SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
or Rule 14a-12
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c)
Evergreen Equity Trust
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
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Page 1 of [ ]
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule, or Registration no.:
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(3) Filing Party:
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(4) Date Filed:
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Page 2 of [ ]
February 2, 1998
Dear Shareholder,
We are pleased to invite you to attend a Special Meeting (the
"Meeting") of shareholders of Evergreen U.S. Real Estate Equity Fund and
Evergreen Global Real Estate Equity Fund (the "Funds"), each a series of
Evergreen Equity Trust (the "Trust"), to be held on February 17, 1998. The
enclosed proxy includes proposals relating to the approval of a new investment
advisory agreement for each of the Funds, changes to certain of the investment
policies and restrictions of the Funds, and the election of members of the
Trust's Board of Trustees. As you may know, Alpine Management & Research,
LLC ("Alpine") has agreed to acquire certain assets of the Funds' investment
adviser, Evergreen Asset Management Corp. ("EAM"), that relate to the management
and operations of the Funds. In connection with this transaction, it is proposed
that the Funds engage Alpine to serve as their investment adviser pursuant to a
new investment advisory agreement between the Trust, on behalf of the Funds, and
Alpine (the "New Agreement").
After considering representations regarding future plans for
managing the Funds made by Mr. Samuel A. Lieber, who has served as the principal
portfolio manager of each Fund since its inception and who is a controlling
person of Alpine, the Trust's Board of Trustees recommends that shareholders
vote to authorize Alpine to serve as investment adviser to the Funds. The
Trustees' determination was based primarily on the fact that Mr. Lieber has
served as the principal portfolio manager of each Fund since its inception, is
the controlling person of Alpine and will continue to serve as the portfolio
manager of the Funds if the New Agreement is approved by shareholders. The
Investment Company Act of 1940 requires that the New Agreement be approved by
shareholders of the Funds prior to its effectiveness. Except for the fact that
Alpine, rather than EAM, will serve as the investment adviser of the Funds, the
New Agreement is the same in all material respects as the advisory agreement
currently in effect between each Fund and EAM. There will be no change in the
investment advisory fees payable by the Funds under the New Agreement.
It is important to keep in mind that Alpine is acquiring
certain assets of EAM and is not acquiring the assets of the Funds. Moreover,
the New Agreement will not result in any change in the individual primarily
responsible for making investment decisions for the Funds.
Upon consummation of the acquisition, which is conditioned
upon shareholder approval of the New Agreement, the Trust will change its name
to Alpine Equity Trust and the Funds will change their names to Alpine U.S. Real
Estate Equity Fund and Alpine International Real Estate Equity Fund.
As noted above, the Proxy Statement also includes proposals
relating to changes in the investment policies and restrictions of each Fund and
the election of Trustees.
THE BOARD OF TRUSTEES HAS APPROVED THE PROPOSALS AND
RECOMMENDS THAT YOU VOTE FOR ALL OF THE PROPOSALS.
Whether or not you plan to attend the Meeting, you may vote by
proxy by signing and returning the enclosed proxy card in the prepaid envelope.
If you attend the Meeting and wish to vote in person, you may revoke your proxy
at that time. You will receive more than one proxy card if you own shares of
both Funds or if you hold shares in more than one account. Please sign and
return each card you receive.
In order to help you understand the proposals, we have
attached the following questions and answers. These questions and answers are
designed to help answer questions you may have and to assist you in casting your
votes. They are being provided as a supplement to, not a substitute for, the
Proxy Statement, which we urge you to review carefully.
Please feel free to call the proxy solicitor, D.F. King & Co.,
at 1-800-290-6429, if you have any questions regarding the voting of your
shares, and please feel free to call us at 1-800-807-2940, if you have any
questions regarding the proposals.
Sincerely,
/s/ George O. Martinez
----------------------
George O. Martinez
Secretary
Evergreen Equity Trust
QUESTIONS & ANSWERS
Q. WHO IS BEING PROPOSED AS THE NEW INVESTMENT ADVISER OF THE FUNDS?
A. Alpine Management & Research, LLC ("Alpine") has agreed to acquire
certain assets of Evergreen Asset Management Corp. ("EAM"), the Funds'
current investment adviser, that relate to the management and
operations of the Funds (the "Acquisition"). The Funds are not being
acquired.
In connection with the Acquisition, it is proposed that Alpine replace
EAM as the investment adviser to the Funds. Alpine is a newly formed
investment adviser which is controlled by Samuel A. Lieber. Mr. Lieber
has served as the portfolio manager of each Fund since its inception.
Unlike many investment advisers that provide advice with respect to a
broad array of investments, Alpine intends to specialize in investments
in real estate related securities.
If shareholders of the Funds approve the proposed new investment
advisory agreement with Alpine (the "New Agreement"), Mr. Lieber will
continue to serve as the person primarily responsible for management of
the Funds. In addition, upon consummation of the Acquisition, the Trust
will change its name to Alpine Equity Trust and the Funds will change
their names to Alpine U.S. Real Estate Equity Fund and Alpine
International Real Estate Equity Fund.
Q. WHY AM I BEING ASKED TO VOTE ON THE NEW INVESTMENT ADVISORY AGREEMENT
AND THE OTHER PROPOSALS?
A. It is proposed that the Funds engage Alpine to serve as their
investment adviser pursuant to the New Agreement. Although the New
Agreement has been approved by the Trust's Board of Trustees, the
Investment Company Act of 1940, as amended (the "1940 Act"), requires
that the New Agreement also be approved by shareholders of the Funds
prior to its effectiveness.
Mutual funds are also required to obtain shareholders' approval of
certain other types of changes. As a shareholder, you have a right to
vote on major policy decisions, such as the proposals discussed in the
Proxy Statement to amend certain of the investment policies and
restrictions of the Funds.
Q. HOW WILL THE NEW AGREEMENTS AFFECT ME AS A SHAREHOLDER?
A. The approval of the New Agreement by shareholders will result in
Alpine replacing EAM as the investment adviser of the Funds. However,
Mr. Lieber will continue to serve as the portfolio manager of the
Funds. Moreover, under the New Agreement, there will be no change in
the advisory fees payable by the Funds or in the services required to
be furnished to the Funds by their investment adviser. However, EAM
currently has
voluntarily agreed to limit expenses of the Funds. This arrangement
will cease to be effective after the Acquisition, subject to approval
by the Trust's Board of Trustees.
Except in one respect noted below, the Acquisition is generally not
expected to result in any significant changes in the shareholder
service offered by the Funds. Shareholders will continue to be able to
avail themselves of a systematic investment plan, telephone investment
plan, systematic cash withdrawal plan, automatic reinvestment plan and
tax sheltered plan. In addition, in connection with the Acquisition,
Alpine has agreed to maintain the Funds' existing classes of shares for
at least one year from the date the Acquisition closes, subject to the
fiduciary obligations of the Trust's Board. Thus, shareholders of the
Funds will be able to invest additional amounts in the same classes of
shares of the Funds that they now hold for at least that period of
time.
The one change that will occur is that, on April 3, 1998 (60 days
after the date of the mailing of the Proxy Statement), shareholders
will no longer be able to exchange shares of the Funds for shares of
funds within the Evergreen family of funds because the investment
adviser of the Funds will not be affiliated with EAM. Shareholders will
have the ability, however, to exchange shares between Alpine U.S.
Real Estate Equity Fund and Alpine International Real Estate Equity
Fund, and it is expected that arrangements will be implemented to
permit Class A and Class Y shares of the Funds to be exchanged for
shares of a money market fund.
Q. WHY ARE CHANGES IN THE INVESTMENT POLICIES AND RESTRICTIONS OF THE
FUNDS BEING PROPOSED?
A. The proposed changes in investment policies and restrictions are
intended by Alpine to provide greater flexibility to the Funds. If the
changes are approved, the Funds will be able to use certain investment
techniques in pursuing their investment goals which are not permissible
under present restrictions and will also be able to make greater use of
certain investment practices which are now permissible only to a more
limited extent. Certain of the current investment policies and
restrictions of the Funds were adopted to comply with laws which no
longer apply to the Funds and it is proposed that these restrictions be
eliminated. In addition, the proposed changes in investment policies
and restrictions would give the Funds investment authority similar to
that of many recently formed mutual funds that invest primarily in
securities of real estate related companies.
The changes in investment policies and restrictions on which
shareholders will be voting are each described in the Proxy Statement.
Alpine believes that the proposed changes should enable the Funds to
respond more effectively to market and industry developments in
managing the Funds' investments by permitting use of a broader array of
investment techniques. The Proxy Statement also describes certain
changes in the Funds' investment policies and restrictions which were
approved by the Board of Trustees on December 17, 1997, on the
recommendation of Alpine, but which do not require shareholder
approval. These changes will become effective on March 4, 1998
(30
days after the date of the mailing of the Proxy Statement), if Alpine
becomes the Funds' investment adviser.
Q. HOW DO THE MEMBERS OF THE BOARD OF TRUSTEES OF MY FUND RECOMMEND THAT I
VOTE?
A. After consideration of Alpine's plans and recommendation, the members
of the Trust's Board of Trustees have voted to approve all of the
proposals and recommend that you vote in favor of or "FOR" all of the
proposals on the enclosed proxy card.
Q. WHOM DO I CALL IF I HAVE QUESTIONS?
A. Please feel free to call the proxy solicitor, D.F. King & Co.
at 1-800-290-6429 if you have any questions regarding the
voting of shares of the Funds, and to call us at 1-800-807-2940,
if you have any questions regarding the proposals.
PLEASE VOTE
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
EVERGREEN EQUITY TRUST
-------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
-------------------------------
Notice is hereby given that a Special Meeting of shareholders of
Evergreen U.S. Real Estate Equity Fund and Evergreen Global Real Estate Equity
Fund (the "Funds"), each a series of Evergreen Equity Trust (the "Trust"), will
be held at 2500 Westchester Avenue, Purchase, New York 10577 on February 17,
1998, at 10:00 a.m., Eastern time for the following purposes:
1. TO APPROVE OR DISAPPROVE A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN
THE TRUST, ON BEHALF OF EACH OF THE FUNDS, AND ALPINE MANAGEMENT & RESEARCH,
LLC.
2. TO ELECT MEMBERS OF THE TRUST'S BOARD OF TRUSTEES TO HOLD OFFICE
UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
3. TO APPROVE OR DISAPPROVE THE FOLLOWING CHANGES IN INVESTMENT
POLICIES AND RESTRICTIONS OF THE FUNDS:
A. Evergreen U.S. Real Estate Equity Fund
(1) An amendment to the Fund's policy of concentrating
its investments in the securities of companies which are principally engaged in
the real estate industry.
(2) An amendment to permit the Fund to borrow money
from banks or by entering into reverse repurchase agreements, in an amount up to
10% of the value of its total assets to increase its holdings of portfolio
securities, and for temporary extraordinary or emergency purposes, in an amount
not exceeding 33 1/3% of the value of its total assets, including any borrowings
for investment (in each case, calculated at the time of borrowing).
(3) Repeal of an investment restriction that limits
the ability of the Fund to pledge, mortgage, hypothecate or otherwise encumber
its assets to secure permitted borrowings.
(4) An amendment to permit the Fund to effect short
sales of securities having a value of up to 10% of the Fund's net assets,
provided that short sales "against the box" are not subject to this limitation.
(5) An amendment to permit the making of loans through
the purchase of permitted investments, including repurchase agreements and debt
securities which are not publicly distributed.
(6) An amendment to broaden the types of real estate
related securities in which the Fund may invest and to permit the Fund to
purchase illiquid securities of real estate related companies.
B. Evergreen Global Real Estate Equity Fund
(1) An amendment to the Fund's policy of concentrating
its investments in the securities of companies which are principally engaged in
the real estate industry.
(2) An amendment to one of the Fund's investment
policies to provide that the Fund will, under normal market conditions, invest
at least 65% of its total assets in real estate related equity securities of
non-U.S. issuers.
