AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 19, 2004



                                             SECURITIES ACT FILE NO. 333-112631
                                      INVESTMENT COMPANY ACT FILE NO. 811-21507
=====================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                ----------------
                                    FORM N-2

                          REGISTRATION STATEMENT UNDER

                         THE SECURITIES ACT OF 1933             [ ]
                        PRE-EFFECTIVE AMENDMENT NO. 2           [X]

                       POST-EFFECTIVE AMENDMENT NO. __          [ ]

                                     AND/OR
                          REGISTRATION STATEMENT UNDER

                     THE INVESTMENT COMPANY ACT OF 1940         [ ]
                               AMENDMENT NO. 2                  [X]
                                                                  =

                        (Check Appropriate Box or Boxes)
                                ----------------


                    EVERGREEN UTILITIES AND HIGH INCOME FUND
               (Exact Name of Registrant As Specified in Charter )

                               200 BERKELEY STREET
                              BOSTON, MA 02116-5034
                    (Address of Principal Executive Offices)
       Registrant's Telephone Number, including Area Code: (617) 210-3200
                                ----------------
                          THE CORPORATION TRUST COMPANY
                               1209 ORANGE STREET
                              WILMINGTON, DE 19801
                     (Name and Address of Agent for Service)
                                ----------------
                                 With copies to:

       DAVID C. MAHAFFEY                            SARAH E. COGAN
   SULLIVAN & WORCESTER LLP                 SIMPSON THACHER & BARTLETT LLP
      1666 K STREET, N.W.                       425 LEXINGTON AVENUE
    WASHINGTON, D.C. 20006                    NEW YORK, NEW YORK 10017
         ----------------                           ----------------




                  APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
 As soon as practicable after the effective date of this Registration Statement.

     If any  securities  being  registered  on this  form will be  offered  on a
delayed or continuous  basis in reliance on Rule 415 under the Securities Act of
1933, other than securities  offered in connection with a dividend  reinvestment
plan, check the following box. [ ]

     This  form is filed  to  register  additional  securities  for an  offering
pursuant  to Rule  462(b)  under  the  Securities  Act and  the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the offering is [ ]

        CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

=====================================================================


                                                                                                            

     TITLE OF SECURITIES             AMOUNT BEING                 PROPOSED                    PROPOSED                  AMOUNT OF
       BEING REGISTERED               REGISTERED           MAXIMUM OFFERING PRICE              MAXIMUM                REGISTRATION
                                                               PER SHARE (1)                  AGGREGATE                    FEE
                                                                                           OFFERING PRICE (1)

 Common Shares (no par value)

                                     12,500,000 shares          $20.00                   $250,000,000                  $31,675(2)





          =====================================================================

          (1)  Estimated  solely for the purpose of computing  the  registration
               fee pursuant to Rule 457.


          (2)  $3,801 of this amount was  previously  paid.  The  remainder  was
               transmitted prior to this filing to the designated lockbox of the
               Securities and Exchange  Commission at Mellon Bank in Pittsburgh,
               Pennsylvania.





     THE REGISTRANT  HEREBY AMENDS THIS  REGISTRATION  STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER  AMENDMENT  WHICH  SPECIFICALLY  STATES  THAT  THIS  REGISTRATION
STATEMENT SHALL  THEREAFTER  BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES  ACT OF 1933 OR UNTIL THIS  REGISTRATION  STATEMENT  SHALL BECOME
EFFECTIVE  ON SUCH  DATE  AS THE  SECURITIES  AND  EXCHANGE  COMMISSION,  ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

     Information  to be  included  in  Part B is set  forth  in  Part B to  this
Registration Statement.

     Information  to be included  in Part C is set forth  under the  appropriate
item, so numbered in Part C to
this Registration Statement.






The  information in this  prospectus is not complete and may be changed.  We may
not sell  these  securities  until the  registration  statement  filed  with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these  securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.



                                   SUBJECT TO COMPLETION, DATED APRIL 19, 2004




PROSPECTUS                          [EVERGREEN LOGO]


                                                                    Shares
                                              Evergreen Utilities and
                                                 High Income Fund
                                                   Common Shares
                                                 $20.00 per Share
                                                  --------------

     Investment Objective. Evergreen Utilities and High Income Fund (the "Fund")
is a newly organized, non-diversified, closed-end management investment company.
The Fund's  investment  objective is to seek a high level of current  income and
moderate capital growth, with an emphasis on providing  tax-advantaged  dividend
income.

     Portfolio Contents. Under normal market conditions, the Fund will invest at
least 80% of its net assets in securities of utilities  companies  (water,  gas,
electric  and  telecommunications  companies)  and  in  U.S.  dollar-denominated
non-investment grade debt securities.  The Fund allocates its assets between two
separate  investment  strategies.  Under  normal  market  conditions,  the  Fund
allocates  approximately 70% of its total assets to an investment  strategy that
focuses on common,  preferred and convertible  preferred  stocks and convertible
debentures of utility  companies (water,  gas,  electric and  telecommunications
companies),  and approximately 30% of its total assets to an investment strategy
that focuses on U.S. dollar-denominated  non-investment grade bonds, debentures,
and other income obligations.

     The Fund's  investment  adviser  reserves the discretion  based upon market
conditions  to  reallocate  the  proportions  of total  assets  invested in each
investment  strategy.  The U.S. high yield debt securities portion of the Fund's
portfolio  is expected to be  invested  in high yield debt  securities  that are
rated  between  and  including  B3 and Ba1 by Moody's  Investors  Service,  Inc.
("Moody's") or B- and BB+ by Standard & Poor's Ratings  Services  ("S&P") or are
unrated  securities of comparable quality as determined by the Fund's investment
adviser.  Up to 35% of the  utilities  portion  of the Fund's  portfolio  may be
invested in convertible  debentures of any quality. Of this 35%, a maximum of 7%
may be non-investment grade. No more than 35% of the Fund's total assets will be
invested  in  non-investment   grade  debt  securities.   Non-investment   grade
securities  are  commonly  referred  to  as  "junk  bonds"  and  are  considered
speculative with respect to the issuer's capacity to pay interest and principal.
They involve  greater risk of loss, are subject to greater price  volatility and
are less liquid,  especially  during periods of economic  uncertainty or change,
than higher rated debt securities.

     An  investment  in the  Fund  involves  a high  degree  of risk  and is not
appropriate  for all  investors.  There can be no  assurance  that the Fund will
achieve its investment objective.



     Investing in the Fund's common shares  involves risks that are described in
the "Risk Factors" section beginning on page 33 of this prospectus.

                                                  --------------
                                                             Per Share    Total
                                                               -----        ---
     Public offering price                                      $20.00     $___
     Sales load                                                $           $___
     Estimated offering expenses(1)                                 $      $___
     Proceeds to the Fund                                           $      $___
     (1) The  aggregate  expenses of the  offering  are  estimated to be $ . The
     investment  adviser has agreed to pay the amount by which the  aggregate of
     all of the Fund's  organizational  expenses and offering  costs (other than
     the sales  load)  exceeds  $0.04  per  common  share.  For  information  on
     additional compensation, see "Underwriting."

     The underwriters may also purchase up to an additional common shares at the
public  offering price,  less the sales load,  within days from the date of this
prospectus to cover over-allotments.

     Neither the Securities and Exchange  Commission (the  "Commission") nor any
state  securities  commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.

     The common shares will be ready for delivery on or about           , 2004.



                                                      -----------

     Citigroup A.G. Edwards & Sons, Inc. Merrill Lynch & Co. Wachovia Securities
Advest, Inc. Ferris, Baker Watts Janney Montgomery Scott LLC Incorporated

     KeyBanc Capital Markets Quick & Reilly, Inc. Wells Fargo Securities, LLC


     ______, 2004












(continued from cover page.)


     No Prior Trading History.  Because the Fund is newly organized,  its shares
have no history of public trading.  Shares of closed-end  funds frequently trade
at  prices  lower  than  their  net  asset  value.  The risk of loss due to this
discount may be greater for initial investors  expecting to sell their shares in
a relatively short period after completion of the public offering.  The Fund has
applied for listing on the American Stock Exchange under the symbol "ERH".


     Investment Adviser.  Evergreen  Investment  Management Company,  LLC is the
Fund's investment adviser. See "Management of the Fund."

     Leverage. The Fund initially intends,  within approximately three months of
the  commencement  of the  Fund's  operations,  to  issue  preferred  shares  of
beneficial  interest  representing  approximately  35%  of  the  Fund's  capital
immediately  after their  issuance.  The Fund  currently does not intend to have
multiple issues of preferred  shares,  but reserves the right to do so. The Fund
may also borrow money from banks or other  financial  institutions or issue debt
securities.  This  practice  is  known as  leverage.  The  Fund  will not  issue
preferred  shares or  borrow  money  if,  immediately  after  such  issuance  or
borrowing,  total  leverage  for the Fund exceeds 38% of the Fund's total assets
immediately  after such issuance or borrowing.  The Fund may also borrow through
reverse  repurchase  agreements  (up to 20% of its total  assets  subject to the
overall  limit on  leverage  and  borrowings).  The use of  preferred  shares or
borrowing to leverage the common shares creates risks. Any such preferred shares
or borrowings will have seniority over the common shares.


     Tender Offers for Shares (Evergreen Enhanced Liquidity Plan). Under certain
circumstances, the Fund intends to make tender offers for up to 5% of the Fund's
outstanding  common shares at net asset value on a quarterly  basis,  subject to
certain  conditions  described  in this  prospectus,  and for a total  of  eight
consecutive calendar quarters.  The Fund will make its first tender offer within
the first six to eight months of the Fund's operations if certain conditions are
met. See "Tender Offers (Evergreen Enhanced Liquidity Plan)."


