15 and December 15, each hereinafter a "Service Fee Record Date") and which are registered in the names of customers for whom you are dealer of record ("Eligible Shares"). Such service fees will be calculated at the rates set forth below and based on the aggregate net asset value of all such Eligible Shares on the Service Fee Record Date; provided, however, that no such service fees will be paid to you for any quarter if the aggregate net asset value of such Eligible Shares on the last business day of the quarter is less than $2 million; and provided further, however, that service fees will only be paid to us to the extent that such amounts have been paid to us by the Fund. Service fees will be paid within 5 days after the Service Fee Record Date. The quarterly rates at which such service fees are payable and the net asset value to which such rates will be applied are set forth below: ANNUAL QUARTERLY AGGREGATE NET ASSET RATE PAYMENT RATE VALUE OF SHARES 0.00000% 0.00000% of the first $1,999,999, plus 0.15000% 0.03750% of the next $8,000,000, plus 0.20000% 0.05000% of the next $15,000,000, plus 0.25000% 0.06250% of the next $25,000,000, plus 0.30000% 0.07500% of amounts over $50,000,000 8. SERVICE FEES FOR EVERGREEN MONEY MARKET FUNDS We will pay you service fees calculated as provided in section II (A)(4)(b) except that the quarterly rate will be 0.075% (approximately 0.30% annually.) B. CLASS B SHARES ALL KEYSTONE AMERICA AND EVERGREEN FUNDS 1. COMMISSIONS Except as otherwise provided in our Agreement, we will pay you commissions on your sales of Class B Shares of the Keystone America Funds and the Evergreen Funds at the rate of 4.00% of the aggregate Offering Price of such Shares, when sold in an eligible sale. 2. PROMOTIONAL INCENTIVES We may, from time to time, provide promotional incentives, including reallowance and/or payment of additional commissions, to certain dealers. Such incentives may, at our discretion, be limited to dealers who allow their individual selling representatives to participate in such additional commissions. 3. SERVICE FEES FOR EVERGREEN FUNDS AND KEYSTONE AMERICA FUNDS (OTHER THAN KEYSTONE STATE TAX FREE FUND AND KEYSTONE STATE TAX FREE FUND - SERIES II) a. Keystone America Funds - Until March 31, 1997, we will pay you service fees calculated as provided in section II (A)(4)(a) above. b. Evergreen Funds and Keystone America Funds (after March 31. 1997). We will pay you service fees calculated as provided in section II (A)(4)(b) above. 4. SERVICE FEES FOR KEYSTONE STATE TAX FREE FUND AND KEYSTONE STATE TAX FREE FUND - SERIES II a. Until March 31, 1997, we will pay you service fees calculated as provided in section II (A)(5)(a) above. b. After March 31, 1997, we will pay you service fees calculated as provided in section II (A)(5)(b) above. c. After June 30, 1997, we will pay you service fees calculated as provided in section II (A)(5)(c) above. C. CLASS C SHARES ALL KEYSTONE AMERICA AND EVERGREEN FUNDS 1. COMMISSIONS Except as provided in our Agreement, we will pay you initial commissions on your sales of Class C Shares of the Keystone America and the Evergreen Funds at the rate of 0.75% of the aggregate Offering Price of such Shares sold in each eligible sale. We will also pay you commissions based on the average daily net asset value of Shares of such Funds you have sold which have been on the books of the Funds for a minimum of 14 months from the date of purchase (plus any reinvested distributions attributable to such Shares), which have been issued and outstanding on the books of such Funds during the calendar quarter and which are registered in the names of customers for whom you are dealer of record ("Eligible Shares"). Such commissions will be calculated quarterly at the rate of 0.1875% per quarter of the average daily net asset value of all such Eligible Shares (approximately 0.75% annually) during such quarter. Such commissions will be paid by the twentieth day of the month before the end of the respective quarter. Such commissions will continue to be paid to you quarterly so long as aggregate payments do not exceed applicable NASD limitations and other governing regulations. 2. SERVICE FEES We will pay you a full year's service fee in advance on your sales of Class C Shares of such Funds at the rate of 0.25% of the aggregate net asset value of such Shares. We will pay you service fees based on the average daily net asset value of Shares of such Funds you have sold which have been on the books of the Funds for a minimum of 14 months from the date of purchase (plus any reinvested distributions attributable to such Shares), which have been issued and outstanding during the respective quarter and which are registered in the names of customers for whom you are the dealer of record ("Eligible Shares"). Such service fees will be calculated quarterly at the rate of 0.0625% per quarter of the average daily net asset value of all such Eligible Shares (approximately 0.25% annually); provided, however, that in any calendar quarter in which total service fees earned by you on Eligible Shares of Funds (except Keystone Liquid Trust Class A Shares) are less than $50.00 in the aggregate, no service fees will be paid to you nor will such amounts be carried over for payment in a future quarter. Service fees will be paid by the twentieth day of the month before the end of the respective quarter. Service fees other than those paid in advance will only be paid by us to the extent that such amounts have been paid to us by the Funds. EX-99.7 5 DEFERRED COMPENSATION PLAN THE EVERGREEN FUNDS DEFERRED COMPENSATION PLAN AGREEMENT, made on this ___ day of ___________, 1995, by and between the registered open-end investment companies listed in Attachment A hereto (each a "Fund" and together, the "Funds"), and ___________ (the "Trustee"). WHEREAS, the Trustee is serving as a director/trustee of the Funds for which he is entitled to receive trustees' fees; and WHEREAS, the Funds and the Trustee desire to permit the Trustee to defer receipt of trustees' fees payable by the Funds; NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the Funds and the Trustee hereby agree as follows: 1. DEFINITION OF TERMS AND CONDITIONS 1.1 Definitions. Unless a different meaning is plainly implied by the context, the following terms as used in this Agreement shall have the meanings specified below: (a) "Beneficiary" shall mean such person or persons designated pursuant to Section 4.3 hereof to receive benefits after the death of the Trustee. (b) "Board of Trustees" shall mean the Board of Trustees or the Board of Directors of a Fund. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. (d) "Compensation" shall mean the amount of trustees' fees paid by a Fund to the Trustee during a Deferral Year prior to reduction for Compensation Deferrals made under this Agreement. (e) "Compensation Deferral" shall mean the amount or amounts of the Trustee's Compensation deferred under the provisions of Section 3 of this Agreement. (f) "Deferral Account" shall mean the account maintained to reflect the Trustee's Compensation Deferrals made pursuant to Section 3 hereof and any other credits or debits thereto. (g) "Deferral-Year" shall mean each calendar year during which the Trustee makes, or is entitled to make, Compensation Deferrals under Section 3 hereof. (h) "Valuation Date" shall mean the last business day of each calendar year and any other day upon which a Fund makes a valuation of the Deferred Account. 1.2 Plurals and Gender. Where appearing in this Agreement the singular shall include the plural and the masculine shall include the feminine, and vice versa, unless the context clearly indicates a different meaning. 