(3) An amendment to permit the Fund to borrow money
from banks and by entering into reverse repurchase agreements, in an amount up
to 10% of the value of its total assets to increase its holdings of portfolio
securities, and for temporary extraordinary or emergency purposes, in an amount
not exceeding 33 1/3% of the value of its total assets, including any borrowings
for investment (in each case, calculated at the time of borrowing).
(4) Repeal of an investment restriction that limits
the ability of the Fund to pledge, mortgage, hypothecate or otherwise encumber
its assets to secure permitted borrowings.
(5) An amendment to permit the Fund to effect short
sales of securities having a value of up to 10% of the Fund's net assets,
provided that short sales "against the box" are not subject to this limitation.
(6) An amendment to permit the making of loans through
the purchase of permitted investments, including repurchase agreements and debt
securities which are not publicly distributed.
(7) Repeal of the Fund's investment restrictions
relating to options to broaden the types of options which the Fund may use both
in pursuing its investment objectives and for hedging purposes.
(8) An amendment to the Fund's policy on
diversification of investments to provide that the prohibitions on investing
more than 5% of the Fund's total assets in the securities of any one issuer or
the purchase of more than 10% of any class of securities of any one issuer apply
only with respect to 75% of the Fund's total assets.
(9) Repeal of the Fund's investment restriction
prohibiting investments in securities of unseasoned issuers.
(10) Repeal of the Fund's investment restriction
limiting the purchase of warrants.
(11) Repeal of the Fund's investment restriction under
which it may not purchase securities of an issuer if (i) one or more officers or
Trustees of the Trust or the Fund's investment adviser or investment sub-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.
(12) An amendment to permit the Fund to purchase and
sell financial futures contracts and related options.
4. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS THEREOF.
The close of business on January 12, 1998 has been fixed as the record
date for the determination of shareholders of each Fund entitled to notice of
and to vote at the Meeting or any adjournments thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN WITHOUT DELAY AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Trustees
George O. Martinez
Secretary
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 17, 1998
The accompanying Proxy is solicited by the Board of Trustees (the
"Trustees") of Evergreen Equity Trust (the "Trust") to be used at a Special
Meeting of shareholders of Evergreen U.S. Real Estate Equity Fund and Evergreen
Global Real Estate Equity Fund (the "Funds"), each a series of the Trust, to be
held on February 17, 1998, at 10:00 a.m., Eastern time at 2500 Westchester
Avenue, Purchase, New York 10577 and at any adjournment or adjournments thereof
(the "Meeting"). The purpose of the Meeting is to consider and act upon the
proposals set forth in the accompanying Notice of Special Meeting of
Shareholders (the "Proposals"). Shareholders of record at the close of business
on January 12, 1998 (the "Record Date") are entitled to notice of and to vote
at the Meeting. Each share is entitled to one vote on all matters described
herein as to which such shares are entitled to vote and each fractional share is
entitled to a proportionate share of one vote on such matters. The most recent
annual report to shareholders of the Funds and most recent semi-annual report to
shareholders are available upon request, without charge, by writing to the Trust
at 200 Berkeley Street, Boston, Massachusetts 02116, or by calling the Trust at
1-800-343-2898. The principal executive offices of the Trust are located at 200
Berkeley Street, Boston, Massachusetts 02116.
The Funds have retained D.F. King & Co. (the "Proxy Solicitor")
to assist them in the solicitation of proxies. The Proxy Solicitor may
supplement its solicitation of proxies by mail, telephone or otherwise. The
costs of soliciting proxies, including the cost of preparing and mailing the
Notice of Special Meeting of Shareholders and this Proxy Statement, will be paid
by Alpine Management & Research, LLC ("Alpine"). (As discussed below,
shareholders of each Fund are being asked to approve a new investment advisory
agreement with Alpine.) The solicitation of proxies by the Proxy Solicitor may
be supplemented by solicitation by mail, telephone or otherwise through
representatives of Alpine and the Funds. This Proxy Statement and form of Proxy
is first being mailed to shareholders on or about February 2, 1998.
Each Fund's approval of Proposal 1 and each of the matters included
within Proposal 3 require the affirmative vote of a "majority of the outstanding
voting securities" of that Fund, which for this purpose means the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of such Fund
or (2) 67% or more of the shares of such Fund present at the Meeting if more
than 50% of the outstanding shares of such Fund are represented at the Meeting
in person or by proxy (the "Holders of a Majority of Shares"). In voting on
these Proposals, shareholders of each Fund will vote separately as a single
class, without regard to the particular class of the Fund's shares that are
held. Proposal 2 requires the affirmative vote of a plurality of all outstanding
shares of the Trust represented in person or by proxy and entitled to vote,
provided that a quorum is present at the Meeting.
All properly executed proxies received prior to the Meeting and not
revoked will be voted at the Meeting in accordance with the instructions marked
thereon. Proxies received prior to the Meeting on which no vote is indicated
will be voted "FOR" each Proposal as to which it is entitled to be voted.
Abstentions do not constitute votes "FOR" a Proposal, have the same effect as
votes "AGAINST" a Proposal (except as to the election of Trustees), and are
treated as shares present at the Meeting for the purpose of determining whether
a quorum exists at the Meeting. Broker non-votes (i.e., proxies received from
brokers or nominees indicating that such persons have not received instructions
from the beneficial owner or other person entitled to vote each share on a
particular matter with respect to which the brokers or nominees do not have
discretionary power) have the effect of a vote "AGAINST" Proposals 1 and 3 if
such votes are determined on the basis of obtaining the affirmative vote of more
than 50% of the outstanding shares of the Fund. Broker non-votes will not
constitute votes "FOR" or "AGAINST" the Proposals and will be disregarded in
determining the voting securities "present" if such vote is determined on the
basis of the affirmative vote of 67% of the voting securities of a Fund present
at the Meeting and are disregarded for purposes of determining a quorum and for
every other purpose relating to the Proposals.
Any shareholder may revoke his or her Proxy at any time before it is
voted by (i) giving written notice of revocation to the Secretary of the Fund,
(ii) properly executing and delivering a later-dated Proxy, or (iii) appearing
in person at the Meeting to vote his or her Shares.
In the event that a quorum is not present at the Meeting, or in the
event that a quorum is present at the Meeting but sufficient votes to approve
any of the Proposals are not received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. A shareholder vote may be taken on one or more Proposals prior to such
adjournment if sufficient votes have been received. Any adjournment will require
the affirmative vote of a majority of those shares present at the Meeting in
person or by proxy. Under the By-Laws of the Trust, a quorum is constituted by
the presence in person or by proxy of the holders of a majority of the
outstanding shares entitled to vote at the Meeting. In the event any adjournment
of the Meeting is proposed, the persons named as proxies will vote those proxies
which they are entitled to vote FOR any of the Proposals in favor of adjournment
and will vote those proxies required to be voted AGAINST all of the Proposals
against any such adjournment.
On the Record Date the following number of shares were outstanding:
EVERGREEN U.S. REAL ESTATE EQUITY FUND
Class Y Class A Class B Class C
1,253,696.116 318,120.782 433,553.908 170,211.421
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
Class Y Class A Class B Class C
2,753,991.413 27,686.129 17,194.987 9,637.231
The following entities owned of record or are known by the Trust to own
beneficially 5% or more of the outstanding shares of the Funds as of December
31, 1997.
2
EVERGREEN U.S. REAL ESTATE FUND
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Owner Percent of Class
--------------- ------------------- -------------------- -----------------
Class Y Stephen A. Lieber 265,773.195 22.333%
1210 Greacon Point Rd.
Mamaroneck, NY 10543-4693
Constance E. Lieber 91,209.715 7.665%
1210 Greacon Point Rd.
Mamaroneck, NY 10543-4693
Charles Schwab & Co. Inc. 77,623.237 6.523%
Special Custody Account for the Exclusive
Benefit of Customers
Reinvest Account Mut Fds Dept
Attn: Mutual Funds Dept
101 Montgomery St.
San Francisco, CA 94104-4122
The Essel Foundation 67,943.547 5.709%
1210 Greacen Point Rd.
Mamaroneck, NY 10543-4693
Samuel A. Lieber 62,560.115 5.257%
2 Beach Ave.
Larchmont, NY 10538-4005
Class A Charles Schwab & Co. Inc. 30,610.026 9.958%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds Dept
101 Montgomery St.
San Francisco, CA 94104-4122
NFSC FEBO #367-355550 20,620.915 6.708%
Charles L. Cabe
Separate Property
C/O CLC Interests
5956 Sherry Ln Ste 1000
Dallas, TX 75225-8021
NFSC FEBO #191-114421 15,736.064 5.119%
Fmt Co Cust IRA
FBO Robert P. White
RR 3 Box 587-1
Jasper, TX 75951
Class B MLPF&S for the sole benefit 59,486.000 13.079%
Of its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E 3rd Floor
Jacksonville, FL 32246-6484
Prudential Securities Inc. FBO 23,614.576 5.192%
Harold L. Endlich Ttee
Harold L. Endlich 1993
Revocable Intervivos Trust UA
DTD 11/05/93
Northridge, CA 91325-2613
Class C MLPF&S for the sole benefit 56,716.000 32.781%
Of its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E 3rd Floor
Jacksonville, FL 32246-6484
NFSC FEBO #X54-079561 11,081.538 6.405%
Thompson Family Trust
Howard J. Thompson Jr Ttee
U/A 0-6/15/93
3755 Milan St.
San Diego, CA 92107-3711
EVERGREEN GLOBAL REAL ESTATE FUND
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Owner Percent of Class
-------------- -------------------- --------------------- -----------------
Class Y Stephen A. Lieber 940,448.479 34.955%
1210 Greacon Point Rd.
Mamaroneck, NY 10543-4693
Charles Schwab & Co. Inc. 320,435.646 11.910%
Special Custody Account for the Exclusive
Benefit of Customers
Reinvest Account Mut Fds Dept
Attn: Mutual Funds Dept
101 Montgomery St.
San Francisco, CA 94104-4122
Samuel A. Lieber 148,396.468 5.516%
2 Beach Ave.
Larchmont, NY 10538-4005
Class A Charles Schwab & Co. Inc. 16,918.814 61.109%
Special Custody Account for the Exclusive
Benefit of Customers
Attn: Mutual Funds Dept.
101 Montgomery St.
San Francisco, CA 94104-4122
Fifth Third Bank Ttee Agt. 2,894.356 10.454%
FBO Ben C. Kaufmann
A/C 38-0-6202337
U/A DTD 5/11/95
P.O. Box 630074
Cincinnati, OH 45263
First Union NatAEI Bank u C/F IN 1,690.238 6.105%
Deborah R. Shore IRA
5706 Cricket Place
McLean, VA 22101
First Union NatAEI Bank u C/F IN 1,663.182 6.007%
Harris Shore IRA
5706 Cricket Place
McLean, VA 22101
Class B MLPF&S for the sole benefit 2,213.000 12.816%
Of its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E. 3rd Floor
Jacksonville, FL 32246-6484
Donaldson Lufkin Jenrette 1,612.274 9.337%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
State Street Bank & Trust Co. 1,605.644 9.299%
Cust for the IRA of
Patricia L. Corey
129 Briarwood Dr.
New Bedford, MA 02745-4206
NFSC FEBO #OKS-628913 1,212.611 7.022%
NFSC/FMTC IRA Rollover
FBO Theodore C. Fleming
1007 Sierra Vista Ct.
Burleson, TX 76028-4061
Class C PaineWebber for the benefit of 2,793.296 28.984%
PaineWebber CDN FBO
William R. Mack Jr.
P.O. box 3321
Weehawken, NJ 07087-8154
Ameritrade Clearing Inc. 2,421.308 25.125%
FBO 4520000367
PO Box 2226
Omaha, NE 68103-2226
Painewebber for the benefit of 1,552.795 16.112%
Peter J. Haigh
Ann Haigh Jtwros
310 S. Highland Ave.
Pittsburgh, PA 15206
MLPF&S for the sole benefit of its Customers 1,259.000 13.064%
Attn: Fund Administration
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
3
PROPOSAL 1 -- APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN EACH OF
THE FUNDS AND ALPINE.