     You should read the prospectus,  which contains important information about
the Fund,  before  deciding  whether to invest in the Fund's common shares,  and
retain it for future  reference.  A Statement of Additional  Information,  dated
_____ , 2004  containing  additional  information  about the Fund has been filed
with the Commission and is  incorporated  by reference in its entirety into this
prospectus.  You  may  request  a free  copy  of  the  Statement  of  Additional
Information, the table of contents of which is on page 60 of this prospectus, by
calling  1-800-730-6001  or by  writing  to the Fund.  You can  review  and copy
documents  the  Fund has  filed at the  Commission's  Public  Reference  Room in
Washington,  D.C. Call 1-202-942-8090 for information.  The Commission charges a
fee for  copies.  You can get the same  information  free from the  Commission's
EDGAR  database  on the  Internet  (http://www.sec.gov).  You  may  also  e-mail
requests for these documents to  publicinfo@sec.gov or make a request in writing
to the Commission's Public Reference Section, Washington, D.C. 20549-0102.

     The Fund's common  shares do not represent a deposit or obligation  of, and
are not  guaranteed  or  endorsed  by,  any  bank or  other  insured  depository
institution  and are not  federally  insured by the  Federal  Deposit  Insurance
Corporation, the Federal Reserve Board or any other government agency.









     You should rely only on the  information  contained in or  incorporated  by
reference in this prospectus.  The Fund has not, and the underwriters  have not,
authorized  any other  person to  provide  you with  different  or  inconsistent
information.  If anyone provides you with different or inconsistent information,
you should not rely on it. The Fund is not, and the underwriters are not, making
an offer to sell these securities in any jurisdiction where the offer or sale is
not  permitted.  You should assume that the  information  in this  prospectus is
accurate only as of the date of this  prospectus,  and that the Fund's business,
financial condition and prospects may have changed since that date.



                                                 TABLE OF CONTENTS

                                                                           Page
                                                                           ----
Prospectus Summary.........................................................  5
Summary of Fund Expenses................................................... 21
The Fund................................................................... 22
Use of Proceeds............................................................ 22
Investment Objective and Principal Investment Strategies................... 23
Leverage................................................................... 30
Risk Factors............................................................... 33
Management of the Fund..................................................... 41
Dividends and Distributions................................................ 43
Automatic Dividend Reinvestment Plan....................................... 44
Closed-End Fund Structure.................................................. 46
U.S. Federal Income Tax Matters............................................ 47
Net Asset Value............................................................ 49
Tender Offers (Evergreen Enhanced Liquidity Plan).......................... 50
Description of Shares...................................................... 52
Anti-takeover Provisions of the Agreement and Declaration of Trust and
  By-laws.................................................................. 53
Underwriting............................................................... 55
Custodian, Transfer Agent, Dividend Disbursing Agent and Registrar......... 58
Validity of Common Shares.................................................. 59
Table of Contents for Statement of Additional Information.................. 60





     Until        (the  25th day after  the date of this  prospectus),  all
dealers that buy, sell or trade the common shares,  whether or not participating
in this offering,  may be required to deliver a prospectus.  This is in addition
to the dealer's obligation to deliver a prospectus when acting as an underwriter
and with respect to their unsold allotments or subscriptions.







                               PROSPECTUS SUMMARY




     This is only a summary. This summary may not contain all of the information
that you should  consider  before  investing in the Fund's  common  shares.  You
should review the more detailed information  contained in this prospectus and in
the statement of additional  information,  especially the  information set forth
under the heading "Risk Factors."

                                     

The Fund..............................   Evergreen Utilities and High Income Fund (the "Fund") is a newly
                                         organized, non-diversified, closed-end management investment company.
                                         The Fund's principal offices are located at 200 Berkeley Street, Boston,
                                         Massachusetts 02116-5034, and its telephone number is 1-800-343-2898.

The Offering..........................   The Fund is offering                   common shares at an initial
                                         offering price of $20.00 per share.  The common shares are being offered
                                         by a group of underwriters (the "underwriters") led by Citigroup Global
                                         Markets Inc., A.G. Edwards & Sons, Inc., Merrill Lynch, Pierce, Fenner &
                                         Smith Incorporated, Wachovia Capital Markets, LLC, Advest, Inc., Ferris,
                                         Baker Watts, Incorporated, Janney Montgomery Scott LLC, KeyBanc Capital
                                         Markets, A Division of McDonald Investments Inc., Quick & Reilly, Inc.
                                         A FleetBoston Financial Company and Wells Fargo Securities, LLC.  You
                                         must purchase at least 100 common shares ($2,000.00) in order to
                                         participate in the offering.  The Fund has granted the underwriters the
                                         right to purchase up to an additional        common shares at the public
                                         offering price, less the sales load, within       days from the date of
                                         this prospectus to cover over-allotments.  Evergreen Investment
                                         Management Company, LLC, the Fund's investment adviser (the "Advisor"),
                                         has agreed to pay the amount by which the aggregate of all of the Fund's
                                         organizational expenses and offering costs (other than sales load)
                                         exceeds $0.04 per common share. See "Underwriting" beginning on page 55.

Investment Objective..................   The Fund's investment objective is to seek a high level of current
                                         income and moderate capital growth, with an emphasis on providing
                                         tax-advantaged dividend income.  There can be no assurance that the Fund
                                         will achieve its investment objective.  See "Investment Objective and
                                         Principal Investment Strategies" beginning on page 23.
Investment Policies...................   Under normal market conditions, the Fund will invest at least 80% of its
                                         net assets in securities of utilities companies (water, gas, electric
                                         and telecommunications companies) and in U.S. non-investment grade debt
                                         securities.  The Fund allocates its assets between two separate
                                         investment strategies.  Under normal market conditions, the Fund
                                         allocates approximately 70% of its total assets to an investment
                                         strategy that focuses on common, preferred and convertible preferred
                                         stocks and convertible debentures of utility companies (water, gas,
                                         electric and telecommunications companies), and approximately 30% of its
                                         total assets to an investment strategy that focuses on U.S. dollar
                                         denominated non-investment grade bonds, debentures, and other income
                                         obligations.  The Advisor reserves the discretion based upon market
                                         conditions to reallocate the proportions of total assets invested in
                                         each investment strategy.  No more than 35% of the Fund's total assets
                                         will be invested in non-investment grade debt securities.  The Fund may
                                         invest up to 25% of its total assets in foreign securities.
                                         The two separate investment strategies are as follows:
                                         o Utility Securities.  Under normal market conditions, the Fund expects
                                         to invest approximately 70% of its total assets to an investment
                                         strategy that focuses on common, preferred and convertible preferred
                                         stocks and convertible debentures of utility companies (water, gas,
                                         electric and telecommunications companies).  The Fund may invest this
                                         portion of its assets in companies of all market capitalizations.  The
                                         Fund may invest up to 35% of this portion of the Fund's assets in
                                         convertible debentures of utility companies of any quality.  Of this
                                         35%, a maximum of 7% may be non-investment grade.


                                         o U.S. High Yield Debt Securities.  Under normal market conditions, the
                                         Fund expects to invest approximately 30% of its total assets in an
                                         investment strategy that focuses on U.S. dollar denominated
                                         non-investment grade bonds, debentures and other income obligations.


                                         The high yield securities in which the Fund invests are expected to be
                                         rated between and including B3 and Ba1 by Moody's or B- and BB+ by S&P
                                         or will be unrated but determined by the Advisor to be of comparable
                                         quality.  This portion of the Fund will not purchase high yield
                                         securities with a rating of CCC or below, although the Fund may hold
                                         such securities as a result of a downgrade in ratings subsequent to
                                         their purchase.  No more than 10% of this portion of the Fund's assets
                                         may be invested in securities that are unrated or rated CCC or below.
                                         Debt securities rated below investment grade are commonly referred to as
                                         "junk bonds" and are considered speculative with respect to the issuer's
                                         capacity to pay interest and repay principal. Non-investment grade debt
                                         securities involve greater risk of loss, are subject to greater price
                                         volatility and are less liquid, especially during periods of economic
                                         uncertainty or change, than higher rated debt securities.  For purposes
                                         of the Fund's credit quality policies, if a security receives different
                                         ratings from nationally recognized securities rating organizations, the
                                         Fund will use the rating chosen by the portfolio managers as
                                         most representative of the security's credit quality.  The Advisor
                                         anticipates that, assuming the issuance of preferred shares representing
                                         approximately 35% of the Fund's capital immediately after their
                                         issuance, the weighted average duration of the Fund's high yield U.S.
                                         debt securities will be 4.6 to 9.2 years (after leverage), although
                                         there is no guarantee that this range will be obtained.

                                         Tax-advantaged Dividend Income.  Recent changes in the tax laws have
                                         allowed qualifying dividends to be taxed at the same rate as long-term
                                         capital gains (currently 15%).  Through the Fund's investments in the
                                         utilities sector, the Fund expects to invest a significant portion of
                                         its assets in equity securities that pay quarterly dividends qualifying
                                         for such rate.  Therefore, a significant portion of the Fund's yield may
                                         be considered to be tax-advantaged relative to investments in securities
                                         that do not qualify for the same rate as long-term capital gains.
                                         However, because the Fund will also invest in debt obligations, it will
                                         have less tax advantages than a fund fully invested in securities
                                         qualifying for this rate.