1.3 Trustees and Directors. Where appearing in this Agreement, "Trustee" shall also refer to "Director" and trustee emeritus and director emeritus and "Board of Trustees" shall also refer to "Board of Directors." 1.4 Headings. The headings and subheadings in this Agreement are inserted for the convenience of reference only and are to be ignored in any construction of the provisions hereof. 1.5 Separate Agreement for Each Fund. This Agreement is drafted, and shall be construed, as a separate agreement between the Trustee and each of the Funds. 2. PERIOD DURING WHICH COMPENSATION DEFERRALS ARE PERMITTED 2.1 Commencement of Compensation Deferrals. The Trustee may elect, on a form provided by, and submitted to, the Secretary of a Fund, to commence Compensation Deferrals under Section 3 hereof for the period beginning on the later of (i) the date this Agreement is executed or (ii) the date such form is submitted to the Secretary of the Fund. 2.2 Termination of Deferrals. The Trustee shall not be eligible to make Compensation Deferrals after the earlier of the following dates: (a) The date on which he ceases to serve as a Trustee of the Fund; or (b) The effective date of the termination of this Agreement. 3. COMPENSATION DEFERRALS 3. Compensation Deferral Elections. (a) Except as provided below, a deferral election on the form described in Section 2.1 hereof, must be filed with the Secretary of a Fund prior to the first day of the Deferral Year to which it applies. The form shall set forth the amount of such Compensation Deferral (in whole percentage amounts) . Such election shall continue in effect for all subsequent Deferral Years unless it is canceled or modified as provided below. Notwithstanding the foregoing, (i) any person who is elected to the Board during a fiscal year of a Fund may elect before becoming a Trustee or within 30 days after becoming a Trustee to defer any unpaid portion of the retainer of such fiscal year and the fees for any future meetings during such fiscal year by filing an election form with the Secretary of the Fund, and (ii) Trustees may elect to defer any unpaid portion of the retainer for the fiscal year in which Deferred Compensation Agreements are first authorized by the Board and any unpaid fees for any future meetings during such fiscal year by submitting an election form to the Secretary of a Fund within 30 days of such authorization. (b) Compensation Deferrals shall be withheld from each payment of Compensation by a Fund to the Trustee based upon the percentage amount elected by the Trustee under Section 3.1 (a) hereof. (c) The Trustee may cancel or modify the amount of his Compensation Deferrals on a prospective basis by submitting to the Secretary of a Fund a revised compensation Deferral election form. Subject to the provisions of Section 4.2 hereof, such change will be effective as of the first day of the Deferral Year following the date such revision is submitted to the Secretary of the Fund. 3.2 Valuation of Deferral Account. (a) A Fund shall establish a bookkeeping Deferral Account to which will be credited an amount equal to the Trustee's Compensation Deferrals under this Agreement. Compensation Deferrals shall be allocated to the Deferral Account on the day such Compensation Deferrals are withheld from the Trustee's Compensation and shall be deemed invested pursuant to Section 3.3, below, as of the same day. The Deferral Account shall be debited to reflect any distributions from such Account. Such debits shall be allocated to the Deferral Account as of the date such distributions are made. (b) As of each Valuation Date, income, gain and loss equivalents (determined as if the Deferral Account is invested in the manner set forth under Section 3.3, below) attributable to the period following the next preceding Valuation Date shall be credited to and/or deducted from the Trustees Deferral Account. 3.3 Investment of Deferral Account Balance (a) (1) The Trustee may select from various options made available by the Funds the investment media in which all or part of his Deferral Account shall be deemed to be invested. The investment media available to the Trustee as of the date of this Agreement are listed in Attachment B hereto. (2) The Trustee shall make an investment designation on a form provided by the Secretary of the Funds (Attachment C) which shall remain effective until another valid designation has been made by the Trustee as herein provided. The Trustee may amend his investment designation daily by giving instructions to the Secretary of the Funds. (3) Any changes to the investment media to be made available to the Trustee, and any limitation on the maximum or minimum percentages of the Trustee's Deferral Account that may be invested in any particular medium, shall be communicated from time-to-time to the Trustee by the Secretary of the Funds. (b) Except as provided below, the Trustee's Deferral Account shall be deemed to be invested in accordance with his investment designations, provided such designations conform to the provisions of this Section. If: (1) the Trustee does not furnish the secretary of the Funds with complete, written investment instructions, or (2) the written investment instructions from the Trustee are unclear, then the Trustee's election to make Compensation Deferrals hereunder shall be held in abeyance and have no force and effect, and he shall be deemed to have selected the Evergreen Money Market Fund until such time as the Trustee shall provide the Secretary of the Funds with complete investment instructions. In the event that any fund under which any portion of the Trustee's Deferral Account is deemed to be invested ceases to exist, such portion of the Deferral Account thereafter shall be held in the successor to such Fund, subject to subsequent deemed investment elections. The use of the returns on the investment media to determine the amount of the earnings credited to a Trustee's Deferral Account is subject to regulatory approval. Until such approval is received, the Compensation Deferrals of a Trustee Under this Agreement shall be continuously credited with earnings in an amount determined by multiplying the balance credited to the Deferral Account by an interest rate equal to the yield on 90-day U.S. Treasury Bills. The Secretary of the Funds shall provide an annual statement to the Trustee showing such information as is appropriate, including the aggregate amount in the Deferral Account, as of a reasonably current date. 4. DISTRIBUTION FROM DEFERRAL ACCOUNT 4.1 In General. Distributions from the Trustee's Deferral Account may be paid in a lump sum or in installments as elected by the Trustee commencing on or as soon as practicable after a date specified by the Trustee, which may not be sooner than the earlier of the first business day of January following (a) a date five years following the deferral election, or (b) the year in which the Trustee ceases to be a member of the Board of Trustees of the Funds. Notwithstanding the foregoing, in the event of the liquidation, dissolution or winding up of a Fund or the distribution of all or substantially all of a Fund's assets and property relating to one or more series of its shares to the shareholders of such series (for this purpose a sale, conveyance or transfer of a Fund's assets to a trust, partnership, association or corporation in exchange for cash shares or other securities with the transfer being made subject to, or with the assumption by the transferee of, the liabilities of the Fund shall not be deemed a termination of the Fund or such a distribution), all unpaid amounts in the Deferral Account as of the effective date thereof shall be paid in a lump sum on such effective date. In addition, upon application by a Trustee and determination by the Chairman of the Board of Trustees of the Funds that the Trustee has suffered a severe and unanticipated financial hardship, the Secretary shall distribute to the Trustee, in a single lump sum, an amount equal to the lesser of the amount needed by the Trustee to meet the hardship plus applicable income taxes payable upon such distribution, or the balance of the Trustee's Deferral Account. 