INTRODUCTION
Shareholders of each Fund are being asked to approve a new investment
advisory agreement with Alpine, pursuant to which Alpine will be retained to
provide investment advisory and management services to that Fund (the "New
Agreement"). If approved by shareholders, the New Agreement will become
effective upon the acquisition by Alpine (the "Acquisition") of certain assets
of Evergreen Asset Management Corp. ("EAM"), the Funds' present investment
adviser, as contemplated by an Asset Purchase Agreement dated as of December 17,
1997 by and among Alpine, Mr. Samuel Lieber and EAM (the "Acquisition
Agreement"). Pursuant to the Acquisition Agreement, Alpine will acquire from EAM
certain of its assets that relate to the management and operations of the Funds.
In connection with the Acquisition, it is proposed that the Funds engage Alpine
to serve as their investment adviser pursuant to the New Agreement between the
Trust, on behalf of the Funds, and Alpine.
After considering representations regarding future plans for managing
the Funds made by Mr. Lieber, the Board of Trustees recommends that shareholders
vote to authorize Alpine to serve as the investment adviser of the Funds. The
Trustees' determination was based primarily on the fact that Mr. Lieber has
served as the principal manager of each Fund since its inception, is the
controlling person of Alpine and will continue to serve as portfolio manager of
the Funds if the Acquisition is consummated and the New Agreement is approved
by shareholders.
Upon consummation of the Acquisition, the Trust will change its name to
Alpine Equity Trust and the Funds will change their names to Alpine U.S. Real
Estate Equity Fund and Alpine International Real Estate Equity Fund.
If the Acquisition is not consummated, EAM will continue to serve as
the investment adviser of the Funds pursuant to the terms of the investment
advisory agreement of the Funds now in effect.
1940 ACT REQUIREMENTS
Section 15(a) of the Investment Company Act of 1940 (the "1940 Act")
prohibits any person from serving as an investment adviser to a registered
investment company except pursuant to a written contract that has been approved
by shareholders. Therefore, in order for Alpine to provide investment advisory
services to each Fund, shareholders of that Fund must approve the New Agreement
with Alpine.
EAM has informed the Trust that it proposes to comply with Section
15(f) of the 1940 Act in connection with the Acquisition. In this regard, EAM,
Alpine and Mr. Lieber have agreed in the Acquisition Agreement to use their
reasonable best efforts to assure compliance with Section 15(f). In substance,
Section 15(f) provides that when a sale of any interest in an investment adviser
occurs, the investment adviser or any of its affiliated persons may receive any
4
amount or benefit in connection therewith as long as two conditions are
satisfied. First, an "unfair burden" must not be imposed on the investment
company as a result of the transaction relating to the sale of such interests,
or any express or implied terms, conditions or understandings applicable
thereto. The term "unfair burden" (as defined in the 1940 Act) includes any
arrangement during the two-year period after the transaction whereby the
investment adviser (or predecessor or successor adviser), or any "interested
person" (as defined in the 1940 Act) of any such adviser, receives or is
entitled to receive any compensation, directly or indirectly, from the
investment company or its securities holders (other than fees for bona fide
investment advisory or other services) or, with certain exceptions, from any
person in connection with the purchase or sale of securities or other property
to, from or on behalf of the investment company. Alpine and EAM are not aware of
any circumstances arising from the Acquisition that might result in an unfair
burden being imposed on either Fund. In particular, Alpine has agreed not to
request an increase in advisory fees payable by the Funds if such request would
result in an increase in such fees during the two year period following the
effective date of the New Agreement. The second condition of Section 15(f) is
that during the three-year period following the consummation of a transaction,
at least 75% of the investment company's board must not be "interested persons"
of the company's investment adviser or predecessor adviser.
In anticipation of the Acquisition and to provide for continuity of
investment advisory services provided to the Funds, at a meeting held in person
on December 17, 1997, the Board of Trustees, including a majority of the
Trustees who are not "interested persons" of the Fund, EAM or Alpine (as defined
by the 1940 Act, the "Independent Trustees"), approved the New Agreement between
the Trust, on behalf of each Fund, and Alpine. The provisions of the New
Agreement are the same in all material respects as the provisions of the
advisory agreement of the Funds currently in effect, except for its date of
effectiveness and the fact that Alpine, rather than EAM, will serve as the
investment adviser of the Funds. A description of the New Agreement is set
forth below. NO INVESTMENT ADVISORY FEE INCREASE IS PROPOSED.
ALPINE
Alpine, located at 2500 Westchester Avenue, Purchase, New York 10577,
is a newly formed Delaware limited liability company. It was formed for the
purpose of providing investment advisory and management services to investment
companies (including the Funds) and other advisory clients.
The members of Alpine are Messrs. Samuel A. Lieber, who is the
controlling person of Alpine, and Marc R. Halle. Alpine does not have any
officers. Although Alpine has no operating history, its members presently are
the persons at EAM primarily responsible for providing investment advisory
services to the Funds. If Alpine becomes the investment adviser to the Funds,
Messrs. Lieber and Halle intend to terminate their employment with EAM,
effective upon the consummation of the Acquisition.
EAM
EAM is a wholly-owned subsidiary of First Union National Bank, North
Carolina ("FUNB"). The address of EAM is 2500 Westchester Avenue, Purchase, New
York 10577.
5
FUNB is a subsidiary of First Union Corporation. The addresses of FUNB and First
Union Corporation are 301 South College Street, Charlotte, North Carolina 28288.
Executive officers and directors of EAM are:
Richard K. Wagoner, Director, 301 South College Street, Charlotte,
North Carolina.
Barbara J. Colvin, Director, 301 South College Street, Charlotte,
North Carolina.
Thomas Hal Clarke, Secretary and Senior Vice President, 301 South College
Street, Charlotte, North Carolina.
Stephen A. Lieber, Chairman and Co-CEO, 2500 Westchester Avenue, Purchase,
New York.
Nola M. Falcone, President and Co-CEO, 2500 Westchester Avenue, Purchase,
New York.
Theodore J. Israel, Executive Vice President, 2500 Westchester Avenue, Purchase,
New York.
Gordon Forrester, Treasurer, 200 Berkeley Street, Boston, Massachuesets.
For each Fund's most recently completed fiscal year: (i) the
aggregate brokerage commissions paid to Lieber and Company, an indirect
wholly-owned subsidiary of FUNB which is currently a subadviser to the Funds, by
Evergreen U.S. Real Estate Equity Fund and Evergreen Global Real Estate Equity
Fund were $152,636 and $41,643, respectively, and (ii) the percentages of
Evergreen U.S. Real Estate Equity Fund's and Evergreen Global Real Estate Equity
Fund's aggregate brokerage commissions paid to Lieber and Company were 92.67%
and 29.76%, respectively.
THE ACQUISITION
On December 17, 1997, Alpine, Mr. Lieber and EAM entered into the
Acquisition Agreement, pursuant to which Alpine will acquire certain assets of
EAM that relate to the management and operations of the Funds. The aggregate
purchase price that will be paid by Alpine to EAM is $500,000 (the "Purchase
Price"), of which $250,000 is payable at the closing of the Acquisition.
The Acquisition is subject to various conditions being satisfied prior
to closing, including, among other things, the requisite approvals of the New
Agreement by shareholders of the Funds and the election of a Board of Trustees,
the composition of which is reasonably satisfactory to Alpine. If the
Acquisition is not consummated, the New Agreement will not be entered into and
the Funds' current investment advisory agreement would remain in place.
The Acquisition is not expected to result in any change in the
individual primarily responsible for making investment decisions for the Funds.
Mr. Samuel A. Lieber, who has served as the principal portfolio manager of each
Fund since its inception, is the controlling person of Alpine and will continue
to serve as portfolio manager of the Funds if the New Agreement is approved by
shareholders.
CURRENT ADVISORY AGREEMENT
The current advisory agreement between the Funds and EAM (the "Current
Agreement") was first approved by the Board of Trustees on February 7, 1994,
and by the shareholders of each Fund on June 23, 1994. The Current Agreement
was voted upon at that time in connection with the acquisition of EAM by FUNB.
The Current Agreement has an initial term of two years and has been
continued in effect from year to year thereafter by action of the Board of
Trustees. The continuation of the Current Agreement for an additional one year
period was last approved by the Trustees at a meeting held on March 11, 1997.
6
As investment adviser to Evergreen U.S. Real Estate Equity Fund, EAM is
entitled to receive from the Fund an annual fee equal to 1% of average daily net
assets of the Fund on the first $750 million of assets, 0.9% of average daily
net assets on an annual basis on the next $250 million in assets, and 0.8% of
average daily net assets on assets in excess of $1 billion. As investment
adviser to Evergreen Global Real Estate Fund, EAM is entitled to receive a fee
equal to 1% of the average daily net assets of the Fund on an annual basis.
THE NEW AGREEMENT
Pursuant to the proposed New Agreement, Alpine will serve as investment
adviser of the Funds. The provisions of the New Agreement are in all material
respects the same as the provisions of the Current Agreement, except for the
effective date of the agreement and the fact that Alpine will serve as the
investment adviser of the Funds.
Under the New Agreement, Alpine will manage and administer the
operations of the Funds, and manage the investment and reinvestment of each
Fund's assets in conformity with such Fund's investment objectives and
restrictions, subject to the supervision of the Trustees, as well as provide
office space, all necessary office facilities, equipment and personnel in
connection with its services under the New Agreement, and will bear all other
expenses it incurs in connection with the services it renders. Except as stated
below, all charges and expenses, other than those specifically referred to above
as being borne by its investment adviser, are currently, and will continue to
be, paid by each Fund, including, but not limited to, custodian charges and
expenses, bookkeeping and auditors' charges and expenses, transfer agent charges
and expenses, fees of Independent Trustees, brokerage commissions, brokerage
fees and expenses, issue and transfer taxes, costs and expenses under
distribution plans, interest, taxes and corporate fees payable to governmental
agencies, the cost of share certificates, fees and expenses of the registration
and qualification of the Fund and its shares with the Securities and Exchange
Commission ("SEC") or under state or other securities laws, expenses of
preparing, printing and mailing of prospectuses, statements of additional
information, notices, reports and proxy materials to shareholders of the Fund,
expenses of shareholders' and Trustees' meetings, charges and expenses of legal
counsel for the Fund and for the Trustees, charges and expenses of filing annual
and other reports with the SEC and other authorities, and all extraordinary
charges and expenses of the Fund.
The form of the New Agreement is attached as Exhibit 1.
EAM has agreed to reimburse Evergreen U.S. Real Estate Equity Fund for
certain expenses or to waive its fee to the extent that the Fund's operating
expenses (including the investment advisory fee and amortization of organization
expenses, but excluding interest, taxes, brokerage commissions, 12b-1
distribution and shareholder services fees, and extraordinary expenses) exceed
1.50% of the Fund's average net assets until the Fund's net assets reach $15
million. This arrangement has been continued in effect notwithstanding the fact
that the Fund's net assets currently exceed $15 million. In addition, for
Evergreen Global Real Estate Equity Fund, EAM voluntarily waived a portion of
its investment advisory fee for each of the Fund's prior fiscal years. These
arrangements will cease to be effective after the Acquisition, subject to
7
approval by the Trust's Board of Trustees. Set forth below are (i) the actual
annual operating expenses (as a percentage of average net assets) of
each class of shares of the Funds net of fee waivers and expense reimbursement
and (ii) the annual operating expenses (as a percentage of average net assets)
of each class of shares of the Funds if each Fund had borne all fees and
expenses for the most recently completed fiscal year.