                                         In addition to the investment strategies discussed above, the Fund may
                                         also invest in the following:

                                         Foreign Currency Transactions.  Foreign currency transactions are
                                         entered into for the purpose of hedging against foreign exchange risk
                                         arising from the Fund's investment or anticipated investment in
                                         securities denominated in foreign currencies.  The Fund also may enter
                                         into these contracts for purposes of increasing exposure to a foreign
                                         currency or to shift exposure to foreign currency fluctuations from one
                                         country to another.  Foreign currency transactions include the purchase
                                         of foreign currency on a spot (or cash) basis, contracts to purchase or
                                         sell foreign currencies at a future date (forward contracts), the
                                         purchase and sale of foreign currency futures contracts, and the
                                         purchase of exchange traded and over-the-counter call and put options on
                                         foreign currency futures contracts and on foreign currencies.
                                         Corporate Loans.  The Fund may invest a portion of its total assets in
                                         loan participations and other claims against a corporate borrower.  The
                                         Fund may invest up to 10% of its total assets in corporate loans.  The
                                         corporate loans in which the Fund invests primarily consist of direct
                                         obligations of a borrower. The Fund may invest in a corporate loan at
                                         origination as a co-lender or by acquiring in the secondary market
                                         participations in, assignments of or novations of a corporate loan. By
                                         purchasing a participation, the Fund acquires some or all of the
                                         interest of a bank or other lending institution in a loan to a corporate
                                         borrower.
                                         Derivatives.  The Fund may invest up to 10% of its total assets in
                                         futures and options on securities and indices and in other
                                         derivatives.   The Fund may use derivatives for a variety of purposes,
                                         including:
                                         o As a hedge against adverse changes in securities market prices or
                                         interest rates; and
                                         o As a substitute for purchasing or selling securities.
                                         In addition, the Fund may enter into interest rate swap transactions
                                         with respect to the total amount the Fund is leveraged in order to hedge
                                         against adverse changes in interest rates affecting dividends payable on
                                         any preferred shares or interest payable on borrowings constituting
                                         leverage. In connection with any such swap transaction, the Fund will
                                         segregate liquid securities in the amount of its obligations under the
                                         transaction.  A derivative is a security or instrument whose value is
                                         determined by reference to the value or the change in value of one or
                                         more securities, currencies, indices or other financial instruments.
                                         The Fund does not use derivatives as a primary investment technique and
                                         generally does not anticipate using derivatives for non-hedging
                                         purposes. In the event the Advisor uses derivatives for non-hedging
                                         purposes, no more than 10% of the Fund's total assets will be committed
                                         to initial margin for derivatives for such purposes.
                                         Temporary Investments.  Due to current market conditions, investments
                                         that, in the judgment of the Advisor, are appropriate investments for
                                         the Fund may not be immediately available.  Therefore, the Fund expects
                                         that there will be an initial investment period of up to three months
                                         following the completion of its common shares offering before it is
                                         fully invested in accordance with its investment objective and
                                         policies.  Pending such investment, the Fund anticipates that all or a
                                         portion of the proceeds will be invested in typically lower-yielding
                                         U.S. government securities or high grade, short-term money market
                                         instruments.
                                         See "Investment Objective and Principal Investment Strategies" beginning
                                         on page 23.
Use of Leverage by the Fund...........   The Fund initially intends, within approximately three months of the
                                         commencement of the Fund's operations, to issue preferred shares of
                                         beneficial interest representing approximately 35% of the Fund's capital
                                         immediately after their issuance.  The Fund may also borrow money from
                                         banks or other financial institutions or issue debt securities. This
                                         practice is known as leverage.  The Fund may not be leveraged at all
                                         times and the amount of borrowing or leverage, if any, may vary
                                         depending upon a variety of factors, including the Advisor's outlook for
                                         the fixed income market and the costs that the Fund would incur as a
                                         result of such leverage.  The Fund will not issue preferred shares or
                                         borrow money if, immediately after such issuance or borrowing, total
                                         leverage for the Fund exceeds 38% of the Fund's total assets immediately
                                         after such issuance or borrowing.  The Fund may also borrow through
                                         reverse repurchase agreements (up to 20% of its total assets subject to
                                         the overall limitation on leverage and borrowings).  The Fund's
                                         leveraging strategy may not be successful.  By leveraging its investment
                                         portfolio, the Fund creates an opportunity for increased net income or
                                         capital appreciation.  However, the use of leverage also involves risks,
                                         which can be significant.  These risks include the possibility that the
                                         value of the assets acquired with such borrowing decreases although the
                                         Fund's liability is fixed, greater volatility in the Fund's net asset
                                         value, fluctuations in the dividend paid by the Fund and the market
                                         price of the Fund's common shares and higher expenses.  Because the
                                         Advisor's fee is based upon a percentage of the Fund's Total Assets (as
                                         defined below), the Advisor's fee will be higher if the Fund is
                                         leveraged and the Advisor will have an incentive to be more aggressive
                                         and leverage the Fund.  The Advisor intends only to leverage the Fund
                                         when it believes that the potential return on such additional
                                         investments is likely to exceed the costs incurred in connection with
                                         the leverage.  See "Leverage" beginning on page 30.

Risks.................................   For a further discussion on the risks described below, see "Risk
                                         Factors" beginning on page 33.
                                            Risk of No Operating History.  The Fund is a newly organized
                                         closed-end management investment company and has no operating history or
                                         history of public trading.
                                            Investment Risk. An investment in the Fund is subject to investment
                                         risk, including the possible loss of the entire principal amount that
                                         you invest. Your investment in the Fund represents an indirect
                                         investment in the securities owned by the Fund.  The value of these
                                         securities may increase or decrease, at times rapidly and unexpectedly.
                                         Your investment in the Fund may at any point in the future be worth less
                                         than your original investment even after taking into account the
                                         reinvestment of dividends and distributions.
                                            Concentration Risk.  The Fund will invest primarily in securities of
                                         utilities companies.  An investment in a fund that concentrates its
                                         investments in a single sector or industry entails greater risk than an
                                         investment in a fund that invests its assets in numerous sectors or
                                         industries.  The Fund may be vulnerable to any financial, economic,
                                         political or other development in its concentration sector or industry
                                         that may weaken the sector or industry. As a result, the Fund's shares
                                         may fluctuate more widely in value than those of a fund investing in a
                                         number of different sectors or industries.
                                            Non-Diversification Risk.  An investment in a fund that is
                                         non-diversified entails greater risk than an investment in a diversified
                                         fund.  When a fund is non-diversified, it may invest a greater
                                         percentage of assets in a single issuer than may be invested by a
                                         diversified fund.  A higher percentage of investments among fewer
                                         issuers may result in greater fluctuation in the total market value of
                                         the Fund's portfolio as compared to a fund which invests in numerous
                                         issuers.

                                            Utility Securities Risk.   Investments in utility sectors include the
                                         unique risks associated with decreases in the demand for utility company
                                         (water, gas and electric) products and services, increased competition
                                         resulting from deregulation, and rising energy costs, among others.
                                         Such developments also could cause utility companies to reduce the
                                         dividends they pay on their stock, potentially decreasing the dividends
                                         you receive from the Fund.  Telecommunications, similar to technology,
                                         is highly dependent on innovation and expansion of existing
                                         technologies, such as internet communications and the ability to access
                                         the internet through cellular phones, as well as intense pricing
                                         competition and industry consolidation.  Water, gas and electric
                                         companies typically borrow heavily to support continuing operations.
                                         Increases in interest rates could increase these utility companies'
                                         borrowing costs, which could adversely impact their financial results
                                         and stock price, and ultimately the value of and total return on your
                                         Fund shares.


                                            Investment Style Risk.  Securities with different characteristics
                                         tend to shift in and out of favor depending upon market and economic
                                         conditions as well as investor sentiment. The Fund may outperform or
                                         underperform other funds that employ a different style of investing.
                                         The Fund may also employ a combination of styles that impact its risk
                                         characteristics. Examples of different styles include growth and value
                                         investing. Growth stocks may be more volatile than other stocks because
                                         they are more sensitive to investor perceptions of the issuing company's
                                         earnings growth potential.  Growth-oriented funds will typically
                                         underperform when value investing is popular.  Value stocks are those
                                         which are undervalued in comparison to their peers due to adverse
                                         business developments or other factors.  Value-oriented funds will
                                         typically underperform when growth investing is popular.
                                            Stock Market Risk.  Your investment in the Fund will be affected by
                                         general economic conditions such as prevailing economic growth,
                                         inflation and interest rates.  When economic growth slows, or interest
                                         or inflation rates increase, equity securities tend to decline in
                                         value.  Such events could also cause companies to decrease the dividends
                                         they pay.  If these events were to occur, the dividend yield, total
                                         return earned on and the value of your investment would likely decline.
                                         Even if general economic conditions do not change, the dividend yield,
                                         total return earned on and the value of your investment could decline if
                                         the particular industries, companies or sectors in which a Fund invests
                                         do not perform well.
                                            Market Capitalization Risk. The Fund may invest the portion of its
                                         assets invested in utilities securities in securities of companies of
                                         all market capitalizations.  Stocks fall into three broad market
                                         capitalization categories--large, medium and small. Investing primarily
                                         in one category carries the risk that due to current market conditions
                                         that category may be out of favor with investors.  If valuations of
                                         large capitalization companies appear to be greatly out of proportion to
                                         the valuations of small or medium capitalization companies, investors
                                         may migrate to the stocks of small- and mid-sized companies causing a
                                         fund that invests in these companies to increase in value more rapidly
                                         than a fund that invests in larger, fully-valued companies.  Investing
                                         in medium and small capitalization companies may be subject to special
                                         risks associated with narrower product lines, more limited financial
                                         resources, smaller management groups or greater dependence on a few key
                                         employees, and a more limited trading market for their stocks as
                                         compared to larger capitalization companies.  As a result, stocks of
                                         small and medium capitalization companies may decline significantly in
                                         market downturns or their value may fluctuate more sharply than other
                                         securities.
                                            Preferred Stock Risk.  The Fund may purchase preferred stock.
                                         Preferred stock, unlike common stock, has a stated dividend rate payable
                                         from the corporation's earnings. Preferred stock dividends may be
                                         cumulative or non-cumulative, participating, or auction rate.
                                         "Cumulative" dividend provisions require all or a portion of prior
                                         unpaid dividends to be paid.  If interest rates rise, the fixed dividend
                                         on preferred stocks may be less attractive, causing the price of
                                         preferred stocks to decline.  Preferred stock may have mandatory sinking
                                         fund provisions, as well as call/redemption provisions prior to
                                         maturity, which can be a negative feature when interest rates decline.
                                         The rights of preferred stock on distribution of a corporation's assets
                                         in the event of a liquidation are generally subordinate to the rights
                                         associated with a corporation's debt securities.