4.2 Death Prior to Complete Distribution of Deferral Account. Upon the death of the Trustee (whether prior to or after the commencement of the distribution of the amounts credited to his Deferral Account), the balance of such Account shall be distributed to his Beneficiary in a lump sum as soon as practicable after the Trustee's death. 4.3 Designation of Beneficiary. For purposes of Section 4.3 hereof, the Trustee's Beneficiary shall be the person or persons so designated by the Trustee in a written instrument submitted to the Secretary of the Funds. In the event the Trustee fails to properly designate a Beneficiary, his Beneficiary shall be the person or persons in the first of the following classes of successive preference Beneficiaries Surviving at the death of the Trustee: the Trustees (1) surviving spouse, or (2) estate. 5. AMENDMENT AND TERMINATION 5.1 The Board of Trustees may at any time in its sole discretion amend or terminate this Plan; provided however, that no Such amendment or termination shall adversely affect the right of Trustees to receive amounts previously credited to their Deferral Accounts. 6. MISCELLANEOUS 6.1 Rights of Creditors. (a) This Agreement is an unfunded and non-qualified deferred compensation arrangement. Neither the Trustee nor other persons shall have any interest in any specific asset or assets of a Fund by reason of any Deferral Account hereunder, nor any rights to receive distribution of his Deferral Account except as and to the extent expressly provided hereunder. A Fund shall not be required to purchase, hold or dispose of any investments pursuant to this Agreement; however, if in order to cover its obligations hereunder the Fund elects to purchase any investments the same shall continue for all purposes to be a part of the general assets and property of the Fund, subject to the claims of its general creditors and no person other than the Fund shall by virtue of the provisions of this Agreement have any interest in such assets other than an interest as a general creditor. (b) The rights of the Trustee and the Beneficiaries to the amounts held in the Deferral Account are unsecured and shall be subject to the creditors of the Funds. With respect to the payment of amounts held under the Deferral Account, the Trustee and his Beneficiaries have the status of unsecured creditors of the Funds. This Agreement is executed on behalf of the Fund by an officer of a Fund as such and not individually. Any obligation of a Fund hereunder shall be an unsecured obligation of the Fund and not of any other person. 6.2 Agents. The Funds may employ agents and provide for such clerical, legal, actuarial, accounting, advisory or other services as they deem necessary to perform their duties under this Agreement. The Funds shall bear the cost of such services and all other expenses they incur in connection with the administration of this Agreement. 6.3 Incapacity. If a Fund shall receive evidence satisfactory to it that the Trustee or any Beneficiary entitled to receive any benefit under this Agreement is, at the time when such benefit becomes payable, a Minor, or is physically or mentally incompetent to give a valid release therefor, and that another person or an institution is then maintaining or has custody of the Trustee or Beneficiary and that no guardian, committee or other representative of the estate of the Trustee or Beneficiary shall have been duly appointed, the Fund may make payment of such benefit otherwise payable to the Trustee or Beneficiary to such other person or institution, including a custodian under a Uniform Gifts to Minors Act, or corresponding legislation (who shall be a guardian of the minor or a trust company), and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit. 6.4 Cooperation of Parties. All parties to this Agreement and any person claiming any interest hereunder agree to perform any and all acts and execute any and all documents and papers which are necessary or desirable for carrying out this Agreement or any of its provisions. 6.5 Governing Law. This Agreement is made and entered into in the State of North Carolina and all matters concerning its validity, construction and administration shall be governed by the laws of the State of North Carolina. 6.6 No Guarantee of Trusteeship. Nothing contained in this Agreement shall be construed as a guaranty or right of any Trustee to be continued as a Trustee of one or more of the Evergreen Funds (or of a right of a Trustee to any specific level of Compensation) or as a limitation of the right of any of the Evergreen Funds, by shareholder action or otherwise, to remove any of its trustees. 6.7 Counsel. The Funds may consult with legal counsel with respect to the meaning or construction of this Agreement, their obligations or duties hereunder or with respect to any action or proceeding or any question of law, and they shall be fully protected with respect to any action taken or omitted by them in good faith pursuant to the advice of legal counsel. 6.8 Spendthrift Provision. The Trustees' and Beneficiaries' interests in the Deferral Account shall not be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charges and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void; nor shall any portion of any such right hereunder be in any manner payable to any assignee, receiver or trustee, or be liable for such person's debts, contracts, liabilities, engagements or torts, Or be subject to any legal process to levy upon or attach. 6.9 Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally or mailed by United States registered or certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight delivery service, addressed to the Trustee at the home address set forth in the Funds' records and to a Fund at its principal place of business, provided that all notices to a Fund shall be directed to the attention of the Secretary of the Fund or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 6.10 Entire Agreement. This Agreement contains the entire understanding between the Funds and the Trustee with respect to the payment of non-qualified elective deferred compensation by the Funds to the Trustee. 6.11 Interpretation of Agreement. Interpretation of, and determinations related to, this Agreement made by the Funds in good faith, including any determinations of the amounts of the Deferral Account, shall be conclusive and binding upon all parties; and a Fund shall not incur any liability to the Trustee for any such interpretation or determination so made or for any other action taken by it in connection with this Agreement in good faith. 6.12 Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of, the Funds and their successors and assigns and to the Trustees and his heirs, executors, administrators and personal representatives. 