EVERGREEN U.S. REAL ESTATE EQUITY FUND
Fiscal Year Ended September 30, 1997
CLASS Y SHARES CLASS A SHARES CLASS B SHARES
-------------- -------------- ------------------
Actual Annual Actual Annual Actual Annual
Operating Operating Operating Operating Operating Operating
Expenses Net Expenses Expenses Net Expenses Expenses Net Expenses
of Fee Without Fee of Fee Without Fee of Fee Without Fee
Waivers and Waivers and Waivers and Waivers and Waivers and Waivers and
Expense Expense Expense Expense Expense Expense
Reimbursements Reimbursements Reimbursements Reimbursements Reimbursements Reimbursements
---------------- -------------- -------------- ----------------- --------------- ---------------
Management
Fees 0.26 1.00 0.26 1.00 0.26 1.00
Other
Expenses 1.24 1.26 1.50 1.49 2.25 2.24
---- ---- ---- ---- ---- ----
Total 1.50 2.26 1.76 2.49 2.51 3.24
==== ==== ==== ==== ==== ====
EVERGREEN U.S. REAL ESTATE EQUITY FUND
Fiscal Year Ended September 30, 1997
CLASS C SHARES
----------------
Annual
Actual Operating
Operating Expenses
Expenses Net Without Fee
of Fee Waivers Waivers and
and Expense Expense
Reimbursements Reimbursements
-------------------- ----------------
Management 0.26 1.00
Fees
Other 2.25 2.24
Expenses ---- ----
2.51 3.24
Total ==== ====
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
Fiscal Year Ended October 31, 1997
CLASS Y SHARES CLASS A SHARES CLASS B SHARES
-------------- -------------- ------------------
Actual Annual Actual Annual Actual Annual
Operating Operating Operating Operating Operating Operating
Expenses Net Expenses Expenses Net Expenses Expenses Net Expenses
of Fee Without Fee of Fee Without Fee of Fee Without Fee
Waivers and Waivers and Waivers and Waivers and Waivers and Waivers and
Expense Expense Expense Expense Expense Expense
Reimbursements Reimbursements Reimbursements Reimbursements Reimbursements Reimbursements
---------------- -------------- -------------- ----------------- --------------- ---------------
Management
Fees 0.92 1.00 0.91 1.00 0.92 1.00
Other
Expenses 0.90 0.90 1.19 1.19 1.89 1.90
---- ---- ---- ---- ---- ----
Total 1.82 1.90 2.10 2.19 2.81 2.90
==== ==== ==== ==== ==== ====
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
Fiscal Year Ended October 31, 1997
CLASS C SHARES
--------------
Annual
Actual Operating
Operating Expenses
Expenses Net Without Fee
of Fee Waivers Waivers and
and Expense Expense
Reimbursements Reimbursements
-------------------- ----------------
Management
Fees 0.92 1.00
Other
Expenses 1.91 1.91
---- ----
Total 2.83 2.91
==== ====
The New Agreement provides that Alpine shall have no liabilities in
connection with rendering services thereunder, other than liabilities resulting
from its willful misfeasance, bad faith, gross negligence or reckless disregard
of its duties. The New Agreement is terminable, without payment of any penalty
on 60 days' written notice, by a vote of the holders of a majority of each
Fund's outstanding voting shares, or by a vote of majority of the members of the
Board of Trustees. In addition, the New Agreement will automatically terminate
upon an "assignment" as such term is defined by the 1940 Act.
If approved by the shareholders of a Fund, the New Agreement will have
an initial term expiring two years after the date of its execution, and may be
continued in effect from year to year thereafter if approved annually by the
shareholders of the Fund or the Board of Trustees, and, in either case, by a
majority of the Independent Trustees by vote cast in person at a meeting called
for such purpose, all as required by the 1940 Act. If approved by shareholders,
the New Agreement will be entered into and become effective upon consummation of
the Acquisition.
ADMINISTRATION AND DISTRIBUTION SERVICES
After the Acquisition, EAM and its affiliates will initially continue
to provide various administrative services to the Funds pursuant to the terms of
the Acquisition Agreement. However, it is expected that, on or about March 31,
1998, a new administrative services provider will provide administrative
services to the Funds pursuant to administration agreements with Alpine, subject
to approval by the Trust's Board of Trustees. Alpine and not the Funds will be
responsible for any fees payable for administrative services.
Evergreen Keystone Distributor, Inc. ("EKD"), located at 120 Clove
Road, Little Falls, New Jersey 07424, presently serves as the distributor of
shares of the Funds and will continue to serve in the same capacity after the
Acquisition. Effective on or about March 31, 1998, it is expected that another
registered broker-dealer will replace EKD as distributor and commence serving as
distributor of shares of the Funds, subject to approval by the Board of
Trustees, including a majority of the Independent Trustees.
SHAREHOLDER SERVICES AND EXCHANGE PRIVILEGES
Except as noted below, the Acquisition is not expected to result in any
significant changes in shareholder services available to shareholders of the
Funds. The Funds expect that
8
they will continue to offer: a systematic investment plan which allows
shareholders to automatically make monthly or quarterly investments into their
accounts; a telephone investment plan, pursuant to which shareholders may make
investments into their accounts; a systematic cash withdrawal plan which enables
shareholders to receive (or designate a third party to receive) a monthly or
quarterly check; an automatic reinvestment plan under which all dividends and
other distributions are automatically reinvested in full and fractional shares
of the Funds; and tax sheltered plans, under which eligible investors may open a
pension and profit sharing account in the Funds.
The Funds' shareholders may currently exchange some or all of their
shares of the Funds for shares of the same class of shares in other Evergreen
mutual funds. Effective April 3, 1998 (60 days after the date of the mailing of
the Proxy Statement), shareholders of the Funds will no longer have this
exchange privilege, if Alpine becomes the Funds' investment adviser. However,
the Funds expect to implement arrangements to enable shareholders of the Class A
and Class Y shares of the Funds to exchange some or all of their shares of the
Funds for shares of a money market fund. No assurance can be given as to when
these arrangements will become effective. Shareholders of the Funds will,
however, continue to have the ability to exchange shares of each Fund for shares
of the same class of the other Fund.
BOARD CONSIDERATION
In approving the New Agreement and determining to submit it to
shareholders of the Funds for approval, the Board of Trustees considered a
number of factors. The Trustees took into consideration the fact that Mr. Samuel
A. Lieber, who is currently the individual primarily responsible for making
investment decisions for each Fund, would continue to act as the portfolio
manager of each Fund. The Trustees relied upon his representations that the New
Agreement will enable the Funds to obtain high quality investment advisory
services at an appropriate cost.
Because the Funds have a specialized investment focus, Alpine
represented to the Trustees that the Funds would benefit from retaining an
investment adviser specializing in investments in real estate related
securities. Such affiliation would result in an increased organizational
emphasis on the Funds because they would no longer be part of a large fund
complex of mutual funds which, for the most part, have a broader investment
focus and are generally much larger in terms of total assets than the Funds.
Certain disadvantages may result from the Funds ceasing to be part of
the Evergreen family of mutual funds. Among other things, on April 3, 1998 (60
days after the date of the mailing of the Proxy Statement), shareholders of the
Funds would no longer have the ability to exchange their shares for shares of
the Evergreen funds. In addition, shareholders of the Funds would no longer have
access to EAM, a larger organization having more personnel and financial
resources than Alpine.
Based upon their consideration of the matters noted above and all the
factors deemed relevant, the Trustees determined to recommend to shareholders of
the Funds that they approve the New Agreement. (As noted above, no increase in
the rate of advisory fees to be charged to the Funds is proposed.)
9
REQUIRED VOTE AND RECOMMENDATION OF THE TRUSTEES
Approval of the New Agreement with respect to each Fund requires the
affirmative vote of Holders of a Majority of Shares of that Fund. In voting on
this Proposal, shareholders of each Fund will vote separately as a single class,
without regard to the particular class of the Fund's shares that are held.
THE TRUSTEES, INCLUDING THE INDEPENDENT
TRUSTEES, RECOMMEND THAT SHAREHOLDERS
VOTE "FOR" THE NEW AGREEMENT.
PROPOSAL 2 -- ELECTION OF TRUSTEES
At the Meeting, shareholders of the Funds will vote for the election of
four persons to serve as Trustees of the Trust, each to hold office until his
successor is elected and qualifies or until his death, retirement, resignation
or removal from office. The election is being held to add Messrs. Samuel A.
Lieber and H. Guy Leibler as Trustees to the existing Board of Trustees,
contingent on consummation of the Acquisition. Messrs. Laurence B. Ashkin and
Foster Bam, who presently serve as Trustees, are also standing for election. The
nominees have been selected and proposed for election by all of the persons
now serving as Independent Trustees of the Trust. Subject to the election of the
nominees, each of the persons now serving as Trustee with the exception of
Messrs. Ashkin and Bam will resign their positions with the Trust, effective
upon consummation of the Acquisition.
The persons named on the accompanying proxy card intend, in the absence
of contrary instructions, to vote all proxies in favor of the election of the
nominees named above as Trustees of the Trust to serve until their successors
are duly elected and qualified. The nominees have each consented to stand for
election and to serve if elected. If any of the nominees should be unable to
serve, an event not now anticipated, the proxies will be voted for such other
person or persons, if any, as shall be designated by the Board of Trustees. The
Board of Trustees recommends that shareholders vote in favor of the election of
the nominees.
The following table sets forth certain information concerning the
present Trustees.
NAME (AGE)
(TRUSTEE SINCE) PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------- -------------------------------------------
Laurence B. Ashkin (68) Trustee of all the Evergreen funds other than Evergreen Investment Trust;
(1996) Real estate developer and construction consultant; President of Centrum
Equities and Centrum Properties, Inc.
10
NAME (AGE)
(TRUSTEE SINCE) PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------- -------------------------------------------
Foster Bam (70) Trustee of all the Evergreen funds other than Evergreen Investment Trust;
(1996) Partner in the law firm of Cummings & Lockwood; Director, Symmetrix, Inc.
(sulphur company) and Pet Practice, Inc. (veterinary services); former
Director, Chartwell Group Ltd. (manufacturer of office furnishings and
accessories), Waste Disposal Equipment Acquisition Corporation and
Rehabilitation Corporation of America (rehabilitation hospitals).
James S. Howell (72) Chairman of the Evergreen Group of Funds; former Chairman of the
(1996) Distribution Foundation for the Carolinas; former Vice President of Lance
Inc. (food manufacturing).
Gerald M. McDonnell (57) (1996) Trustee of the Evergreen funds; Sales Representative with Nucor-Yamoto,
Inc. (steel producer).
Thomas L. McVerry (58) Trustee of the Evergreen funds; former Vice President and Director of
(1996) Rexham Corporation; former Director of Carolina Cooperative Federal
Credit Union.
William Walt Pettit (40) Trustee of the Evergreen funds; Partner in the law firm of William Walt
(1996) Pettit, P.A.
Russell A. Salton, III MD (49) (1996) Trustee of the Evergreen funds; Medical Director, U.S. Health Care/Aetna
Health Services; former Managed Health Care Consultant; former President,
Primary Physician Care.
Michael S. Scofield (53) Trustee of the Evergreen funds; Attorney, Law Offices of Michael S.
(1996) Scofield.
Mr. Bam is a Partner in the lawfirm of Cummings & Lockwood which has
from time to time provided legal services to FUNB.
The following table sets forth certain information concerning the two
nominees who are not currently Trustees. Information concerning the other two
nominees, Messrs. Ashkin and Bam, who now are Trustees and will continue to
serve as such after the Acquisition, if elected at the meeting, is set forth in
the table above.
Samuel A. Lieber (41)* Member of Alpine Management & Research, LLC (since November 1997); and
Portfolio Manager of Evergreen U.S. Real Estate Equity Fund (since 1993)
and Evergreen Global Real Estate Equity Fund (since 1989).
11
H. Guy Leibler (43) Chairman and President of Pailatus, a news media company (since January
1997); Director and Chairman of White Plains Hospital Center (since April
1988); Advisor to Sony/Loews Theaters, an entertainment company (July
1995 to March 1997); President of Sony Plaza, Inc., a consumer
electronics, music and film company (January 1993 to June 1995); and
President and Chief Executive Officer of Schulman Realty.