                                            Credit Risk.  Credit risk refers to an issuer's ability to make
                                         payments of principal and interest when they are due.  Because the Fund
                                         will own securities with low credit quality, it will be subject to a
                                         high level of credit risk.  The credit quality of such securities is
                                         considered speculative by rating agencies with respect to the issuer's
                                         ability to pay interest or principal.  The prices of lower grade
                                         securities are more sensitive to negative corporate developments, such
                                         as a decline in profits, or adverse economic conditions, such as a
                                         recession, than are the prices of higher grade securities.  Securities
                                         that have longer maturities or that do not make regular interest
                                         payments also fluctuate more in price in response to negative corporate
                                         or economic news.  Therefore, lower grade securities may experience high
                                         default rates, which could mean that the Fund may lose some of its
                                         investments in such securities.  If this occurs, the Fund's net
                                         asset value and ability to make distributions to you would be adversely
                                         affected.  The effects of this default risk are significantly greater
                                         for the holders of lower grade securities because these securities often
                                         are unsecured and subordinated to the payment rights of other creditors
                                         of the issuer.  The Fund may also be subject to credit risk to the
                                         extent it engages in transactions, such as repurchase agreements or
                                         dollar rolls, which involve a promise by a third party to honor an
                                         obligation to the Fund.
                                            Interest Rate Risk.  If interest rates go up, the value of debt
                                         securities and certain dividend paying stocks tends to fall.  If a Fund
                                         invests a significant portion of its portfolio in debt securities or
                                         stocks purchased primarily for dividend income, and interest rates rise,
                                         then the value of your investment may decline.  If interest rates go
                                         down, interest earned by a Fund on its debt investments may also
                                         decline, which could cause the Fund to reduce the dividends it pays.
                                         The longer the term of a debt security held by a Fund, the more the Fund
                                         is subject to interest rate risk.
                                            High Yield Debt Securities Risk.  Investment in high yield securities
                                         involves substantial risk of loss.  Non-investment grade debt securities
                                         or comparable unrated securities are commonly referred to as "junk
                                         bonds" and are considered predominantly speculative with respect to the
                                         issuer's ability to pay interest and principal and are susceptible to
                                         default or decline in market value due to adverse economic and business
                                         developments.  The market values for high yield securities tend to be
                                         very volatile, and these securities are less liquid than investment
                                         grade debt securities.  For these reasons, your investment in the Fund
                                         is subject to the following specific risks:
                                         o Increased price sensitivity to changing interest rates and to a
                                         deteriorating economic environment.
                                         o Greater risk of loss due to default or declining credit quality.
                                         o Adverse company specific events are more likely to render the issuer
                                         unable to make interest and/or principal payments.
                                         o If a negative perception of the high yield market develops, the price
                                         and liquidity of high yield securities may be depressed.  This negative
                                         perception could last for a significant period of time.
                                         o Adverse changes in economic conditions are more likely to cause a high
                                         yield issuer to default on principal and interest payments than an
                                         investment grade issuer.  The principal amount of high yield securities
                                         outstanding has proliferated in the past decade as an increasing number
                                         of issuers have used high yield securities for corporate financing.  An
                                         economic downturn could severely affect the ability of highly leveraged
                                         issuers to service their debt obligations or to repay their obligations
                                         upon maturity.
                                         o The secondary market for high yield securities may not be as liquid as
                                         the secondary market for more highly rated securities, a factor which
                                         may have an adverse effect on the Fund's ability to dispose of a
                                         particular security.  There are fewer dealers in the market for high
                                         yield securities than for investment grade obligations.  The prices
                                         quoted by different dealers may vary significantly and the spread
                                         between the bid and ask price is generally much larger than for higher
                                         rated instruments.  Under adverse market or economic conditions, the
                                         secondary market for high yield securities could contract further,
                                         independent of any specific adverse changes in the condition of a
                                         particular issuer, and these instruments may become illiquid.  As a
                                         result, the Fund could find it more difficult to sell these securities
                                         or may be able to sell the securities only at prices lower than if such
                                         securities were widely traded.  Prices realized upon the sale of such
                                         lower rated or unrated securities, under these circumstances, may be
                                         less than the prices used in calculating the Fund's net asset value.
                                         In addition to the risks discussed above, debt securities, including
                                         high yield securities, are subject to certain risks, including:
                                            Issuer Risk.  The value of corporate income-producing securities may
                                         decline for a number of reasons which directly relate to the issuer,
                                         such as management performance, financial leverage and reduced demand
                                         for the issuer's goods and services.
                                            Reinvestment Risk.  Reinvestment risk is the risk that income from
                                         the Fund's bond portfolio will decline if and when the Fund invests the
                                         proceeds from matured, traded or called bonds at market interest rates
                                         that are below the portfolio's current earnings rate. A decline in
                                         income could affect the common shares' market price or their overall
                                         returns.
                                            Prepayment Risk.  During periods of declining interest rates, the
                                         issuer of a security may exercise its option to prepay principal earlier
                                         than scheduled, forcing the Fund to reinvest in lower yielding
                                         securities.  Debt securities frequently have call features that allow
                                         the issuer to repurchase the security prior to its stated maturity.  An
                                         issuer may redeem an obligation if the issuer can refinance the debt at
                                         a lower cost due to declining interest rates or an improvement in the
                                         credit standing of the issuer.
                                            Extension Risk. During periods of rising interest rates, the average
                                         life of certain types of securities may be extended because of slower
                                         than expected principal payments.  This may lock in a below market
                                         interest rate, increase the security's duration (the estimated period
                                         until the security is paid in full) and reduce the value of the security.
                                            Management Risk.  The Fund is subject to management risk because it
                                         is an actively managed investment portfolio.  The Advisor's judgment
                                         about the attractiveness, relative value or potential appreciation of a
                                         particular sector, security or investment strategy may prove to be
                                         incorrect and there can be no guarantee that it will produce the desired
                                         results.
                                            Foreign (Non-U.S.) Investment Risk.  Investing in the securities of
                                         foreign issuers may involve unique risks compared to investing in the
                                         securities of U.S. issuers.  Some of these risks do not apply to issuers
                                         located in larger, more developed countries.  These risks will be more
                                         pronounced if the Fund invests significantly in emerging market
                                         countries or in one country.  For example, political turmoil and
                                         economic instability in the countries in which a Fund invests could
                                         adversely affect the dividend yield, total return earned on and the
                                         value of your investment.  Less information about non-U.S. issuers or
                                         markets may be available due to less rigorous disclosure and accounting
                                         standards or regulatory practices.  This may make it harder to get
                                         accurate information about a security or company, and increase the
                                         likelihood that an investment will not perform as well as expected.
                                         Many non-U.S. markets are smaller, less liquid and more volatile than
                                         US. markets.  In a changing market, the Advisor may not be able to sell
                                         the Fund's portfolio securities in amounts and prices the Advisor
                                         considers reasonable.  In addition, if the value of any foreign currency
                                         in which a Fund's investments are denominated declines relative to the
                                         U.S. dollar, the dividend yield, total return earned on and the value of
                                         your investment in the Fund may decline as well.

                                            Currency Devaluation and Fluctuations Risk.  The Fund may invest in
                                         non-dollar-denominated investments.  The Fund may be limited in its
                                         ability to hedge the value of its non-dollar-denominated investments
                                         against currency fluctuations.  As a result, a decline in the value of
                                         currencies in which the Fund's investments are denominated against the
                                         dollar will result in a corresponding decline in the dollar value of the
                                         Fund's assets.  These declines will in turn affect the Fund's income and
                                         net asset value.