6.13 Severability. In the event any one or more provisions of this Agreement are held to be invalid or unenforceable, such illegality or unenforceability shall not affect the validity or enforceability of the other provisions hereof and such other provisions shall remain in full force and effect unaffected by such invalidity or unenforceability. 6.14 Execution of Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. EVERGREEN TRUST EVERGREEN EQUITY TRUST EVERGREEN INVESTMENT TRUST EVERGREEN TOTAL RETURN FUND EVERGREEN GROWTH AND INCOME FUND THE EVERGREEN AMERICAN RETIREMENT TRUST EVERGREEN FOUNDATION TRUST EVERGREEN MUNICIPAL TRUST EVERGREEN MONEY MARKET FUND EVERGREEN LIMITED MARKET FUND, INC. By: ________________ ____________________ Witness John J. Pileggi President ________________ ____________________ Witness Trustee ATTACHMENT A EVERGREEN TRUSTS & FUNDS 1. EVERGREEN TRUST a. Evergreen Fund b. Evergreen Aggressive Growth Fund 2. EVERGREEN EQUITY TRUST a. Evergreen Global Real Estate Equity Fund b. Evergreen U.S. Real Estate Equity Fund C. Evergreen Global Leaders Fund 3. EVERGREEN INVESTMENT TRUST a. Evergreen International Equity Fund b. Evergreen Emerging Markets Growth Fund C. Evergreen Balanced Fund d. Evergreen Value Fund e. Evergreen Utility Fund f. Evergreen U.S. Government Fund g. Evergreen Fixed Income Fund h. Evergreen Managed Bond Fund (Y Shares only) i. Evergreen High Grade Tax Free Fund J. Evergreen Florida Municipal Bond Fund k. Evergreen Georgia Municipal Bond Fund 1. Evergreen North Carolina Municipal Bond Fund M. Evergreen South Carolina Municipal Bond Fund n. Evergreen Virginia Municipal Bond Fund 0. Evergreen Treasury Money Market 4. EVERGREEN TOTAL RETURN FUND 5. EVERGREEN GROWTH AND INCOME FUND 6. THE EVERGREEN AMERICAN RETIREMENT TRUST a. Evergreen American Retirement Fund b. Evergreen Small Cap Equity Income Fund 7. EVERGREEN FOUNDATION TRUST a. Evergreen Foundation Fund b. Evergreen Tax Strategic Foundation Fund 8. EVERGREEN MUNICIPAL TRUST a. Evergreen Short-intermediate municipal Fund b. Evergreen Short-intermediate Municipal Fund-California C. Evergreen Florida High Income Municipal Fund d. Evergreen Tax Exempt Money Market Fund 9. EVERGREEN MONEY MARKET FUND 10. EVERGREEN LIMITED MARKET FUND, INC. ATTACHMENT B EVERGREEN TRUSTS & FUNDS Available Fund Options Evergreen International Equity Fund Evergreen Aggressive Growth Fund Evergreen Fund Evergreen Foundation Fund Evergreen Growth & Income Evergreen Value Evergreen Fixed Income Evergreen Money Market Fund ATTACHMENT C DEFERRED COMPENSATION AGREEMENT DEFERRAL ELECTION FORM TO: The Secretary of The Evergreen Funds FROM: DATE: With respect to the Deferred Compensation Agreement (the "Agreement") dated as of November __, 1995 by and between the undersigned and The Evergreen Funds, I hereby make the following elections: Deferral of Compensation Starting with Compensation to be paid to me with respect to services provided by me to The Evergreen Funds after the date this election form is provided to The Evergreen Funds, and for all periods thereafter (unless subsequently amended by way of a new election form), I hereby elect that ___ percent (__%) of my Compensation (as defined under the Agreement) be deferred and that the Funds establish a bookkeeping account credited with amounts equal to the amount so deferred (the "Deferral Account"), The Deferral Account shall be further credited with income equivalents as provided under the Agreement. Each Compensation Deferral (as defined in the Agreement) shall be deemed invested pursuant to Section 3.3 of the Agreement as of the same day it would have been paid to me. I wish the Compensation Deferral to be invested in the Funds and percentages noted in Annex A to this Form. I understand that the amounts held in the Deferral Account shall remain the general assets of The Evergreen Funds and that, with respect to the payment of such amounts, I am merely a general creditor of The Evergreen Funds. I may not sell, encumber, pledge, assign or otherwise alienate the amounts held under the Deferral Account. Distribution from Deferral Account I hereby elect that distributions from my Deferral Account be paid: ______ in a lump sum or ______ in quarterly installments for ___ years (specify a number of years not to exceed ten); commencing on the first business day of January following: ______ the year in which I cease to be a member of the Board of Trustees of the Funds, or ______ a calendar year but not a year earlier than 2000. I hereby agree that the terms of the Agreement are incorporated herein and are made a part hereof. Dated as of the day and year first above written. WITNESS: TRUSTEE: __________________ __________________ RECEIVED: THE EVERGREEN FUNDS By:____________________ Name:__________________ Title:_________________ Date:__________________ ANNEX A I desire that my deferred Compensation be invested as follows: Evergreen International Equity Fund %_____ Evergreen Aggressive Growth Fund %_____ Evergreen Fund %_____ Evergreen Foundation Fund %_____ Evergreen Growth & Income Fund %_____ Evergreen Value %_____ Evergreen Fixed Income %_____ Evergreen Money Market Fund %_____ ______________________ 100% of Deferred Compensation Amount ATTACHMENT D THE EVERGREEN FUNDS DEFERRED COMPENSATION PLAN DESIGNATION OF BENEFICIARY You may designate one or more beneficiaries to receive any amount remaining in your Deferral Account at your death. If your Designated Beneficiary survives you, but dies before receiving the full amount of the Deferral Account to which he or she is entitled, the remainder will be paid to the Designated Beneficiary's estate, unless you specifically elect otherwise in your Designation of Beneficiary form. You may indicate the names not only of one or more primary Designated Beneficiaries but also the names of secondary beneficiaries who would receive amounts in your Deferral Account in the event the primary beneficiary or beneficiaries are not alive at your death. In the case of each Designated Beneficiary, give his or her name, address, relationship to you, and the percentage of your Deferral Account he or she is to receive. You may change your Designated Beneficiaries at any time, without their consent, by filing a new Designation of Beneficiary form with the Secretary of the Funds. ****************************************** As a participant in the Evergreen Funds' Deferred Compensation Plan (the "Plan"), I hereby designate the person or persons listed below to receive any amount remaining in my Deferral Account in the event of my death. This designation of beneficiary shall become effective upon its delivery to the Secretary of the Funds prior to my death, and revokes any designation(s) of beneficiary previously made by me. I reserve the right to revoke this designation of beneficiary at any time without notice to any beneficiary. I hereby name the following as primary Designated Beneficiaries under the Plan: _____________________________________________________________________ Name Relationship Percentage Address _____________________________________________________________________ Name Relationship Percentage Address _____________________________________________________________________ Name Relationship Percentage Address _____________________________________________________________________ Name Relationship Percentage Address In the event that one or more of my primary Designated Beneficiaries predeceases mer his or her share shall be allocated among the Surviving primary Designated Beneficiaries. I name the following as secondary Designated Beneficiaries under the Plan, in the event that no primary Designated Beneficiary survives me: ______________________________________________________________________ Name Relationship Percentage Address ______________________________________________________________________ Name Relationship Percentage Address ______________________________________________________________________ Name Relationship Percentage Address ______________________________________________________________________ Name Relationship Percentage Address In the event that no primary Designated Beneficiary survives me and one or more of the secondary Designated Beneficiaries predeceases me, his or her share shall be allocated among the surviving secondary Designated Beneficiaries. ___________________ _____________________ (witness) (Signature of Trustee) Date: Date: EX-99.B10 6 SMALL CAP VALUE FUND OPINION OF COUNSEL James P. Wallin 2500 Westchester Avenue Purchase, New York 10577 March 18, 1997 Evergreen Trust 2500 Westchester Avenue Purchase, New York 10577 Dear Sirs: Evergreen Trust, a Massachusetts business trust (the "Trust"), is filing with the Securities and Exchange Commission a Post-Effective Amendment to its Registration Statment on Form N-1A (the "Amendment") for the purpose of registering an additional series of shares to be known as "Evergreen Small Cap Value Fund" (the "Fund"). I have, as counsel, participated in various proceedings relating to the Trust and to the Amendment. I have examined copies, either certified or otherwise proved to our satisfaction to be genuine, of the Trust's Declaration of Trust, as now in effect, the minutes of meetings of the Trustees of the Trust and other documents relating to the organization and operation of the Trust. I have also reviewed the form of the Amendment being filed by the Trust. I am generally familiar with the business affairs of the Trust. The Trust has advised me that the shares of the Fund will only be sold in the manner contemplated by the prospectus of the Fund current at the time of sale, and that the shares of the Fund will only be sold for a consideration not less than the net asset value thereof as required by the Investment Company Act of 1940 and not less than the par value thereof. Based upon the foregoing, it is my opinion that the Shares will be, when issued, fully paid and non-assessable. However, I note that as set forth in the Registration Statement, the Fund's shareholders might, under certain circumstances, be liable for transactions effected by the Trust. I hereby consent to the filing of this Opinion with the Securities and Exchange Commission together with the Amendment, and to the filing of this Opinion under the securities laws of any state. I am a member of the Bar of the State of New York and do not hold myself out as being conversant with the laws of any jurisdiction other than those of the United States of America and the State of New York. I note that I am not licensed to practice law in The Commonwealth of Massachusetts, and to the extent that any opinion expressed herein involves the law of Massachusetts, such opinion should be understood to be based solely upon my review of the documents referred to above, the published statutes of that Commonwealth and, where applicable, published cases, rules or regulations of regulatory bodies of that Commonwealth. Very truly yours, /s/James P. Wallin --------------------- James P. Wallin EX-99.11 7 CONSENTS OF AUDITORS CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus and Statement of Additional Information constituting parts of this Post-Effective Amendment No. 33 to the registration statement on Form N-1A (the "Registration Statement") of our report dated November 18, 1996, relating to the financial statements and financial highlights appearing in the September 30, 1996 Annual Report to Shareholders of Evergreen Fund and Evergreen Aggressive Growth Fund, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the heading "Financial Highlights" in the Prospectus and under the headings "Independent Auditors" and "Financial Statements" in the Statement of Additional Information. Price Waterhouse LLP 1177 Avenue of the Americas New York, NY 10036 March 18, 1997 CONSENT OF INDEPENDENT AUDITORS The Board of Trustees and Shareholder Evergreen Small Cap Value Fund We consent to the use of our report dated March 18, 1997 incorporated by reference herein. KPMG Peat Marwick LLP Boston, Massachusetts March 19, 1997 EX-99.15B 8 SMALL CAP VALUE FUND 12B-1 PLANS DISTRIBUTION PLAN OF CLASS A SHARES THE EVERGREEN TRUST EVERGREEN SMALL CAP VALUE FUND Section 1. The Evergreen Trust (the "Trust") may act as the distributor of securities which are issued in respect of one or more of its separate investment series, pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") according to the terms of this Distribution Plan ("Plan"). Section 2. The Trust may expend daily amounts at an annual rate of .75 of 1% of the average daily net asset value of the Class A Shares ("Shares") of its Evergreen Small Company Value Fund Series ("Fund") to finance any activity which is principally intended to result in the sale of Shares including, without limitation, expenditures consisting of payments to a principal underwriter of the Fund (Principal Underwriter) or others in order: (i) to enable payments to be made by the Principal Underwriter or others for any activity primarily intended to result in the sale of Shares, including, without limitation, (a) compensation to public relations consultants or other persons assisting in, or providing services in connection with, the distribution of Shares, (b) advertising, (c) printing and mailing of prospectuses and reports for distribution to persons other than existing shareholders, (d) preparation and distribution of advertising material and sales literature, (e) commission payments, and principal and interest expenses associated with the financing of commission payments, made by the Principal Underwriter in connection with the sale of Shares and (f) conducting public relations efforts such as seminars; (ii) to enable the Principal Underwriter or others to receive, pay or to have paid to others who have sold Shares, or who provide services to holders of Shares, a maintenance or other fee in respect of services provided to holders of Shares, at such intervals as the Principal Underwriter may determine, in respect of Shares previously sold and remaining outstanding during the period in respect of which such fee is or has been paid; and/or (iii) to compensate the Principal Underwriter for its efforts in respect of sales of Shares since inception of the Plan. Appropriate adjustments shall be made to the payments made pursuant to this Section 2 to the extent necessary to ensure that no payment is made by the Fund with respect to any Class in excess of the applicable limit imposed on asset based, front end and deferred sales charges under subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. (the "NASD"). In addition, to the extent any amounts paid hereunder fall within the definition of an "asset based sales charge" under said NASD Rule such payments shall be limited to .75 of 1% of the aggregate net asset value of the Shares on an annual basis and, to the extent that any such payments are made in respect of "shareholder services" as that term is defined in the NASD Rule, such payments shall be limited to .25 of 1% of the aggregate net asset value of the Shares on an annual basis and shall only be made in respect of shareholder services rendered during the period in which such amounts are accrued. Section 3. This Plan shall not take effect with respect to any Fund until it has been approved by votes of a majority of (a) the outstanding Shares of such Series, (b) the Trustees of the Trust, and (c) those