*If the Acquisition is consummated and Mr. Lieber is elected, he will
be deemed an "interested person" of the Funds by virtue of his affiliation with
and controlling interest in Alpine.
The following table sets forth certain information regarding the
compensation received by the Trustees for the year ended October 31, 1997.
Compensation Table
Pension or Estimated Total
Retirement Annual Compensation
Aggregate Benefits Accrued Benefits from Fund
Compensation As Part of Fund Upon Complex Paid
Name of Trustee From Funds (1) Expenses (2) Retirement (2) to Trustees (3)
- ---------------
Laurence Ashkin 1,491 0 0 64,400
Foster Bam 790 0 0 49,575
James S. Howell 1,545 0 0 99,667
Robert J. Jeffries 640 0 0 13,871
Gerald M. McDonnell 1,190 0 0 86,801
Thomas L. McVerry 1,633 0 0 90,728
William Walt Pettit 1,488 0 0 88,893
Russell A. Salton, III, M.D. 1,489 0 0 90,243
Michael S. Scofield 1,289 0 0 87,343
Total 11,555 0 0 671,521
(1) Total compensation from Evergreen Global Real Estate Equity and Evergreen
US Real Estate Equity Funds 11/1/96-10/31/97. This includes both the portion
paid and deferred.
(2) No pension or retirement benefits are accrued as part of fund expenses.
(3) Total compensation from all funds in The Evergreen Group of Mutual Funds
11/1/96-10/31/97.
Trustees who are affiliated persons of EAM or any of its affiliates
receive no compensation from the Funds. Each Trustee of the Trust who is not
affiliated persons of EAM or any of its affiliates is paid an annual retainer
equal to $50,000. In addition, the Chairman of the Board of The Evergreen Group
of Mutual Funds is paid an annual fee of $25,000. Each Trustee who is not an
affiliated person of EAM or any of its affiliates also receives a meeting fee
equal to $5,000 per meeting attended, and a fee of $500 for each special
telephonic meeting in which he participates.
Messrs. Ashkin, Bam, McVerry and Pettit represent the Trust on the
Audit Committee. The Audit Committee reviews the services performed by the
Trust's independent public accountant. Members of the Audit Committee are paid
an annual retainer fee of $5,000 and the Chairman of the Audit Committee
receives an additional $16,000 annual fee. Trustees are also entitled to be
reimbursed for out-of-pocket expenses incurred as a Trustee. Officers of the
Trust receive no compensation from the Trust. Each member of the Executive
Committee receives an additional fee of $500 per meeting of the Executive
Committee and members of the Performance Committee are paid an annual retainer
fee of $2,500. The Chairman of the Performance Committee receives an additional
$2,500 annual fee.
A pro rota portion of the fees to Trustees noted above are allocated
to the Funds based upon the relative net assets of each Fund as compared to the
net assets of all funds in The Evergreen Group of Mutual Funds.
During the most recent fiscal year, the Board of Trustees had the
following number of meetings: 4. Each of the Trustees attended at least 75% of
the total number of meetings of the Board of Trustees and applicable Committees
of each Fund during its most recent fiscal year.
Any individual who has been appointed as a Trustee Emeritus of one
or more funds in The Evergreen Group of Mutual Funds is paid one-half of the
annual retainer fees that are payable to regular Trustees, and one-half of the
meeting fees for each meeting attended.
If the Acquisition is consummated, the Trust will pay an annual fee to
each Trustee who is not an officer or employee of the Trust's investment adviser
or distributor (or any affiliated company of the investment adviser or
distributor) in the amount of $5,000. Travel expenses of Trustees who are not
affiliated persons of the Trust's investment adviser or distributor (or any
affiliated company of the investment adviser or distributor) which are incurred
in connection with attending meetings of the Board of Trustees will also be
reimbursed.
OFFICERS OF THE TRUST
The executive officers of the Trust are:
13
William J. Tomko (39), President and Treasurer (since December 1997),
3435 Stelzer Road, Columbus, Ohio.
D'Ray Moore (38), Vice President (since December 1997), 3435 Stelzer Road,
Columbus, Ohio.
George O. Martinez (38), Secretary (since December 1997), 3435 Stelzer Road,
Columbus, Ohio.
If the Acquisition is consummated, the executive officers of the Trust
will be:
Samuel A. Lieber (41), 2500 Westchester Avenue, Purchase, New York.
President. Member of Alpine Management & Research, LLC since November 1997.
Portfolio Manager of Evergreen U.S. Real Estate Equity Fund (since 1993) and
Evergreen Global Real Estate Equity Fund (since 1989).
Marc R. Halle (36), 2500 Westchester Avenue, Purchase, New York.
Secretary/Treasurer. Member of Alpine Management & Research, LLC since November
1997. Real Estate Analyst of Evergreen U.S. Real Estate Equity Fund and
Evergreen Global Real Estate Equity Fund since 1994. Acquisition and Finance, W&
M Properties, Inc. from 1989 to 1994.
REQUIRED VOTE AND RECOMMENDATION OF THE TRUSTEES
Election of each of the nominees for Trustee requires the affirmative
vote of a plurality of all outstanding shares of the Trust represented in person
or by proxy and entitled to vote, provided that a quorum is present at the
Meeting.
THE TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMEND THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF EACH OF THE NOMINEES.
PROPOSAL 3 -- CHANGES IN INVESTMENT POLICIES AND RESTRICTIONS
At the Meeting, shareholders of the Funds will be asked to
approve certain changes in the investment policies and restrictions of the
Funds. These changes are described below and have been proposed for a variety of
reasons. Generally, they are intended to provide the Funds with greater
flexibility in pursuing their investment objectives. If the changes are
approved, the Funds will be able to use certain investment techniques in
pursuing their investment goals which are not permissible under their present
policies and will also be able to make greater use of certain currently
permissible investment practices. The Trustees have approved each of the
proposed changes in investment policies and restrictions based upon Alpine's
recommendations and expectations that the ability to use a broader array of
investment techniques and strategies, comparable to those used by certain other
mutual funds that invest primarily in real estate securities, would be likely to
benefit the Funds and their shareholders. Shareholders are being given the
option to approve all, some or none of these proposed changes on the proxy card
enclosed with this Proxy Statement. The approved changes will only become
effective if Alpine becomes the Funds'investment adviser.
After considering representations made by Alpine, the Trustees have
approved certain other changes in the Funds' investment policies and
restrictions which do not require shareholder approval. These changes are
described in Appendix A. These changes will become effective on March 4, 1998
(30 days after the date of the mailing of the Proxy Statement), if Alpine
becomes the Funds' investment adviser. Each Fund's prospectus states that
shareholders will be given 30 days' prior notice to any changes in policies of
the Fund that are not fundamental. Effective March 4, 1998, this notice
requirement will be repealed if Alpine becomes the Funds' investment adviser.
14
PROPOSALS RELATING TO BOTH EVERGREEN U.S. REAL ESTATE EQUITY FUND
AND EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
PROPOSAL 3.A.(1) AND 3.B.(1) - CONCENTRATION OF INVESTMENTS
Each Fund's current investment policy regarding the concentration of
its investments in any one industry states that the Fund "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."
It is proposed that each Fund's current policy be amended to provide
that:
"The Fund will concentrate its investments in the securities of
companies engaged principally in the real estate industry and may
invest all of its assets in such securities; however, the Fund may
temporarily invest less than 25% of the value of its assets in such
securities during periods of adverse economic conditions in the real
estate industry."
The amended concentration policy would provide greater investment
flexibility to the Funds. For example, although the investment policies of each
Fund presently contemplate that a Fund will normally invest at least 65% of
its total assets in the equity securities of companies principally engaged in
the real estate industry or which own significant real estate assets, each
Fund's current policy on concentration imposes a more stringent requirement that
the Fund invest at least 65% of its total assets in the securities of companies
principally engaged in the real estate industry. The present policies of the
Funds would therefore prevent the Funds from investing 60% of their assets in
the equity securities of companies engaged in the real estate industry and
investing the balance of their assets in the securities of companies which own
significant real estate assets. The proposed new concentration policy would
permit such an investment position to be maintained, but would require that each
Fund normally invest at least 25% of its assets in the securities of companies
principally engaged in the real estate industry and invest at least 65% of its
assets in a combination of the equity securities of such companies and the
equity securities of companies which own significant real estate assets.
PROPOSALS 3.A.(2) AND 3.B.(3) - BORROWING
Each Fund's current investment restriction regarding borrowing states
that the Fund "may not borrow money, issue senior securities or enter into
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 or such borrowing." Under this restriction, the
proceeds from borrowings may only be used for certain temporary or emergency
purposes, such as to provide liquidity to facilitate redemption requests, and
may not be used to purchase additional portfolio securities (a practice known as
leverage). In addition, the Funds currently may not enter into reverse
repurchase agreements exceeding 5% of the value of their total assets. With
respect to Evergreen Global Real Estate Equity Fund, the Fund may not purchase
any securities at a time when borrowings are outstanding.
It is proposed that each Fund's current restriction be amended to
provide that:
15
"The Fund may not issue senior securities as defined by the
1940 Act, except that the Fund may borrow money from banks and
enter into reverse repurchase agreements (i) in the aggregate
amount of up to 10% of the value of its total assets to
increase its holdings of portfolio securities and (ii) for
temporary extraordinary or emergency purposes, subject to
the overall limitation that total borrowings by the Fund
(including borrowing through reverse repurchase agreements)
may not exceed 33 1/3% of the value of the Fund's total assets
(measured in each case at the time of borrowing)."
The amended investment restriction would increase the aggregate amount
of money that each of the Funds may borrow from 10% to 33 1/3% of its total
assets. It would also permit a Fund to borrow money for investment purposes
in an amount up to 10% of its total assets. In addition, the proposed change
clarifies that the Funds may enter into reverse repurchase agreements other than
for temporary or emergency purposes and, with respect to Evergreen Global Real
Estate Equity Fund, removes the Fund's restriction on purchasing any securities
at a time when borrowings are outstanding.
The practice of borrowing money for investment purposes, known as
"leverage," will permit the Funds to purchase a greater amount of securities
than would otherwise be possible. This will permit each Fund to increase its
investment return if the additional securities purchased increase in value in an
amount exceeding the interest and other costs (such as commitment fees) incurred
in connection with the borrowing. However, if the purchased securities decrease
in value, the Funds will suffer a loss. Thus, if the Funds borrow money, their
share prices may be subject to greater fluctuation until the borrowing is paid
off. Use of leverage is, for this reason, considered to be a speculative
investment practice and will be limited to not more than 10% of each Fund's
total assets.
PROPOSALS 3.A.(3) AND 3.B.(4) - PLEDGING ASSETS
Each Fund's current investment restriction regarding pledging assets
states that the Fund may not "mortgage, pledge or hypothecate any assets except
in connection with any [permitted] borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of [the] Fund's total
assets at the time of such borrowing."
It is proposed that each of the Funds repeal this restriction. If this
proposal is approved by shareholders of a Fund, the following non-fundamental
restriction will be implemented:
"The Fund may not pledge, mortgage, hypothecate or otherwise
encumber its assets, except to secure permitted borrowings and
to implement collateral and similar arrangements incident to
permitted investment practices."
The replacement of each Fund's current restriction on pledging assets
with the new non-fundamental restriction would assure that each Fund's authority
to pledge or otherwise encumber its assets is co-extensive with the need to do
so based on the permissible investment practices of each Fund. The new
restriction would not itself change the types of investment practices in which
the Funds may engage, but rather would facilitate these practices by helping to
assure
16
the ability of the Funds to establish collateral and similar arrangements that
may be required. As a non-fundamental policy, the Trustees would have the
authority to modify the new restriction on pledging assets as they may in the
future determine to be appropriate.
PROPOSALS 3.A.(4) AND 3.B.(5) - SHORT SALES
Each Fund's current investment restriction relating to short sales
states, in relevant part, that the Fund "may not make short sales of securities
unless, at the time of each such sale and thereafter while a short position
exists, [the] 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." This restriction prohibits the use of short sales other than short
sales "against the box."