                                            Convertible Securities Risk.  Convertible securities generally offer
                                         lower interest or dividend yields than non-convertible securities
                                         of similar quality.  As with all fixed income securities, the market
                                         values of convertible securities tend to decline as interest rates
                                         increase and, conversely, to increase as interest rates decline.
                                         However, when the market price of the common stock underlying a
                                         convertible security exceeds the conversion price, the convertible
                                         security tends to reflect the market price of the underlying common
                                         stock. As the market price of the underlying common stock declines, the
                                         convertible security tends to trade increasingly on a yield basis and
                                         thus may not decline in price to the same extent as the underlying
                                         common stock.  Convertible securities rank senior to common stocks in an
                                         issuer's capital structure and consequently entail less risk than the
                                         issuer's common stock.
                                            Corporate Loans Risk.  The Fund may acquire interests in loans made
                                         by banks or other financial institutions to corporate issuers or
                                         participation interests in such loans (up to 10% of the Fund's total
                                         assets).  By purchasing a participation interest in a loan, the Fund
                                         acquires some or all of the interest of a bank or other lending
                                         institution in a loan to a corporate or government borrower.  The
                                         participations typically will result in the Fund having a contractual
                                         relationship only with the lender, not the borrower.  The Fund will have
                                         the right to receive payments of principal, interest and any fees to
                                         which it is entitled only from the lender selling the participation and
                                         only upon receipt by the lender of the payments from the borrower.
                                         If the Fund only acquires a participation in the loan made by a third
                                         party, the Fund may not be able to control the exercise of any remedies
                                         that the lender would have under the corporate loan.  Such third party
                                         participation arrangements are designed to give corporate loan investors
                                         preferential treatment over high yield investors in the event of a
                                         deterioration in the credit quality of the issuer.  Even when these
                                         arrangements exist, however, there can be no assurance that the
                                         principal and interest owed on the corporate loan will be repaid in
                                         full.  The secondary dealer market for certain corporate loans may not
                                         be as well developed as the secondary dealer market for bonds and,
                                         therefore, presents increased market risk relating to liquidity and
                                         pricing concerns. In addition, the markets in loans are not regulated by
                                         federal securities laws or the Commission.
                                            Derivatives Risk.  Even a small investment in derivatives can have
                                         a significant impact on the Fund's exposure to interest rates or currency
                                         exchange rates. If changes in a derivative's value do not correspond to
                                         changes in the value of the Fund's other investments, the Fund may not
                                         fully benefit from or could lose money on the derivative position. In
                                         addition, some derivatives involve risk of loss if the person who issued
                                         the derivative defaults on its obligation. Certain derivatives may be
                                         less liquid and more difficult to value.
                                            Counterparty Risk.  The Fund will be subject to credit risk with
                                         respect to the counterparties to the derivatives contracts purchased by
                                         the Fund. If a counterparty becomes bankrupt or otherwise fails to
                                         perform its obligations under a derivative contract due to financial
                                         difficulties, the Fund may experience significant delays in obtaining
                                         any recovery under the derivative contract in a bankruptcy or other
                                         reorganization proceeding. The Fund may obtain only a limited recovery
                                         or may obtain no recovery in such circumstances.
                                            Leverage Risk.  The Fund initially intends to issue preferred shares
                                         of beneficial interest representing approximately 35% of the Fund's
                                         capital after their issuance of common shares. The Fund may also borrow
                                         money from banks or other financial institutions or issue debt
                                         securities.  The Fund will not issue preferred shares or borrow money
                                         if, immediately after such issuance or borrowing, total leverage for the
                                         Fund exceeds 38% of the Fund's total assets immediately after such
                                         issuance or borrowing.  Leverage creates risks which may adversely
                                         affect the return for the holders of common shares, including:
                                         o the likelihood of greater volatility of net asset value, market price
                                         and dividend rate of the Fund's common shares;
                                         o fluctuations in the dividend rates on any preferred shares or in
                                         interest rates on borrowings and short-term debt;
                                         o increased operating costs, which may reduce the Fund's total return;
                                         and
                                         o the potential for a decline in the value of an investment acquired
                                         with borrowed funds, while the Fund's obligations under such borrowing
                                         remain fixed.
                                         To the extent the income or capital appreciation derived from securities
                                         purchased with funds received from leverage exceeds the cost of
                                         leverage, the Fund's return will be greater than if leverage had not
                                         been used.  Conversely, if the income or capital appreciation from the
                                         securities purchased with such funds is not sufficient to cover the cost
                                         of leverage or if the Fund incurs capital losses, the return of the Fund
                                         will be less than if leverage had not been used, and therefore the
                                         amount available for distribution to shareholders as dividends and other
                                         distributions will be reduced or potentially eliminated.
                                         Certain types of borrowings may result in the Fund being subject to
                                         covenants in credit agreements, including those relating to asset
                                         coverage, borrowing base and portfolio composition requirements and
                                         additional covenants that may affect the Fund's ability to pay dividends
                                         and distributions on common shares in certain instances.  The Fund may
                                         also be required to pledge its assets to the lenders in connection with
                                         certain types of borrowing.  The Fund may be subject to certain
                                         restrictions on investments imposed by guidelines of one or more
                                         nationally recognized rating organizations which may issue ratings for
                                         the preferred shares or short-term debt instruments issued by the Fund.
                                         These guidelines may impose asset coverage or portfolio composition
                                         requirements that are more stringent than those imposed by the
                                         Investment Company Act of 1940, as amended (the "1940 Act").
                                            Market Price of Shares Risk. Whether investors will realize a gain or
                                         loss upon the sale of the Fund's common shares will depend upon whether
                                         the market value of the shares at the time of sale is above or below the
                                         price the investor paid, taking into account transaction costs, for the
                                         shares and is not directly dependent upon the Fund's net asset value.
                                         Because the market value of the Fund's shares will be determined by
                                         factors such as the relative demand for and supply of the shares in the
                                         market, general market conditions and other factors beyond the control
                                         of the Fund, the Fund cannot predict whether its common shares will
                                         trade at, below or above net asset value, or below or above the initial
                                         offering price for the shares.
                                            Market Disruption and Geopolitical Risk.  The war with Iraq, its
                                         aftermath and the continuing occupation of Iraq are likely to have a
                                         substantial impact on the U.S. and the world economies and securities
                                         markets.  The nature, scope and duration of the occupation cannot be
                                         predicted with any certainty.  Terrorist attacks on the World Trade
                                         Center and Pentagon on September 11, 2001 closed some of the U.S.
                                         securities markets for a four-day period and the occurrence of similar
                                         events in the future cannot be ruled out.  The war and occupation,
                                         terrorism and related geopolitical risks have led, and may in the future
                                         lead, to increased short-term market volatility and may have adverse
                                         long-term effects on the U.S. and world economies and markets
                                         generally.  Those events could also have an acute effect on individual
                                         issuers or related groups of issuers, securities markets, interest
                                         rates, auctions, secondary trading, ratings, credit risk, inflation and
                                         other factors relating to the common shares.
                                            Inflation Risk.  Inflation risk is the risk that the value of assets
                                         or income from the Fund's investments will be worth less in the future
                                         as inflation decreases the value of money. As inflation increases, the
                                         real, or inflation-adjusted, value of the common shares and
                                         distributions can decline and the dividend payments on the Fund's
                                         preferred shares, if any, or interest payments on Fund borrowings, if
                                         any, may increase.
                                            Market Discount Risk.  Shares of closed-end funds frequently trade at
                                         prices lower than their net asset value.  This is commonly referred to
                                         as "trading at a discount."  This characteristic of shares of closed-end
                                         funds is a risk separate and distinct from the risk that the Fund's net
                                         asset value may decrease. Investors who sell their shares within a
                                         relatively short period after completion of the public offering are
                                         likely to be exposed to this risk.  Accordingly, the Fund is designed
                                         primarily for long-term investors and should not be considered a vehicle
                                         for trading purposes.  Net asset value will be reduced following the
                                         offering by the underwriting discount and the amount of offering
                                         expenses paid by the Fund.
                                            Tender Offers (Evergreen Enhanced Liquidity Plan) Risk.  The Fund's
                                         potential quarterly tender offers for common shares may prevent the Fund
                                         from taking advantage of attractive investment opportunities.  Moreover,
                                         if the Fund does not generate sufficient cash flow from operations, it
                                         may be forced to sell investments at disadvantageous times, and in
                                         amounts that the Adviser would not otherwise contemplate, or to borrow
                                         money, in order to make such tender offers.  If the Fund borrows money,
                                         rather than liquidate investments, to fund a tender offer, it is subject
                                         to the risk that investment return on the common shares will be reduced
                                         to the extent the cost of borrowings exceeds income on the retained
                                         investments.

                                            Liquidity Risk.  The Fund does not intend to purchase illiquid
                                         securities, which are securities that cannot be disposed of within seven
                                         days in the ordinary course of business at approximately the value at
                                         which the Fund has valued the securities. However, the Fund is not
                                         required to sell or dispose of any debt security that becomes illiquid
                                         subsequent to its purchase. Illiquid securities may be subject to wide
                                         fluctuations in market value. The Fund may be subject to significant
                                         delays in disposing of illiquid securities. Accordingly, the Fund may be
                                         forced to sell these securities at less than fair market value or may
                                         not be able to sell them when the Advisor believes that it is desirable
                                         to do so. Illiquid securities also may entail registration expenses and
                                         other transaction costs that are higher than those for liquid securities.
                                            Anti-takeover Provisions Risk.  The Fund's Declaration of Trust and
                                         By-laws include provisions that could limit the ability of other
                                         entities or persons to acquire control of the Fund or to change
                                         the composition of its Board of Trustees. Such provisions could limit the
                                         ability of shareholders to sell their shares at a premium over
                                         prevailing market prices by discouraging a third party from seeking to
                                         obtain control of the Fund. These provisions include staggered terms of
                                         office for the Trustees, advance notice requirements for shareholder
                                         proposals, and super-majority voting requirements for open-ending the
                                         Fund or a merger, liquidation, asset sale or similar transactions.
                                            Other Regulatory Matters Risk. Governmental and self-regulatory
                                         authorities have instituted numerous ongoing investigations of various
                                         practices in the securities and mutual fund industries, including those
                                         relating to market-timing and late trading. The investigations cover
                                         advisory companies to mutual funds (including the Advisor),
                                         broker-dealers, hedge funds and others.  Wachovia Corporation (the
                                         Advisor's parent) and/or certain of its subsidiaries (including the
                                         Advisor) have received subpoenas and/or other requests for documents and
                                         testimony relating to the investigations, are attempting to comply with
                                         those requests and are cooperating with the investigations. Wachovia
                                         Corporation and its subsidiaries, including the Advisor, are continuing
                                         their own internal review of policies, practices, procedures and
                                         personnel, and are taking remedial actions where appropriate. Wachovia
                                         Corporation also is cooperating with governmental and self-regulatory
                                         authorities in matters relating to the brokerage operations of
                                         Prudential Financial, Inc. ("Prudential") that were included in Wachovia
                                         Corporation's retail brokerage combination with Prudential. Under the
                                         terms of that transaction, Wachovia Corporation is indemnified by
                                         Prudential for liabilities relating to those matters.
                                         Based on information currently available, advice of counsel, available
                                         insurance coverage and established reserves, Wachovia Corporation
                                         believes that the eventual outcome of the actions against Wachovia
                                         Corporation and/or its subsidiaries, including the matters described
                                         above, will not, individually or in the aggregate, have a material
                                         adverse effect on Wachovia Corporation's consolidated financial position
                                         or results of operations or on its subsidiaries, including the Advisor.
                                         However, in the event of unexpected future developments, it is possible
                                         that the ultimate resolution of those matters, if unfavorable, may be
                                         material to Wachovia Corporation's results of operations for any
                                         particular period, including for that of the Advisor.
Investment Adviser....................   Evergreen Investment Management Company, LLC (previously defined as the
                                         "Advisor") is responsible on a day-to-day basis for investment of the
                                         Fund's portfolio in accordance with its investment objective and
                                         policies.  Day-to-day management of these portions of the Fund's
                                         portfolio is the responsibility of a team of portfolio management
                                         professionals from the Advisor's High Yield Bond and Value Equity teams,
                                         respectively.