Trustees of the Trust who are not "interested persons" of the Fund (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or any agreements of the Trust related hereto or any other person related to this Plan ("Disinterested Trustees"), cast in person at a meeting called for the purpose of voting on this Plan. In addition, any agreement related to this Plan and entered into by the Fund in connection therewith shall not take effect until it has been approved by votes of a majority of (a) the Board of Trustees of the Trust, and (c) the Disinterested Trustees of the Trust. Section 4. Unless sooner terminated pursuant to Section 6, this Plan shall continue in effect for a period of one year from the date it takes effect and thereafter shall continue in effect for additional periods that shall not exceed one year so long as such continuance is specifically approved by votes of a majority of both (a) the Board of Trustees of the Trust and (b) the Disinterested Trustees of the Trust, cast in person at a meeting called for the purpose of voting on this Plan. Section 5. Any person authorized to direct the disposition of monies paid or payable pursuant to this Plan or any related agreement shall provide to the Trust's Board and the Board shall review at least quarterly a written report of the amounts so expended and the purposes for which such expenditures were made. Section 6. This Plan may be terminated at any time with respect to any Fund by vote of a majority of the Disinterested Trustees, or by vote of a majority of the Shares of the Fund. Section 7. Any agreement of the Trust, with respect to any Fund, related to this Plan shall be in writing and shall provide: A. That such agreement may be terminated with respect to a Fund at any time without payment of any penalty, by vote of a majority of the Disinterested Trustees or by a vote of a majority of the outstanding Shares of such Fund on not more than sixty days written notice to any other party to the agreement; and B. That such agreement shall terminate automatically in the event of its assignment. Section 8. This Plan may not be amended to increase materially the amount of distribution expenses provided for in Section 2 with respect to a Fund unless such amendment is approved by a vote of at least a majority (as defined in the 1940 Act) of the outstanding Shares of such Fund, and no material amendment to this Plan shall be made unless approved by votes of a majority of (a) the Board of Trustees of the Trust, and (c) the Disinterested Trustees of the Trust, cast in person at a meeting called for the purpose of voting on such amendment. DATED: March 3, 1997 DISTRIBUTION PLAN OF CLASS B SHARES THE EVERGREEN TRUST EVERGREEN SMALL CAP VALUE FUND Section 1. The Evergreen Trust (the "Trust") may act as the distributor of securities which are issued in respect of one or more of its separate investment series, pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") according to the terms of this Distribution Plan ("Plan"). Section 2. The Trust may expend daily amounts at an annual rate of 1% of the average daily net asset value of the Class B Shares ("Shares") of its Evergreen Small Company Value Fund Series ("Fund") to finance any activity which is principally intended to result in the sale of Shares including, without limitation, expenditures consisting of payments to a principal underwriter of the Fund (Principal Underwriter) or others in order: (i) to enable payments to be made by the Principal Underwriter or others for any activity primarily intended to result in the sale of Shares, including, without limitation, (a) compensation to public relations consultants or other persons assisting in, or providing services in connection with, the distribution of Shares, (b) advertising, (c) printing and mailing of prospectuses and reports for distribution to persons other than existing shareholders, (d) preparation and distribution of advertising material and sales literature, (e) commission payments, and principal and interest expenses associated with the financing of commission payments, made by the Principal Underwriter in connection with the sale of Shares and (f) conducting public relations efforts such as seminars; (ii) to enable the Principal Underwriter or others to receive, pay or to have paid to others who have sold Shares, or who provide services to holders of Shares, a maintenance or other fee in respect of services provided to holders of Shares, at such intervals as the Principal Underwriter may determine, in respect of Shares previously sold and remaining outstanding during the period in respect of which such fee is or has been paid; and/or (iii) to compensate the Principal Underwriter for its efforts in respect of sales of Shares since inception of the Plan. Appropriate adjustments shall be made to the payments made pursuant to this Section 2 to the extent necessary to ensure that no payment is made by the Fund with respect to any Class in excess of the applicable limit imposed on asset based, front end and deferred sales charges under subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. (the "NASD"). In addition, to the extent any amounts paid hereunder fall within the definition of an "asset based sales charge" under said NASD Rule such payments shall be limited to .75 of 1% of the aggregate net asset value of the Shares on an annual basis and, to the extent that any such payments are made in respect of "shareholder services" as that term is defined in the NASD Rule, such payments shall be limited to .25 of 1% of the aggregate net asset value of the Shares on an annual basis and shall only be made in respect of shareholder services rendered during the period in which such amounts are accrued. Section 3. This Plan shall not take effect with respect to any Fund until it has been approved by votes of a majority of (a) the outstanding Shares of such Series, (b) the Trustees of the Trust, and (c) those Trustees of the Trust who are not "interested persons" of the Fund (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or any agreements of the Trust related hereto or any other person related to this Plan ("Disinterested Trustees"), cast in person at a meeting called for the purpose of voting on this Plan. In addition, any agreement related to this Plan and entered into by the Fund in connection therewith shall not take effect until it has been approved by votes of a majority of (a) the Board of Trustees of the Trust, and (c) the Disinterested Trustees of the Trust. Section 4. Unless sooner terminated pursuant to Section 6, this Plan shall continue in effect for a period of one year from the date it takes effect and thereafter shall continue in effect for additional periods that shall not exceed one year so long as such continuance is specifically approved by votes of a majority of both (a) the Board of Trustees of the Trust and (b) the Disinterested Trustees of the Trust, cast in person at a meeting called for the purpose of voting on this Plan. Section 5. Any person authorized to direct the disposition of monies paid or payable pursuant to this Plan or any related agreement shall provide to the Trust's Board and the Board shall review at least quarterly a written report of the amounts so expended and the purposes for which such expenditures were made. Section 6. This Plan may be terminated at any time with respect to any Fund by vote of a majority of the Disinterested Trustees, or by vote of a majority of the Shares of the Fund. Section 7. Any agreement of the Trust, with respect to any Fund, related to this Plan shall be in writing and shall provide: A. That