It is proposed that each Fund's current restriction be amended to
provide that:
"The Fund may effect short sales of securities subject to the
limitation that the Fund may not sell a security short if, as
a result of such sale, the current value of securities sold
short by the Fund would exceed 10% of the value of the Fund's
net assets; provided, however, if the Fund owns or has the
right to obtain securities equivalent in kind and amount to
the securities sold short (i.e. short sales "against the
box"), this limitation is not applicable."
A short sale involves the sale of a security that the Fund does not own
in anticipation of purchasing the same security (or a security exchangeable
therefor) at a later date at a lower price. To make delivery to the buyer, the
Fund must borrow the security, and is obligated to return the security to the
lender which is accomplished by a later purchase of the security by the Fund to
close its short position. When a Fund effects a short sale, it must maintain
collateral in a segregated account consisting of cash or liquid portfolio
securities with a value equal to the current market value of the securities sold
short, which is marked to market daily. A short sale involves the risk that the
security sold short may increase in value before the Fund purchases it, and the
Fund could incur a loss. Theoretically, an unlimited increase in the market
price of the security would result in an unlimited loss to the Fund.
Because of this risk, the use of short sales is considered a
speculative investment practice. The limited use of this practice, however,
would permit each Fund to pursue opportunities to profit from anticipated
declines in the prices of securities which in the view of the Funds' investment
adviser are overvalued or are likely to be adversely affected by particular
trends or events relating to the issuers of those securities, the industry
sector in which the issuer is engaged or the general markets or economy.
PROPOSAL 3.A.(5) AND 3.B.(6) - LOANS
Each Fund's current investment restriction regarding loans states that
the Fund "may not lend [its] funds to other persons, except through the purchase
of a portion of an issue of debt securities publicly distributed or the entering
into of repurchase agreements."
It is proposed that each Fund's current restriction be amended to
provide that:
17
"The Fund may not make loans of money or securities, except to
the extent that the Fund may lend money through the purchase
of permitted investments, including repurchase agreements, and
may lend securities in accordance with such procedures as may
be adopted by the Trustees."
The Funds are currently authorized to lend their portfolio securities.
Loans of securities by a Fund, if and when made, may not exceed 30% of the value
of the Fund's total assets and must be collateralized by cash or U.S. government
securities that are maintained at all times equal to at least 100% of the
current market value of the securities loaned, including accrued interest. The
effect of the proposed amendment to each Fund's restriction on loans will be to
eliminate a restriction on the Funds purchasing debt securities which are not
publicly distributed, and to insure that each Fund's investment restriction
concerning loans does not operate to restrict the purchase of permitted
investments by the Funds. Purchases of debt securities that are not publicly
traded will be subject to the restrictions of the Funds applicable to the
purchase of illiquid securities under which each Fund may not purchase an
illiquid security if it would cause more than 15% of the net assets of the Fund
to be invested in illiquid securities.
PROPOSAL RELATING TO EVERGREEN U.S. REAL ESTATE
EQUITY FUND
PROPOSAL 3.A.(6) - REAL ESTATE
The Fund's current investment restriction concerning real estate states
that the Fund may not "purchase, sell or invest in real estate or interests in
real estate, except (i) [the] 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) [the Fund] 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."
It is proposed that the Fund's current restriction be amended to
provide that:
"The Fund may not purchase, sell or invest in real estate, but
may invest in securities of companies that deal in real estate
or are engaged in the real estate business, including real
estate investment trusts, and securities secured by real
estate or interests therein and may hold and sell real estate
acquired through default, liquidation or other distributions
of an interest in real estate as a result of the Fund's
ownership of such securities."
This change would broaden the types of securities of real estate
related companies in which the Fund may invest.
PROPOSALS RELATING TO EVERGREEN GLOBAL REAL ESTATE
EQUITY FUND
PROPOSAL 3.B.(2) - INVESTMENT IN SECURITIES OF NON-U.S. ISSUERS
The Fund has a fundamental policy which presently requires, "[u]nder
normal conditions, [that the Fund] invest at least 65% of its total assets in
equity securities of domestic and foreign exchanges or NASDAQ listed companies
principally engaged in the real estate industry." Another fundamental policy
requires that the Fund invest at least 65% of its total assets in the equity
securities of companies of at least three countries, including the United
States, except
18
when abnormal market or financial conditions warrant the assumption of a
temporary defensive position.
It is proposed these policies be repealed and replaced with the
following non-fundamental policy:
"Under normal market conditions, at least 65% of the Fund's
total assets will be invested in equity securities of non-U.S.
issuers located in at least three countries outside of the
United States which are principally engaged in the real estate
industry or which own significant real estate assets."
The purpose of these proposed changes is to better reflect the Fund's
primary focus on foreign securities by stating that real estate related equity
securities of non-U.S. issuers will be the types of securities in which the Fund
will invest 65% of its assets. In addition, the changes will permit non-publicly
traded securities to be counted toward the requirement that the Fund invest at
least 65% of its total assets in real estate related issuers.
A mutual fund using the word "international" in its name must invest at
least 65% of assets in securities of countries outside the U.S., whereas a
"global" fund invests in securities issued worldwide, including the U.S. Thus,
if shareholders approve the changes in investment policy described above, and
Alpine becomes the Fund's investment adviser, it is expected that the name of
the Fund will be changed to "Alpine International Real Estate Equity Fund".
PROPOSAL 3.B.(7) - OPTIONS
The Fund's current investment restriction relating to options states
that the Fund "may not write, purchase or sell put or call options, or
combinations thereof except as permitted under 'Description of Funds Investment
Practices and Restrictions' in [the] Fund's Prospectus." The Fund's prospectus
states that the Fund: (1) may not deal in options on securities indices; (2) may
write covered call options and secured put options on up to 5% of its net
assets; (3) may purchase foreign currency put options, provided that such
options are traded on U.S. exchanges or U.S. over-the-counter markets; (4) may
write a call option on a foreign currency only in conjunction with a purchase of
a put option on that currency; and (5) may not enter into futures contracts or
related options if, immediately thereafter, the amounts committed to margin and
premiums paid for unexpired options would exceed 5% of the Fund's net assets and
more than 30% of the Fund's net assets would be hedged thereby. In addition, no
more than 5% of the Fund's net assets may be represented by premiums paid by the
Fund with respect to options on foreign currencies outstanding at any one time.
It is proposed that this restriction be repealed.
The purpose of this change is to provide greater flexibility in using
options as part of the Fund's investment program. Repeal of the restriction will
broaden the types of options which the Fund may use both in pursuing its
investment objective and for hedging purposes. For example, the Fund would be
able to purchase call options in seeking to realize gains (and not just in
hedging its portfolio positions and in hedging against increases in the prices
of securities it intends to purchase). This change would also enable the Fund to
use stock index options to
19
manage risk. In addition, the change will enable the Fund to alter its
investment practices with respect to options by action of the Board of Trustees,
without the delay and expense of a shareholder vote to amend the Fund's
policies.
Options transactions involve costs to the Fund and may result in
losses. Certain risks arise because of the possibility of imperfect correlation
between movements in the prices of options and movements in the prices of the
underlying security or securities held by the Fund. The successful use by the
Fund of options transactions depends on the ability of its investment adviser to
forecast market movements correctly. Other risks arise from the Fund's potential
inability to close out options positions because in some cases there can be no
assurance that the Fund would be able to effect closing transactions at any
particular time or at an acceptable price.
To the extent that the Fund purchases and sells options in the
over-the-counter markets, its ability to terminate options in these markets may
be more limited than for exchange-traded options. These transactions also
involve the risk that securities dealers participating in such transactions
would be unable to meet their obligations to the Fund. The Fund would, however,
engage in over-the-counter transactions only when, in the opinion of its
investment adviser, the pricing mechanism and liquidity of the over-the-counter
markets are satisfactory and the participants are responsible parties likely to
meet their obligations.
PROPOSAL 3.B.(8) -DIVERSIFICATION
The Fund's current investment restriction relating to diversification
of its investments states that the Fund may not "invest more than 5% of its
total assets, at the time of the investment in question, in the securities of
any one issuer, other than the U.S. government and its agencies or
instrumentalities . . . ." In addition, another restriction provides that the
Fund "may not purchase more than 10% of any class of securities of any one
issuer other than the U.S. government and its agencies or instrumentalities."
It is proposed that these restrictions be amended and restated to
provide that:
"With respect to 75% of its total assets, the Fund may not
purchase a security, other than securities issued or
guaranteed by the U.S. government, its agencies or
instrumentalities, if as a result of such purchase, more than
5% of the value of the Fund's total assets would be invested
in the securities of any one issuer, or the Fund would own
more than 10% of the voting securities of any one issuer."
The proposed changes in these restrictions will conform the Fund's
restrictions on the diversification of its investments to the diversification
requirements applicable under the 1940 Act to mutual funds, such as the Fund,
which have elected to be diversified funds.
The Fund has elected to be a "diversified, open-end management
investment company" under the 1940 Act. This requires that the diversification
policy contained in the current investment restriction of the Fund apply only
with respect to 75% of the total assets of the Fund. The current policies of the
Fund are more restrictive, applying the limitation to 100% of the Fund's assets.
The primary purpose of the proposed change is to allow the Fund to invest in
20
accordance with the limits contained in the 1940 Act for diversified open-end
management investment companies.
This proposed change would give the Fund flexibility to purchase larger
amounts of an issuer's securities when its investment adviser identifies what it
believes to be an attractive investment opportunity. It should be recognized,
however, that the Fund may be exposed to greater investment risk to the extent
that the Fund will be able to invest up to 25% of its assets without limitation
on the percentage of the Fund's assets invested in the securities of any one
issuer.
PROPOSAL 3.B.(9) - UNSEASONED ISSUERS
The Fund's current investment restriction relating to "unseasoned
issuers" states that the Fund may not "invest more than 15% 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, 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)." It is proposed that this restriction be repealed.
This investment restriction was adopted to comply with requirements of
certain state laws which are no longer applicable to the Fund, and the 1940 Act
does not contain a similar restriction. Elimination of this restriction will
enhance the ability of the Fund to invest in the securities of newer companies
which are deemed to be attractive investment opportunities by the Fund's
investment adviser.
These companies will frequently be smaller companies having less
revenues and smaller market capitalization than more seasoned issuers.
Investments in securities of these companies may present greater opportunities
for capital appreciation, but may also involve greater risks than investments in
larger, more mature issuers. Such companies may have limited product lines,
markets or financial resources, and their securities may trade less frequently
and in more limited volume than the securities of larger companies. In addition,
there may be less available information regarding these smaller companies and,
when available, information may be incomplete or inaccurate. As a result, the
securities of smaller companies may experience significantly more price
volatility and less liquidity than securities of larger companies, and any
resulting volatility and limited liquidity will impact the Fund.
PROPOSAL 3.B.(10) - WARRANTS
The Fund's current investment restriction concerning warrants states
that the Fund "may not invest more than 5% of [its] net assets in warrants, and
of this amount, no more than 2% of [its] total net assets may be invested in
warrants that are listed on neither the New York nor the American Stock
Exchange." It is proposed that this restriction be repealed.
This investment restriction, like the restriction relating to
unseasoned issuers, was designed to comply with the requirements of certain
state laws which are no longer applicable to the Fund. Elimination of this
restriction will permit the Fund to invest a greater percentage of its
21
assets in warrants and to make such investments without regard to whether the
warrants are listed on a securities exchange. This would, for example, enable
the Fund to acquire non-publicly traded warrants from an issuer in connection
with the purchase of other securities of that issuer, and to acquire warrants in
amounts exceeding the 5% and 2% limitations set forth in the Fund's current
investment restriction.
Warrants are securities which entitle the holder to purchase the
securities of a company (generally, its common stock) at a specified price
during a specified time period. Because of this feature, the values of rights
and warrants are affected by factors similar to those which determine the price
of common stocks and exhibit similar behavior. Warrants may be purchased
directly or may be acquired in connection with a corporate reorganization or
exchange offer.