                                         The Advisor has been managing mutual funds and private accounts since
                                         1932 and, as of December 31, 2003, with its affiliates, managed over
                                         $247 billion in assets, including more than $4.5 billion in high yield
                                         fixed income assets.  The Advisor is a wholly-owned subsidiary of
                                         Wachovia Corporation.

                                         The Fund pays the Advisor an annual fee for its investment advisory
                                         services equal to 0.60% of the Fund's average daily Total Assets. This
                                         fee is payable monthly. "Total Assets" means the net assets of the Fund
                                         (plus borrowings or other leverage for investment purposes to the extent
                                         excluded in calculating net assets)  See "Management of the Fund"
                                         beginning on page 41.


Listing...............................   Currently, there is no public market for the Fund's common shares. The
                                         Fund has applied for listing on the American Stock Exchange under the
                                               ===========
                                         symbol "ERH".

Custodian and Transfer Agent..........   State Street Bank and Trust Company will serve as the Fund's custodian,
                                         and EquiServe Trust Company, N.A. will serve as the Fund's transfer
                                         agent.
Administrator.........................   The Fund has engaged Evergreen Investment Services, Inc. ("EIS") to
                                         provide certain administrative services for the Fund. The Fund will pay
                                         the administrator a monthly fee computed at an annual rate of 0.05% of
                                         the Fund's average daily Total Assets.
Market Price of Common Shares........... Common shares of closed-end investment companies frequently trade at prices
                                         lower than their net asset value. Common
                                         shares of closed-end investment companies have in the past during some
                                         periods traded at prices higher than their net asset value and during
                                         other periods traded at prices lower then their net asset value. The
                                         Fund cannot assure you that its common shares will trade at a price
                                         higher than or equal to net asset value. The Fund's net asset value will
                                         be reduced immediately following this offering by the sales load and the
                                         amount of the organization and offering expenses paid by the Fund. See
                                         "Use of Proceeds." In addition to net asset value, the market price of
                                         the Fund's common shares may be affected by such factors as the Fund's
                                         use of leverage, dividend stability, portfolio credit quality,
                                         liquidity, market supply and demand, the Fund's dividends paid (which
                                         are in turn affected by expenses), call protection for portfolio
                                         securities and interest rate movements. See "Leverage," "Risk Factors"
                                         and "Description of Shares."  The Fund's common shares are designed
                                         primarily for long-term investors, and you should not purchase common
                                         shares if you intend to sell them shortly after purchase.
Distributions.........................   The Fund intends to distribute to common shareholders all or a portion
                                         of its net investment income monthly and net realized capital gains, if
                                         any, at least annually.  While the Fund will attempt to maintain a
                                         stable level of distributions, the Fund will still comply with
                                         Subchapter M of the Internal Revenue Code of 1986, as amended (the
                                         "Code").  The Fund intends to seek an exemptive order from the Commission
                                         that would allow it to distribute capital gains monthly to further allow
                                         it to maintain a stable level of distributions to shareholders.  The
                                         Fund expects that it will declare initial distributions within
                                         approximately 45 days and commence paying dividends within approximately
                                         60 to 90 days from the date of this prospectus. However, investments
                                         that, in the judgment of the Advisor, are appropriate investments for
                                         the Fund may not be immediately available.  Therefore, the Fund expects
                                         that there will be a period of up to three months following
                                         the completion of its common shares offering before it is fully invested
                                         in accordance with its investment objective and policies.  Pending such
                                         investment, the Fund anticipates that all or a portion of the proceeds
                                         will be invested in U.S. government securities or high grade, short-term
                                         money market instruments.
                                         At times, in order to maintain a stable level of distributions, the Fund
                                         may pay out less than all of its net investment income or pay out
                                         accumulated undistributed income in addition to current net investment
                                         income.
                                         Dividend and capital gains distributions generally are reinvested in
                                         additional common shares of the Fund.  However, an investor can choose
                                         to receive distributions in cash. Since not all investors can
                                         participate in the Fund's Automatic Dividend Reinvestment Plan (the
                                         "Plan"), you should contact your broker or nominee to confirm that you
                                         are eligible to participate in the Plan.  See "Dividends and
                                         Distributions" beginning on page 43.
Tender Offers (Evergreen
Enhanced Liquidity Plan)............     For a time period of eight consecutive calendar quarters beginning six
                                         to eight months after the Fund's commencement of operations, if the
                                         Fund's common shares trade at a greater than 5% discount to net asset
                                         value for a certain number of days during a quarter, the Fund intends to
                                         make a tender offer during such quarter for up to 5% of the Fund's
                                         outstanding common shares at net asset value, subject to certain
                                         conditions described in this prospectus. The Fund will make its first
                                         tender offer within the first six to eight months of the Fund's
                                         operations and for the next seven consecutive calendar quarters of
                                         operation thereafter if certain conditions are met. See "Tender Offers
                                         (Evergreen Enhanced Liquidity Plan)" beginning on page 50.







                            SUMMARY OF FUND EXPENSES

     The following fee table shows the Fund's estimated expenses as a percentage
of net assets attributable to common shares assuming the use of leverage through
the  issuance  of  preferred  shares  in an  amount  equal to 35% of the  Fund's
capital.  Footnote  2 to the table  also  shows  Fund  estimated  expenses  as a
percentage  of net assets  attributable  to common  shares,  but assumes that no
preferred  shares are issued or  outstanding  (such as will be the case prior to
the Fund's expected issuance of preferred shares.)

                                                                                     

Shareholder Transaction Expenses:
     Sales Load (as a percentage of offering price).................................     4.50%
     Dividend Reinvestment Plan Fees................................................     None(1)

                                                                              Percentage of net assets
                                                                               attributable to common
                                                                           shares (assuming the issuance
                                                                            of Fund preferred shares)(2)
                                                                             ---------------------------
Annual Expenses:
     Management Fee.................................................................  0.92%
     Other Expenses.................................................................  0.38%(3)(4)
                                                                                        -----
     Total Annual Expenses..........................................................  1.30%(5)


(1)  A shareholder that directs the plan agent to sell shares held in a dividend
     reinvestment account will pay brokerage charges.

(2)  The table  presented  in this  footnote  estimates  what the Fund's  annual
     expenses  would  be  stated  as a  percentage  of  the  Fund's  net  assets
     attributable to common shares but, unlike the table above,  assumes that no
     Fund preferred shares are issued or outstanding. This will be the case, for
     instance,  prior to the Fund's expected  issuance of preferred  shares.  In
     accordance with these  assumptions,  the Fund's expenses would be estimated
     as follows:

                                                                             

                                                                              Percentage of net assets
                                                                               attributable to common
                                                                                shares (assuming no
                                                                               Fund preferred shares
                                                                             are issued or outstanding)
                                                                              ------------------------
     Annual Expenses:
         Management Fee.............................................................    0.60%
         Other Expenses.............................................................   0.20%(3)
                                                                                        -----
         Total Annual Expenses..............................................        0.80% (5)(6)
                                                                                        -----


(3)  Other  Expenses  includes an  administrative  services  fee of 0.05% of the
     Fund's  average  daily Total  Assets  payable to EIS, an  affiliate  of the
     Advisor.

(4)  If the Fund offers preferred shares, costs of the offering, estimated to be
     approximately  1.20% of the total dollar amount of the Fund preferred share
     offering,  will  effectively be borne by the  shareholders of common shares
     and result in the  reduction  of the paid-in  capital  attributable  to the
     common shares.  Assuming the issuance of Fund preferred shares in an amount
     equal to 35% of the Fund's capital (after  issuance),  those offering costs
     are  estimated  to be no more than  approximately  $0.13 per  common  share
     (0.64%  of  the  offering  price  or  $1,609,979  based  on a  $250,000,000
     offering).  These  offering costs are not included among the expenses shown
     in the table.

(5)  The Fund will bear expenses in connection with the offering in an amount up
     to $0.04 per share.  The  Advisor has agreed to pay the amount by which the
     aggregate  of all of the Fund's  organizational  expenses  and all offering
     costs (other than the sales load)  exceeds $0.04 per common share (0.20% of
     the  offering  price).  These  offering  costs are not  included  among the
     expenses shown in the table. If the Fund completes an offering of preferred
     shares, the Fund will also pay expenses in connection with such offering.

(6)  The Advisor has agreed to  contractually  waive the  management  fee and/or
     reimburse  expenses  in order to limit  Total  Annual  Expenses to 1.50% if
     preferred shares are issued and to 1.00% if no preferred shares are issued.

     The purpose of the tables in this section is to assist you in understanding
the  various  costs  and  expenses  that a  shareholder  will bear  directly  or
indirectly by investing in the Fund's common shares.  The amount set forth under
Other  Expenses in each table is based upon  estimates for the Fund's first year
of operations and assumes that the Fund issues  approximately  12,500,000 common
shares and, with respect to the first table,  issues preferred shares as a means
of  leverage.  If the Fund issues fewer  common  shares,  all other things being
equal,  these  expenses  as a  percentage  of net  assets  would  increase.  For
additional  information with respect to the Fund's expenses,  see "Management of
the Fund."