such agreement may be terminated with respect to a Fund at any time without payment of any penalty, by vote of a majority of the Disinterested Trustees or by a vote of a majority of the outstanding Shares of such Fund on not more than sixty days written notice to any other party to the agreement; and B. That such agreement shall terminate automatically in the event of its assignment. Section 8. This Plan may not be amended to increase materially the amount of distribution expenses provided for in Section 2 with respect to a Fund unless such amendment is approved by a vote of at least a majority (as defined in the 1940 Act) of the outstanding Shares of such Fund, and no material amendment to this Plan shall be made unless approved by votes of a majority of (a) the Board of Trustees of the Trust, and (c) the Disinterested Trustees of the Trust, cast in person at a meeting called for the purpose of voting on such amendment. DATED: March 3, 1997 DISTRIBUTION PLAN OF CLASS C SHARES THE EVERGREEN TRUST EVERGREEN SMALL CAP VALUE FUND Section 1. The Evergreen Trust (the "Trust") may act as the distributor of securities which are issued in respect of one or more of its separate investment series, pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") according to the terms of this Distribution Plan ("Plan"). Section 2. The Trust may expend daily amounts at an annual rate of 1% of the average daily net asset value of the Class C Shares ("Shares") of its Evergreen Small Company Value Fund Series ("Fund") to finance any activity which is principally intended to result in the sale of Shares including, without limitation, expenditures consisting of payments to a principal underwriter of the Fund (Principal Underwriter) or others in order: (i) to enable payments to be made by the Principal Underwriter or others for any activity primarily intended to result in the sale of Shares, including, without limitation, (a) compensation to public relations consultants or other persons assisting in, or providing services in connection with, the distribution of Shares, (b) advertising, (c) printing and mailing of prospectuses and reports for distribution to persons other than existing shareholders, (d) preparation and distribution of advertising material and sales literature, (e) commission payments, and principal and interest expenses associated with the financing of commission payments, made by the Principal Underwriter in connection with the sale of Shares and (f) conducting public relations efforts such as seminars; (ii) to enable the Principal Underwriter or others to receive, pay or to have paid to others who have sold Shares, or who provide services to holders of Shares, a maintenance or other fee in respect of services provided to holders of Shares, at such intervals as the Principal Underwriter may determine, in respect of Shares previously sold and remaining outstanding during the period in respect of which such fee is or has been paid; and/or (iii) to compensate the Principal Underwriter for its efforts in respect of sales of Shares since inception of the Plan. Appropriate adjustments shall be made to the payments made pursuant to this Section 2 to the extent necessary to ensure that no payment is made by the Fund with respect to any Class in excess of the applicable limit imposed on asset based, front end and deferred sales charges under subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. (the "NASD"). In addition, to the extent any amounts paid hereunder fall within the definition of an "asset based sales charge" under said NASD Rule such payments shall be limited to .75 of 1% of the aggregate net asset value of the Shares on an annual basis and, to the extent that any such payments are made in respect of "shareholder services" as that term is defined in the NASD Rule, such payments shall be limited to .25 of 1% of the aggregate net asset value of the Shares on an annual basis and shall only be made in respect of shareholder services rendered during the period in which such amounts are accrued. Section 3. This Plan shall not take effect with respect to any Fund until it has been approved by votes of a majority of (a) the outstanding Shares of such Series, (b) the Trustees of the Trust, and (c) those Trustees of the Trust who are not "interested persons" of the Fund (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or any agreements of the Trust related hereto or any other person related to this Plan ("Disinterested Trustees"), cast in person at a meeting called for the purpose of voting on this Plan. In addition, any agreement related to this Plan and entered into by the Fund in connection therewith shall not take effect until it has been approved by votes of a majority of (a) the Board of Trustees of the Trust, and (c) the Disinterested Trustees of the Trust. Section 4. Unless sooner terminated pursuant to Section 6, this Plan shall continue in effect for a period of one year from the date it takes effect and thereafter shall continue in effect for additional periods that shall not exceed one year so long as such continuance is specifically approved by votes of a majority of both (a) the Board of Trustees of the Trust and (b) the Disinterested Trustees of the Trust, cast in person at a meeting called for the purpose of voting on this Plan. Section 5. Any person authorized to direct the disposition of monies paid or payable pursuant to this Plan or any related agreement shall provide to the Trust's Board and the Board shall review at least quarterly a written report of the amounts so expended and the purposes for which such expenditures were made. Section 6. This Plan may be terminated at any time with respect to any Fund by vote of a majority of the Disinterested Trustees, or by vote of a majority of the Shares of the Fund. Section 7. Any agreement of the Trust, with respect to any Fund, related to this Plan shall be in writing and shall provide: A. That such agreement may be terminated with respect to a Fund at any time without payment of any penalty, by vote of a majority of the Disinterested Trustees or by a vote of a majority of the outstanding Shares of such Fund on not more than sixty days written notice to any other party to the agreement; and B. That such agreement shall terminate automatically in the event of its assignment. Section 8. This Plan may not be amended to increase materially the amount of distribution expenses provided for in Section 2 with respect to a Fund unless such amendment is approved by a vote of at least a majority (as defined in the 1940 Act) of the outstanding Shares of such Fund, and no material amendment to this Plan shall be made unless approved by votes of a majority of (a) the Board of Trustees of the Trust, and (c) the Disinterested Trustees of the Trust, cast in person at a meeting called for the purpose of voting on such amendment. DATED: March 3, 1997 EX-99.18 9 SMALL CAP VALUE FUND 18F-3 PLAN MULTIPLE CLASS PLAN FOR THE EVERGREEN/KEYSTONE FUND GROUP Each Fund in the Evergreen/Keystone group of mutual funds currently offers up to four classes of shares with the following class provisions and current offering and exchange characteristics. Additional classes of shares (such classes being shares having characteristics referred to in Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940 Act")), when created, may have characteristics that differ from those described. I. CLASSES A. Class A Shares 1. Class A Shares have a distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act (a "12b-1 Distribution Plan") and/or a shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Class A shares, as described in the Fund's current prospectus. 