PROPOSAL 3.B.(11) - INVESTMENT IN SECURITIES OWNED BY TRUSTEES/OFFICERS
The Fund currently has an investment restriction under which it may not
"purchase or retain the securities of any issuer if (i) one or more officers or
Trustees of [the] Fund or its investment adviser or investment sub-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." It is
proposed that this restriction be repealed.
This restriction was adopted to comply with the requirements of certain
state laws which are no longer applicable to the Fund.
Elimination of the restriction will not significantly affect the Fund's
investment practices. Provisions of the 1940 Act regulate transactions between
an investment company and companies which are affiliated persons, as defined by
the 1940 Act, of directors and officers of the investment company. Under those
provisions, such transactions are generally prohibited without SEC approval.
PROPOSAL 3.B.(12) - COMMODITIES
The Fund's current investment restriction regarding commodities states
that the Fund may not "purchase, sell or invest in commodities or commodity
contracts; provided, however, that this policy does not prevent [the] Fund from
purchasing and selling currency futures contracts and entering into forward
foreign currency contracts."
It is proposed that this restriction be amended to provide that:
"The Fund may not purchase, sell or invest in commodities,
provided that this restriction shall not prohibit the Fund
from purchasing and selling securities or other instruments
backed by commodities or financial futures contracts and
related options, including but not limited to, currency
futures contracts and stock index futures."
22
The purpose of this change is to enable the Fund to use a wider array
of financial futures contracts (in addition to currency futures) and related
options as part of its investment program. For example, the Fund would be able
to invest in stock index futures under the amended restriction. The Fund may use
futures contracts and related options for the purpose of seeking to reduce the
overall investment risk that would otherwise be associated with the securities
in which it invests. For example, the Fund may sell a stock index futures
contract in anticipation of a general market or market sector decline that might
adversely affect prices of the Fund's portfolio securities. To the extent that
there is a correlation between the Fund's portfolio and a particular stock
index, the sale of futures contracts on that index could reduce the Fund's
general market risk and permit the Fund to retain its securities positions. In
addition, the Fund would be able to purchase stock index futures contracts to
hedge against a market advance that might increase the prices of securities that
the Fund is planning to acquire.
The purchase and sale futures contracts and related options involve
risks different from those involved with direct investments in securities and
also require different skills from the Fund's investment adviser in managing the
Fund's portfolio of investments. While utilization of futures contracts and
similar instruments may be advantageous to the Fund, if its investment adviser
is not successful in employing such instruments in managing the Fund's
investments or in predicting market changes, the Fund's performance will be
worse than if the Fund did not make such investments. It is possible that there
will be imperfect correlation, or even no correlation, between price movements
of the investments being hedged and the options or futures used. It is also
possible that the Fund may be unable to purchase or sell a portfolio security at
a time that otherwise would be favorable for it to do so, or that the Fund may
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
hedging transactions, or that the Fund may be unable to close out or liquidate
its hedged position. In addition, the Fund will pay commissions and other costs
in connection with such investments, which may increase the Fund's expenses and
reduce its yield.
REQUIRED VOTE AND RECOMMENDATION OF THE TRUSTEES
The Trustees have reviewed information from Alpine concerning the
potential benefits and risks associated with the proposed amendments to each
Funds' investment policies and restrictions and, at a meeting of the Board,
voted to approve each of the proposed amendments.
The affirmative vote of Holders of a Majority of the Shares of a Fund
is required to approve each of the proposed amendments of that Fund's policies
and restrictions set forth in the proposals above. In voting on this Proposal,
shareholders of each Fund will vote separately as a single class on each
Proposal applicable to that Fund, without regard to the particular class of the
Fund's shares that are held.
THE TRUSTEES, INCLUDING THE INDEPENDENT
TRUSTEES, RECOMMEND THAT SHAREHOLDERS
VOTE "FOR" EACH OF THESE PROPOSALS.
23
CHANGES NOT REQUIRING SHAREHOLDER APPROVAL
As noted above, the Board of Trustees has approved certain changes in
the investment policies and restrictions of the Funds that do not require
shareholder approval. These changes will become effective on March 4, 1998
(30 days after the date of the mailing of the Proxy Statement), if Alpine
becomes the Funds' investment adviser.
With respect to Evergreen U.S. Real Estate Equity Fund, these include,
among others, changes that will: permit the Fund to invest in a wider range of
debt and equity securities of real estate and non-real estate related companies
(including, to a limited extent, lower-quality debt securities); permit greater
use of options and futures by the Fund in pursuing its investment objective and
for hedging purposes; and expand the Fund's ability to purchase non-publicly
traded securities.
With respect to Evergreen Global Real Estate Equity Fund, the changes
will, among other things: permit the Fund to invest in a wider range of debt and
equity securities of real estate and non-real estate related companies
(including, to a limited extent, lower-quality debt securities) and permit
greater use of options and futures by the Fund.
These changes and the other changes in policies and restrictions
adopted by the Board of Trustees are described in Appendix A.
24
ADDITIONAL INFORMATION
OTHER MATTERS TO COME BEFORE THE MEETING
The Trustees know of no business which will be presented for
consideration at the Meeting other than that set forth in Proposals 1 through 3
of the Notice of Special Meeting. If any other matters are properly presented,
it is the intention of the persons designated as proxies to vote such proxies in
accordance with their judgment on such matters.
DEADLINE FOR SHAREHOLDER PROPOSALS
The Trust does not hold regularly scheduled annual meetings of
shareholders. Any shareholder desiring to present a proposal for inclusion at
the next meeting of shareholders should submit such proposal to the Trust.
25
EXHIBIT
Exhibit 1 Form of Investment Management Agreement between Alpine Equity
Trust, on behalf of Alpine U.S. Real Estate Equity Fund and
Alpine International Real Estate Equity Fund, and Alpine
Management & Research, LLC.
26
APPENDIX A
Set forth below are descriptions of the changes in the investment
policies and restrictions of Evergreen U.S. Real Estate Equity Fund and
Evergreen Global Real Estate Equity Fund which do not require shareholder
approval. These changes have been approved by the Board of Trustees and will
become effective on March 4, 1998 (30 days after the date of the mailing of
the Proxy Statement), if Alpine becomes the Funds' investment adviser.
EVERGREEN U.S. REAL ESTATE EQUITY FUND
INVESTMENTS IN REAL ESTATE RELATED AND EQUITY SECURITIES
Currently, under normal conditions, the Fund invests 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 or which own
significant real estate assets.
This policy will be amended to provide that:
"Under normal market conditions, at least 65% of the Fund's
total assets will be invested in equity securities of U.S.
issuers which are principally engaged in the real estate
industry or which own significant real estate assets."
This change will permit non-publicly traded securities of real estate
related companies to be counted toward the requirement that the Fund invest 65%
of its total assets in real estate related issuers.
In addition, the Fund's prospectus currently states that equity
securities "include common stock, preferred stock and securities convertible
into common stock." The Fund's prospectus will be amended to state that: "Equity
securities include common stock, preferred stock and securities convertible into
common stock, such as warrants, rights and options." This amendment will clarify
that warrants, rights and options, which are securities that have equity
characteristics, may be used in pursuing the Fund's investment objective of
long-term growth of capital.
DEBT SECURITIES AND SECURITIES OF NON-REAL ESTATE RELATED COMPANIES
Currently, the investment policies of the Fund provide that the Fund
may invest up to 35% of its total assets in: equity securities of issuers whose
products and services are related to the real estate industry; securities of
issuers which are unrelated to the real estate industry, but whose real estate
assets are substantial relative to the price of the companies' securities;
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; and non-convertible debt securities of issuers which are unrelated to
the real estate industry.
27
These policies will be amended so that, under normal market conditions,
the Fund will be permitted to invest up to 35% of its total assets in debt
securities, equity securities of companies that are unrelated to the real estate
industry, money market instruments, and options, financial futures and currency
contracts.
This change will permit the Fund to invest in debt securities of real
estate related companies and companies whose products or services are related to
the real estate industry. The Fund would also continue to have the ability to
invest without limitation in high quality money market instruments if, in the
opinion of the Fund's investment adviser, market conditions warrant a temporary
defensive investment position.
The Board of Trustees has also determined to amend the Fund's policy on
the purchase of debt securities to permit up to 15% of the Fund's total assets
to be invested in debt securities which are not rated as
"investment grade" or which are unrated and are not determined by the Fund's
investment adviser to be comparable to debt having an "investment grade" rating.
Debt securities rated "investment grade" are those which have been rated no
lower than than A by Standard & Poor's Rating Group ("S&P") or Moody's Investors
Service, Inc. ("Moody's").
This change will permit the Fund to invest up to 15% of its total
assets in non-investment grade debt securities. Currently, non-convertible debt
securities purchased by the Fund must be rated investment grade or better, or
unrated securities which have been determined to be of comparable quality;
however, up to 10% of the Fund's total assets may be invested in unrated debt
secured by real estate assets if the investment adviser believes that the
securities are trading at a discount and that the underlying collateral will
secure repayment.
The new policies are intended to provide the Fund with greater
flexibility to invest in a wider range of debt securities, including a limited
amount of non-investment grade debt.
Lower-quality debt securities (i.e., "junk bonds") are considered to
have speculative characteristics and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness, or may already be in
default. The market prices of these securities may fluctuate more than higher
quality securities in periods of general economic difficulty.
FOREIGN SECURITIES
Although the Fund invests principally in equity securities of U.S.
issuers, the Board of Trustees has adopted a non-fundamental investment policy
that will permit the Fund to invest up to 15% of the value of its total assets
in equity and debt securities of foreign issuers, including depository receipts
(such as American Depository Receipts) that represent indirect interests in
securities of foreign issuers. This new policy will enable the Fund to invest a
limited portion of its assets in the securities of foreign issuers in pursuing
its investment objective.
Investments in foreign securities are affected by risk factors
generally not thought to be present in the U.S. With respect to such securities,
there may be more limited information publicly available concerning the issuer
than would be the case with respect to domestic securities, different accounting
standards are used by foreign issuers and foreign trading markets
28
are generally not as liquid as U.S. markets. Foreign securities also involve
such risks as currency risks, possible imposition of withholding or confiscatory
taxes, possible currency transfer restrictions, expropriation or other adverse
political or economic developments and the difficulty of enforcing obligations
in other countries. These risks are greater in emerging markets and in less
developed countries.
The purchase of securities denominated in foreign currencies will
subject the value of the Fund's investments in those securities to fluctuations
due to changes in foreign exchange rates. To hedge against the effects of
changes in foreign exchange rates, the Fund will be authorized to enter into
forward foreign currency exchange contracts ("forward contracts"). These
contracts represent agreements to exchange an amount of currency at an agreed
upon future date and rate. The Fund will generally use forward contracts only to
"lock in" the price in U.S. dollars of a foreign security that the Fund plans to
purchase or to sell, but in certain limited cases may use such contracts to
hedge against an anticipated substantial decline in the price of a foreign
currency against the U.S. dollar that would adversely affect the U.S. dollar
value of foreign securities held by the Fund. Forward contracts will not be used
in all cases and, in any event, cannot completely protect the Fund against all
changes in the values of foreign securities resulting from fluctuations in
foreign exchange rates. The Fund will not enter into a forward contract if, as a
result, forward contracts would represent more than 15% of the Fund's total
assets. For hedging purposes, the Fund will also be permitted to use options on
foreign currencies, which expose the Fund to certain risks.
SECURITIES OF REAL ESTATE INVESTMENT TRUSTS
Currently, the Fund may only invest in real estate investment trusts
("REITs") and limited partnerships which are traded on major exchanges. This
policy has been amended by the Board of Trustees to eliminate the requirement
that such securities be traded on an exchange. As a result, the Fund will be
able to invest in REITs which are traded over-the-counter or which are not
publicly traded. Any investments in non-publicly traded securities will be
subject to the Fund's overall restriction on investments in illiquid securities.