     The  following  example  illustrates  the expenses  that you would pay on a
$1,000 investment in common shares  (including the sales load of $45,  estimated
offering expenses of this offering of $2.00 and the estimated  offering costs of
issuing preferred shares, assuming the Fund issues preferred shares representing
35% of the Fund's capital (after their  issuance) of $6.44) in years one through
ten, assuming (1) total net annual expenses of 1.30% of net assets  attributable
to common shares (assuming the issuance of preferred shares) and (2) a 5% annual
return:*

                                                                                    

                                                       1 Year        3 Years        5 Years      10 Years
                                                       -------       -------        -------       -------
     Total Expenses Incurred.....................       $66            $93           $122           $203


     * The example should not be considered a representation of future expenses.
     Actual  expenses  may be higher or lower  than  those  shown.  The  example
     assumes that the estimated  "Other Expenses" set forth in the fee table are
     accurate and that all dividends  and  distributions  are  reinvested at net
     asset value.  Actual  expenses  may be greater or less than those  assumed.
     Moreover,  the Fund's actual rate of return may be greater or less than the
     hypothetical 5% return shown in the example.




                                    THE FUND




     The  Fund  is a newly  organized,  non-diversified,  closed-end  management
investment  company.  The Fund was organized as a statutory trust under the laws
of the state of Delaware on February 4, 2004, and has registered  under the 1940
Act. As a recently  organized  entity,  the Fund has no operating  history.  The
Fund's  principal   offices  are  located  at  200  Berkeley   Street,   Boston,
Massachusetts 02116-5034, and its telephone number is 1-800-343-2898.




                                 USE OF PROCEEDS




     The net proceeds of this offering will be approximately $ (or approximately
$ assuming the  underwriters  exercise the  overallotment  option in full) after
payment of offering costs  estimated to be  approximately $ .. and the deduction
of the  sales  load.  The  Advisor  has  agreed  to pay the  amount by which the
aggregate of all of the Fund's organizational expenses and offering costs (other
than the sales load) exceeds $0.04 per common share.

     The Fund will invest the net  proceeds of the offering in  accordance  with
its  investment  objective  and policies as stated below.  However,  investments
that, in the judgment of the Advisor,  are appropriate  investments for the Fund
may not be immediately available. Therefore, the Fund expects that there will be
a period of up to three months  following  the  completion  of its common shares
offering before it is fully invested in accordance with its investment objective
and  policies.  Pending  such  investment,  the Fund  anticipates  that all or a
portion of the proceeds will be invested in U.S.  government  securities or high
grade,  short-term  money market  instruments.  See  "Investment  Objective  and
Principal Investment Strategies."




            INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES




     Investment Objective
     The Fund's  investment  objective is to seek a high level of current income
and  moderate  capital  growth,  with an  emphasis on  providing  tax-advantaged
dividend income. The Fund's investment objective is a fundamental policy and may
not be changed  without the  approval of a majority  of the  outstanding  voting
securities (as defined in the 1940 Act) of the Fund. The Fund makes no assurance
that it will realize its objective.

     Principal Investment Strategies

     Under normal  market  conditions,  the Fund will invest at least 80% of its
net assets in  securities  of  utilities  companies  (water,  gas,  electric and
telecommunications  companies) and in U.S non-investment  grade debt securities.
Under normal market  conditions,  the Fund  allocates  approximately  70% of its
total assets to an  investment  strategy  that focuses on common,  preferred and
convertible preferred stocks and convertible  debentures of utility (water, gas,
electric and telecommunications  companies),  and approximately 30% of its total
assets  in an  investment  strategy  that  focuses  on U.S.  dollar  denominated
non-investment grade bonds, debentures, and other income obligations.  This is a
non-fundamental  policy and may be changed by the Board of  Trustees of the Fund
so long as shareholders  are provided with at least 60 days prior written notice
of any change as required by the rules under the 1940 Act. The Advisor  reserves
the discretion  based upon market  conditions to reallocate  the  proportions of
total  assets  invested  in each  investment  strategy.  No more than 35% of the
Fund's total assets will be invested in  non-investment  grade debt  securities.
The Fund may  invest up to 25% of its total  assets in  foreign  securities.

     An  investment  in the Fund may be  speculative  in that it involves a high
degree of risk and should not  constitute  a complete  investment  program.  See
"Risk Factors."

     The Fund  principally  allocates  its assets among two separate  investment
strategies:


     o Utility Securities.  Under normal market conditions,  the Fund expects to
invest  approximately  70% of its total assets in an  investment  strategy  that
focuses on common,  preferred and convertible  preferred  stocks and convertible
debentures of utility  companies (water,  gas,  electric and  telecommunications
companies).  The Fund may invest this  portion of its assets in companies of all
market capitalizations. This portion generally will be invested in approximately
60 to 70 different securities of utilities companies.  In addition, the Fund may
invest up to 35% of this portion of the Fund's assets in convertible  debentures
of  utility  companies  of any  quality.  Of this 35%,  a  maximum  of 7% may be
non-investment grade.


     Recent  changes in the tax laws have  allowed  qualifying  dividends  to be
taxed at the same rate as long-term  capital gains (currently 15%).  Through the
Fund's  investments  in the  utilities  sector,  the Fund  expects  to  invest a
significant  portion  of its  assets in  equity  securities  that pay  quarterly
dividends  qualifying  for such rate.  Therefore,  a significant  portion of the
Fund's yield may be considered to be  tax-advantaged  relative to investments in
securities  that do not qualify for the same rate as  long-term  capital  gains.
However,  because  the Fund will also invest in debt  obligations,  it will have
less tax advantages than a fund fully invested in securities qualifying for this
rate.

     o U.S. High Yield Debt Securities. Under normal market conditions, the Fund
invests  approximately  30% of its total assets in an  investment  strategy that
focuses on U.S. dollar denominated  non-investment  grade bonds,  debentures and
other income obligations.

     The high yield  securities  in which this  portion of the Fund  invests are
expected to be rated  between and  including B3 and Ba1 by Moody's or B- and BB+
by S&P or will be unrated  but  determined  by the  Advisor to be of  comparable
quality.  This portion of the Fund's portfolio targets securities with a minimum
rating of B to BB at the time of  purchase  and  attempts to maintain a weighted
average  credit  quality with respect to the high yield  securities  of B to BB.
This portion of the Fund will not purchase high yield  securities  with a rating
of CCC or below,  although  the Fund may hold such  securities  as a result of a
downgrade  in ratings  subsequent  to their  purchase.  No more than 10% of this
portion of the Fund's assets may be invested in securities that are rated CCC or
below or are unrated.  Debt securities rated below investment grade are commonly
referred to as "junk bonds" and are considered  speculative  with respect to the
issuer's capacity to pay interest and repay principal. Non-investment grade debt
securities involve greater risk of loss, are subject to greater price volatility
and are less  liquid,  especially  during  periods of  economic  uncertainty  or
change,  than higher rated debt  securities.  For purposes of the Fund's  credit
quality  policies,  if a security  receives  different  ratings from  nationally
recognized securities rating organizations,  the Fund will use the rating chosen
by the  portfolio  managers  as most  representative  of the  security's  credit
quality.  The Fund's high yield securities may have fixed or variable  principal
payments and all types of interest  rate and  dividend  payment and reset terms,
including fixed rate, adjustable rate, contingent, deferred, payment in kind and
auction rate features.  The Fund invests in high yield  securities  with a broad
range of  maturities.  The Advisor  anticipates  that,  assuming the issuance of
preferred  shares   representing   approximately   35%  of  the  Fund's  capital
immediately  after their issuance,  the weighted  average duration of the Fund's
high yield  U.S.  debt  securities  will be 4.6 to 9.2 years  (after  leverage),
although  there is no  guarantee  that this  range  will be  obtained.  Maturity
measures the average final payable dates of debt instruments.  Duration measures
the  average  life of a bond,  defined as the  weighted-average  maturity of the
periods until payment is made, with weights proportional to the present value of
payment.  For example, a fund with a duration of 5 years would likely drop 5% in
value if interest rates rise one percentage. Because the Fund will be leveraged,
its net asset  value may fall more than 5%  because  changes in the value of the
Fund are borne entirely by the common shareholders.

     In other than normal market conditions,  when changing economic  conditions
and other  factors  cause the yield  difference  between  lower rated and higher
rated  securities  to narrow,  the Fund may  purchase  higher  rated  U.S.  debt
instruments  if the  Advisor  believes  that  the  risk of loss  of  income  and
principal may be reduced substantially with only a relatively small reduction in
yield.

     The Advisor will monitor the weighting of each  investment  strategy within
the Fund's  portfolio on an ongoing  basis and  rebalance the Fund's assets when
the  Advisor  determines  that  such a  rebalancing  is  necessary  to align the
portfolio  in  accordance  with the  investment  strategies  described  above in
"Investment Objective and Principal Investment  Strategies--Principal Investment
Strategies."  From time to time, the Fund's Advisor may make  adjustments to the
weighting of each investment  strategy.  Such adjustments  would be based on the
Advisor's  review and  consideration of the expected returns for each investment
strategy and would factor in the stock,  bond and money  markets,  interest rate
and corporate  earnings  growth trends,  and economic  conditions  which support
changing investment opportunities.



     Other Investment Techniques and Strategies

     In addition to the principal  investment  strategies  discussed  above, the
Fund may at times  invest a portion of its assets in the  investment  strategies
and may use certain  investment  techniques as described below. The Statement of
Additional  Information  provides a more detailed discussion of certain of these
and other  securities and techniques and indicates if the Fund is subject to any
limitations with respect to a particular investment strategy.  (Please note that
some of these strategies may be a principal investment strategy for a portion of
the Fund and consequently  are also described above under "Principal  Investment
Strategies".)