2. Class A Shares are offered with a front-end sales load, except that purchases of Class A Shares made under certain circumstances are not subject to the front-end load or may be subject to a contingent deferred sales charge ("CDSC"), as described in the Fund's current prospectus. 3. Shareholders may exchange Class A Shares of the Fund for Class A Shares of any other fund named in the Fund's prospectus. B. Class B Shares 1. Class B Shares have adopted a 12b-1 Distribution Plan and/or a shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Class B shares, as described in the Fund's current prospectus. 2. Class B Shares are offered at net asset value without a front-end sales load, but may be subject to a CDSC as described in the Fund's current prospectus. 3. Class B Shares automatically convert to Class A Shares without a sales load or exchange fee after designated periods. 4. Shareholders may exchange Class B Shares of the Fund for Class B Shares of any other fund described in the Fund's prospectus. C. Class C Shares 1. Class C Shares have adopted a 12b-1 Distribution Plan and/or a shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Class C shares, as described in the Fund's current prospectus. 2. Class C Shares are offered at net asset value without a front-end sales load, but may be subject to a CDSC as described in the Fund's current prospectus. 3. Shareholders may exchange Class C Shares of the Fund for Class C Shares of any other fund named in the Fund's prospectus. D. Class Y Shares 1. Class Y Shares have no distribution or shareholder services plans. 2. Class Y Shares are offered at net asset value without a front-end sales load or CDSC. 3. Shareholders may exchange Class Y Shares of the Fund for Class Y Shares of any other fund described in the Fund's prospectus. II. CLASS EXPENSES Each class bears the expenses of its 12b-1 Distribution Plan and/or shareholder services plan. There currently are no other class specific expenses. III. EXPENSE ALLOCATION METHOD All income, realized and unrealized capital gains and losses and expenses not assigned to a class will be allocated to each class based on the relative net asset value of each class. IV. VOTING RIGHTS A. Each class will have exclusive voting rights on any matter submitted to its shareholders that relates solely to its class arrangement. B. Each class will have separate voting rights on any matter submitted to shareholders where the interests of one class differ from the interests of any other class. C. In all other respects, each class has the same rights and obligations as each other class. V. EXPENSE WAIVERS OR REIMBURSEMENTS Any expense waivers or reimbursements will be in compliance with Rule 18f-3 issued under the 1940 Act. EX-99.19 10 POWERS OF ATTORNEY POWER OF ATTORNEY I, the undersigned, hereby constitute Joseph J. McBrien, James P. Wallin, John J. Pileggi and Joan V. Fiore, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Evergreen Asset Management Corp. and First Union National Bank of North Carolina serve as investment adviser as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. In Witness Whereof, I have executed this Power of Attorney as of this 8th day of February, 1996. Signature /s/John J. Pileggi - ------------------ John J. Pileggi Title, President and Treasurer POWER OF ATTORNEY I, the undersigned, hereby constitute Joseph J. McBrien, James P. Wallin, John J. Pileggi and Joan V. Fiore, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Evergreen Asset Management Corp. and First Union National Bank of North Carolina serve as investment adviser as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. In Witness Whereof, I have executed this Power of Attorney as of this 8th day of February, 1996. Signature /s/Michael S. Scofield - ----------------------- Michael S. Scofield Title, Trustee POWER OF ATTORNEY I, the undersigned, hereby constitute Joseph J. McBrien, James P. Wallin, John J. Pileggi and Joan V. Fiore, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Evergreen Asset Management Corp. and First Union National Bank of North Carolina serve as investment adviser as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. In Witness Whereof, I have executed this Power of Attorney as of this 8th day of February, 1996. Signature /s/Laurence B. Ashkin - --------------------- Laurence B. Ashkin Title, Trustee POWER OF ATTORNEY I, the undersigned, hereby constitute Joseph J. McBrien, James P. Wallin, John J. Pileggi and Joan V. Fiore, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Evergreen Asset Management Corp. and First Union National Bank of North Carolina serve as investment adviser as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. In Witness Whereof, I have executed this Power of Attorney as of this 8th day of February, 1996. Signature /s/ Foster Bam - ------------------ Foster Bam Title, Trustee POWER OF ATTORNEY I, the undersigned, hereby constitute Joseph J. McBrien, James P. Wallin, John J. Pileggi and Joan V. Fiore, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Evergreen Asset Management Corp. and First Union National Bank of North Carolina serve as investment adviser as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. In Witness Whereof, I have executed this Power of Attorney as of this 8th day of February, 1996. Signature /s/ James Howell - ------------------ James Howell Title, Trustee POWER OF ATTORNEY I, the undersigned, hereby constitute Joseph J. McBrien, James P. Wallin, John J. Pileggi and Joan V. Fiore, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Evergreen Asset Management Corp. and First Union National Bank of North Carolina serve as investment adviser as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. In Witness Whereof, I have executed this Power of Attorney as of this 8th day of February, 1996. Signature /s/ Gerald McDonnell - -------------------- Gerald McDonnell Title, Trustee POWER OF ATTORNEY I, the undersigned, hereby constitute Joseph J. McBrien, James P. Wallin, John J. Pileggi and Joan V. Fiore, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Evergreen Asset Management Corp. and First Union National Bank of North Carolina serve as investment adviser as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. In Witness Whereof, I have executed this Power of Attorney as of this 8th day of February, 1996. Signature /s/ Thomas L. McVerry - --------------------- Thomas L. McVerry Title, Trustee POWER OF ATTORNEY I, the undersigned, hereby constitute Joseph J. McBrien, James P. Wallin, John J. Pileggi and Joan V. Fiore, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Evergreen Asset Management Corp. and First Union National Bank of North Carolina serve as investment adviser as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. In Witness Whereof, I have executed this Power of Attorney as of this 8th day of February, 1996. Signature /s/ William W. Pettit - --------------------- William W. Pettit Title, Trustee POWER OF ATTORNEY I, the undersigned, hereby constitute Joseph J. McBrien, James P. Wallin, John J. Pileggi and Joan V. Fiore, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Evergreen Asset Management Corp. and First Union National Bank of North Carolina serve as investment adviser as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. In Witness Whereof, I have executed this Power of Attorney as of this 8th day of February, 1996. Signature /s/ Russell A. Salton, III - -------------------------- Russell A. Salton, III Title, Trustee -----END PRIVACY-ENHANCED MESSAGE-----