The purpose of this change is to permit the Fund to pursue its investment
objective by investing in a wider range of securities.
PORTFOLIO TURNOVER
Although the Fund seeks long-term capital growth, the Fund may from
time to time engage in short-term trading strategies and securities may be sold
without regard to the time they have been held when investment considerations
warrant such action. These policies, together with the changes being made in the
investment restrictions of the Fund to expand its ability to engage in
transactions in options and futures, may have the effect of increasing the
annual rate of portfolio turnover of the Fund. As a result, the Fund's annual
portfolio turnover rate may be higher than the rates of certain other investment
companies. However, it is not expected that the Fund's annual portfolio turnover
rate will exceed 150%. A high portfolio turnover rate will result in higher
brokerage costs to the Fund and may also result in the realization of greater
capital gains which will be subject to tax, including short-term gains which
will be taxable to shareholders at ordinary income tax rates.
29
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Fund's prospectus will be amended to clarify that the Fund may
purchase or sell securities on a when-issued or delayed delivery basis. In these
transactions, securities are purchased or sold by the Fund with payment and
delivery taking place as much as a month or more in the future. The Fund engages
in these transactions to secure an advantageous price or yield at the time of
entering into the transactions. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to be
advantageous. In addition, the value of securities purchased on a when-issued or
delayed delivery basis is subject to market fluctuation and no dividends or
interest accrues to the purchaser during the period before the settlement date.
When the Fund enters into a when-issued and delayed delivery transaction, it
will "cover" its position by maintaining in a segregated account with the Fund's
custodian, cash and liquid securities held by the Fund and having a value
(determined daily) equal to or greater the purchase commitment or delivery
obligation of the Fund.
USE OF OPTIONS
The Fund currently has an investment restriction relating to options
which states that the Fund "may not write, purchase or sell put or call options,
or combinations thereof except [the Fund] may do so as permitted under
'Description of Funds - Investment Practices and Restrictions' in its
Prospectus."
In this regard, the prospectus of the Fund will be amended so as to
permit the Fund to purchase and sell options on individual stocks, indices
(stock index options) and on groups of securities. These may include both
exchange traded and over-the-counter options.
The purpose of this change is to enable greater use of options as part
of the Fund's investment program. The Fund may use options either in pursuing
its investment objective and for hedging purposes. For example, the Fund might
purchase call options on a security in seeking to realize gains, or to hedge its
portfolio positions or to hedge against increases in the prices of securities it
intends to purchase. The change will also enable the Fund to use stock index
options to manage risk.
Options transactions involve costs to the Fund and may result in
losses. Certain risks arise because of the possibility of imperfect correlation
between movements in the prices of options and movements in the prices of the
underlying security or securities held by the Fund. The successful use by the
Fund of options transactions depends on the ability of its investment adviser to
forecast market movements correctly. Other risks arise from the Fund's potential
inability to close out options positions because in some cases there can be no
assurance that the Fund would be able to effect closing transactions at any
particular time or at an acceptable price.
To the extent that the Fund purchases and sells options in the
over-the-counter markets, its ability to terminate options in these markets may
be more limited than for exchange-traded options. These transactions also
involve the risk that securities dealers participating in such transactions
would be unable to meet their obligations to the Fund. The Fund would, however,
engage in over-the-counter transactions only when, in the opinion of its
investment adviser, the
30
pricing mechanism and liquidity of the over-the-counter markets are satisfactory
and the participants are responsible parties likely to meet their obligations.
LIMITATIONS ON OPTIONS AND FUTURES TRANSACTIONS
The Fund's current policy setting forth limitations on transactions in
futures contracts and options states that 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 options would exceed 30% of its total assets; or
(iii) purchase call options if, as a result, the current value of the option
premiums for options purchased by the Fund would exceed 5% of the Fund's total
assets."
This restriction is being replaced with the following non-fundamental
restriction:
"The Fund may not purchase financial futures contracts and
related options except for 'bona fide hedging' purposes, but
may enter into such contracts for non-hedging purposes
provided that aggregate initial margin deposits plus premiums
paid by the Fund for open futures options positions, less the
amount by which any such positions are 'in-the-money,' may not
exceed 5% of the Fund's total assets."
This change would eliminate the current limitation on the Fund's use of
futures and related options for hedging purposes and would also allow the Fund
to the use these instruments for non-hedging purposes in an amount up to 5% of
its total assets.
Transactions in futures and related options involve certain risks. For
example, the Fund may lose the expected benefit of a transaction if securities
prices change in an unanticipated manner. Such unanticipated changes in
securities prices may also result in poorer overall performance of the Fund than
if the Fund had not entered into any futures transactions.
The Fund's non-fundamental restriction with respect to options will be
as follows: "The Fund may invest up to 10% of the value of its total assets,
represented by the premium paid, in the purchase of call and put options on
securities and securities indices. The Fund may not write (i.e., sell) covered
call and put options on securities and securities indices with aggregate
exercise prices in excess of 15% of the value of the Fund's assets measured at
the time an option is written."
UNSEASONED ISSUERS
The Fund's current investment restriction relating to "unseasoned
issuers" states that the Fund may not "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)." This restriction is being repealed.
31
This investment restriction was adopted to comply with requirements of
certain state laws which are no longer applicable to the Fund, and the 1940 Act
does not contain a similar restriction. Elimination of this restriction will
enhance the ability of the Fund to invest in the securities of newer companies
which are deemed to be attractive investment opportunities by the Fund's
investment adviser.
These companies will frequently be smaller companies having less
revenues and smaller market capitalization than more seasoned issuers.
Investments in securities of these companies may present greater opportunities
for capital appreciation, but may also involve greater risks than investments in
larger, more mature issuers. Such companies may have limited product lines,
markets or financial resources, and their securities may trade less frequently
and in more limited volume than the securities of larger companies. In addition,
there may be less available information regarding these smaller companies and,
when available, information may be incomplete or inaccurate. As a result, the
securities of smaller companies may experience significantly more price
volatility and less liquidity than securities of larger companies, and any
resulting volatility and limited liquidity will impact the Fund.
WARRANTS
The Fund's current investment restriction concerning warrants states
that the Fund "may not invest more than 5% of [its] net assets in warrants, and
of this amount, no more than 2% of [its] total net assets may be invested in
warrants that are listed on neither the New York nor the American Stock
Exchange." This restriction is being repealed.
This investment restriction, like the restriction relating to
unseasoned issuers, was designed to comply with the requirements of certain
state laws which are no longer applicable to the Fund. Elimination of this
restriction will permit the Fund to invest a greater percentage of its assets in
warrants and to make such investments without regard to whether the warrants are
listed on a securities exchange. This would, for example, enable the Fund to
acquire non-publicly traded warrants from an issuer in connection with the
purchase of other securities of that issuer, and to acquire warrants in amounts
exceeding the 5% and 2% limitations set forth in the Fund's current investment
restriction.
Warrants are securities which entitle the holder to purchase the
securities of a company (generally, its common stock) at a specified price
during a specified time period. Because of this feature, the values of rights
and warrants are affected by factors similar to those which determine the price
of common stocks and exhibit similar behavior. Warrants may be purchased
directly or may be acquired in connection with a corporate reorganization or
exchange offer.
INVESTMENT IN SECURITIES OWNED BY TRUSTEES/OFFICERS
The Fund currently has an investment restriction under which it may not
"purchase or retain the securities of any issuer if (i) one or more officers or
Trustees of [the] Fund or its investment adviser or investment sub-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
32
persons own or would own, directly or beneficially, more than 5% of such
securities." This restriction is being repealed.
This restriction was adopted to comply with the requirements of certain
state laws which are no longer applicable to the Fund.
Elimination of the restriction will not significantly affect the Fund's
investment practices. Provisions of the 1940 Act regulate transactions between
an investment company and companies which are affiliated persons, as defined by
the 1940 Act, of directors and officers of the investment company. Under those
provisions, such transactions are generally prohibited without SEC approval.
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
EQUITY SECURITIES
The Fund's prospectus states that equity securities "include common
stock, preferred stock and securities convertible into common stock." The Fund's
prospectus will be amended to state that: "Equity securities include common
stock, preferred stock and securities convertible into common stock, such as
warrants, rights and options." This amendment will clarify that warrants, rights
and options, which are securities that have equity characteristics, may be used
in pursuing the Fund's investment objective of long-term growth of capital.
DEBT SECURITIES AND SECURITIES OF NON-REAL ESTATE RELATED COMPANIES
Currently, the Fund's investment policies provide that the Fund may
invest up to 35% of its total assets in equity securities of issuers whose
products and services are related to the real estate industry; securities of
issuers unrelated to the real estate industry, but whose real estate assets are
substantial relative to the price of the companies' securities or which offer
significant capital appreciation potential; and debt securities which, in
general, are investment grade or better quality debt securities. In addition, up
to 10% of the Fund's total assets may be invested in unrated debt securities of
issuers secured by real estate where the Fund's investment adviser believes that
the securities are trading at a discount and the underlying collateral will
ensure repayment of principal.
These policies will be amended so that, under normal market conditions,
the Fund will be permitted to invest up to 35% of its total assets in debt
securities, equity securities of companies that are unrelated to the real estate
industry, money market instruments, and options, financial futures and currency
contracts.
This change will permit the Fund to invest in debt securities of real
estate related companies and companies whose products or services are related to
the real estate industry. The Fund would also continue to have the ability to
invest without limitation in high quality money market instruments if, in the
opinion of the Fund's investment adviser, market conditions warrant a temporary
defensive investment position.
33
The Board of Trustees has also determined to amend the Fund's policy on
the purchase of debt securities to permit up to 15% of the Fund's total assets
to be invested in debt securities which are not rated as "investment grade" or
which are unrated and are not determined by the Fund's investment adviser to be
comparable to debt having an "investment grade" rating. Debt securities rated
"investment grade" are those which have been rated no lower than A by S&P or
Moody's.
This change will permit the Fund to invest up to 15% of its total
assets in non-investment grade debt securities. Currently, non-convertible debt
securities purchased by the Fund must be rated investment grade or better
quality, or unrated securities which have been determined by the Fund's
investment adviser to be of comparable quality; however up to 10% of the Fund's
total assets may be invested in unrated debt securities of issuers secured by
real estate where the Fund's investment adviser believes that the securities are
trading at a discount and the underlying collateral will ensure repayment of
principal.
The new policies are intended to provide the Fund with greater
flexibility to invest in a wider range of debt securities, including a limited
amount of non-investment grade debt.
Lower-quality debt securities (I.E., "junk bonds") are considered to
have speculative characteristics and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness, or may already be in
default. The market prices of these securities may fluctuate more than higher
quality securities in periods of general economic difficulty.
SECURITIES OF REAL ESTATE INVESTMENT TRUSTS
Currently, the Fund may only invest in real estate investment trusts
("REITs") and limited partnerships which are traded on major exchanges. This
policy has been amended by the Board of Trustees to eliminate the requirement
that such securities be traded on an exchange. As a result, the Fund will be
able to invest in REITs which are traded over-the-counter or which are not
publicly traded. Any investments in non-publicly traded securities will be
subject to the Fund's overall restriction on investments in illiquid securities.
The purpose of this change is to permit the Fund to pursue its investment
objective by investing in a wider range of securities.
PORTFOLIO TURNOVER
Although the Fund seeks long-term capital growth, the Fund may from
time to time engage in short-term trading strategies and securities may be sold
without regard to the time they have been held when investment considerations
warrant such action. These policies, together with the changes being made in the
investment restrictions of the Fund to expand its ability to engage in
transactions in options and futures, may have the effect of increasing the
annual rate of portfolio turnover of the Fund. As a result, the Fund's annual
portfolio turnover rate may be higher than the rates of certain other investment
companies. However, it is not expected that the Fund's annual portfolio turnover
rate will exceed 150%. A high portfolio turnover rate will result in higher
brokerage costs to the Fund and may also result in the realization of greater
capital gains which will be subject to tax, including short-term gains which
will be taxable to shareholders at ordinary income tax rates.
34