     Investments in Equity Securities. The Fund may invest in equity securities.
Equity  securities,  such as common  stock,  generally  represent  an  ownership
interest in a company.  While  equity  securities  have  historically  generated
higher average returns than fixed income securities, equity securities have also
experienced  significantly  more volatility in those returns.  An adverse event,
such as an unfavorable  earnings  report,  may depress the value of a particular
equity  security  held by the  Fund.  Also,  the  price  of  equity  securities,
particularly  common  stocks,  are  sensitive to general  movements in the stock
market.  A drop in the stock  market may depress the price of equity  securities
held by the Fund.

     Convertible  and Other  Securities.  The Fund's  investment in fixed income
securities may include bonds and preferred  stocks that are convertible into the
equity  securities of the issuer or a related company.  The Fund will not invest
more than 35% of the  utilities  portion  of the  Fund's  assets in  convertible
securities  of any quality.  Of this 35%, a maximum of 7% may be  non-investment
grade.  Depending upon the  relationship  of the conversion  price to the market
value of the underlying  securities,  convertible securities may trade more like
equity securities than debt instruments.

     Foreign Currency  Transactions.  Foreign currency  transactions are entered
into for the purpose of hedging against  foreign  exchange risk arising from the
Fund's investment or anticipated investment in securities denominated in foreign
currencies.  The Fund  also may enter  into  these  contracts  for  purposes  of
increasing  exposure  to a foreign  currency  or to shift  exposure  to  foreign
currency fluctuations from one country to another. Foreign currency transactions
include the purchase of foreign currency on a spot (or cash) basis, contracts to
purchase or sell foreign  currencies at a future date (forward  contracts),  the
purchase and sale of foreign  currency  futures  contracts,  and the purchase of
exchange traded and  over-the-counter  call and put options on foreign  currency
futures contracts and on foreign currencies.

     These hedging transactions do not eliminate  fluctuations in the underlying
prices of the  securities  which the Fund owns or intends to  purchase  or sell.
They simply  establish  a rate of exchange  which can be achieved at some future
point in time.

     Preferred Shares. The Fund may invest in preferred shares. Preferred shares
are  equity  securities,  but they have  many  characteristics  of fixed  income
securities,  such as a fixed dividend payment rate and/or a liquidity preference
over the issuer's common shares.  However,  because  preferred shares are equity
securities,  they may be more susceptible to risks traditionally associated with
equity investments than the Fund's fixed income securities.

     Corporate  Loans.  The Fund may  invest a  portion  of its  assets  in loan
participations and other claims against corporate borrowers. The Fund may invest
up to 10% of its total assets in corporate loans.  The Fund considers  corporate
loans to be high yield debt  instruments  if the  issuer  has  outstanding  debt
securities rated below investment grade or has no rated securities, and includes
corporate  loans in  determining  the  percentage  of its total  assets that are
invested in high yield debt  instruments.  The corporate loans in which the Fund
invests  primarily  consist of direct  obligations  of a borrower.  The Fund may
invest in a corporate  loan at origination as a co-lender or by acquiring in the
secondary market  participations  in, assignments of or novations of a corporate
loan.  By  purchasing  a  participation,  the Fund  acquires  some or all of the
interest  of a bank  or  other  lending  institution  in a loan  to a  corporate
borrower.  The  participations  typically  will  result  in the  Fund  having  a
contractual  relationship only with the lender, not the borrower.  The Fund will
have the right to receive payments of principal,  interest and any fees to which
it is  entitled  only from the lender  selling the  participation  and only upon
receipt by the lender of the  payments  from the  borrower.  Many such loans are
secured, although some may be unsecured.  Loans that are fully secured offer the
Fund more  protection  than an  unsecured  loan in the event of  non-payment  of
scheduled  interest  or  principal.  However,  there  is no  assurance  that the
liquidation  of  collateral  from a secured  loan would  satisfy  the  corporate
borrower's  obligation,  or that the collateral  can be liquidated.  Direct debt
instruments  may involve a risk of loss in case of default or  insolvency of the
borrower and may offer less legal  protection  to the Fund in the event of fraud
or  misrepresentation.  In  addition,  loan  participations  involve  a risk  of
insolvency of the lending bank or other financial  intermediary.  The markets in
loans are not regulated by federal securities laws or the Commission.

     As in the case of other high yield investments, such corporate loans may be
rated in the lower rating  categories of the established  rating services (B3 or
higher  by  Moody's  or B- or  higher  by S&P),  or may be  unrated  investments
considered by the Advisor to be of comparable  quality.  As in the case of other
high yield  investments,  such corporate loans can be expected to provide higher
yields than lower  yielding,  higher rated fixed income  securities,  but may be
subject to greater risk of loss of  principal  and income.  There are,  however,
some  significant  differences  between  corporate  loans and high yield  bonds.
Corporate  loan  obligations  are  frequently  secured  by  pledges of liens and
security  interests in the assets of the borrower,  and the holders of corporate
loans are frequently the beneficiaries of debt service subordination  provisions
imposed on the borrower's  bondholders.  These arrangements are designed to give
corporate loan investors preferential treatment over high yield investors in the
event of a  deterioration  in the credit quality of the issuer.  Even when these
arrangements exist, however, there can be no assurance that the borrowers of the
corporate  loans will repay  principal  and/or pay  interest in full.  Corporate
loans  generally  bear  interest  at  rates  set at a margin  above a  generally
recognized  base lending rate that may fluctuate on a day-to-day  basis,  in the
case of the prime  rate of a U.S.  bank.  Consequently,  the value of  corporate
loans held by the Fund may be expected to fluctuate  significantly less than the
value of other fixed rate high yield  instruments  as a result of changes in the
interest rate  environment.  On the other hand, the secondary  dealer market for
certain  corporate  loans may not be as well  developed as the secondary  dealer
market for high yield  bonds and,  therefore,  presents  increased  market  risk
relating to liquidity and pricing concerns.

     Structured Securities.  The Fund may invest in structured  securities.  The
value of the  principal  and/or  interest on such  securities  is  determined by
reference  to  changes  in the value of  specific  currencies,  interest  rates,
commodities, indices or other financial indicators ("Reference") or the relative
change in two or more  References.  The interest  rate or the  principal  amount
payable upon maturity or redemption may be increased or decreased depending upon
changes in the Reference.  The terms of the structured securities may provide in
certain  circumstances that no principal is due at maturity and, therefore,  may
result in a loss of the  Fund's  investment.  Changes  in the  interest  rate or
principal  payable at maturity  may be a multiple of the changes in the value of
the Reference.  Consequently,  structured securities may entail a greater degree
of market risk than other types of fixed income securities.

     U.S. Government  Securities.  U.S. government  securities in which the Fund
may invest  include debt  obligations of varying  maturities  issued by the U.S.
Treasury or issued or  guaranteed  by an agency or  instrumentality  of the U.S.
government,  including the Federal  Housing  Administration,  Federal  Financing
Bank,  Farmers Home  Administration,  Export-Import  Bank of the United  States,
Small Business Administration,  Government National Mortgage Association (GNMA),
General Services  Administration,  Central Bank for  Cooperatives,  Federal Farm
Credit Banks,  Federal Home Loan Banks,  Federal Home Loan Mortgage  Corporation
(FHLMC),  Federal National Mortgage Association (FNMA), Maritime Administration,
Tennessee  Valley  Authority,  District of Columbia  Armory Board,  Student Loan
Marketing  Association,  Resolution Trust  Corporation and various  institutions
that  previously were or currently are part of the Farm Credit System (which has
been undergoing  reorganization  since 1987). Some U.S.  government  securities,
such as U.S.  Treasury bills,  Treasury notes and Treasury  bonds,  which differ
only in their interest rates, maturities and times of issuance, are supported by
the full faith and credit of the United States.  Securities  issued by GNMA, but
not those issued by FNMA or FHLMC,  are also backed by the full faith and credit
of the U.S. government.  Others are supported by: (1) the right of the issuer to
borrow from the U.S.  Treasury,  such as  securities  of the  Federal  Home Loan
Banks; (2) the  discretionary  authority of the U.S.  government to purchase the
agency's  obligations,  such as securities of the FNMA or FHLMC; or (3) only the
credit of the issuer. In general, securities issued by U.S. government-sponsored
entities are neither insured nor guaranteed by the U.S.  Treasury.  No assurance
can be given that the U.S.  government  will  provide  financial  support in the
future to U.S. government agencies,  authorities or  instrumentalities  that are
not  supported  by the full faith and credit of the  United  States.  Securities
guaranteed  as to principal and interest by the U.S.  government,  its agencies,
authorities or  instrumentalities  include: (i) securities for which the payment
of principal and interest is backed by an irrevocable letter of credit issued by
the U.S.  government or any of its agencies,  authorities or  instrumentalities;
and (ii) participations in loans made to non-U.S.  governments or other entities
that are so guaranteed. The secondary market for certain of these participations
is limited  and,  therefore,  they may be regarded as illiquid  (i.e.,  the Fund
cannot easily resell them within seven days at current value).

     Other Investment Companies.  The Fund may invest in the securities of other
investment companies to the extent that such investments are consistent with the
Fund's  investment  objective and policies and  permissible  under the 1940 Act.
Under the 1940 Act, the Fund may not acquire the securities of other domestic or
non-U.S.  investment  companies if, as a result, (i) more than 10% of the Fund's
total assets would be invested in securities of other investment companies, (ii)
such  purchase  would  result in more than 3% of the  total  outstanding  voting
securities of any one  investment  company being held by the Fund, or (iii) more
than 5% of the Fund's  total  assets  would be  invested  in any one  investment
company.  These  limitations  do not  apply to the  purchase  of  shares  of any
investment company in connection with a merger, consolidation, reorganization or
acquisition of substantially all the assets of another investment company.

     The Fund, as a holder of the securities of other investment companies, will
bear its pro rata portion of the other investment companies' expenses, including
advisory  fees.  These  expenses  are in addition to the direct  expenses of the
Fund's own operations.

     Defensive  and  Temporary  Investments.  Under  unusual  market or economic
conditions or for temporary defensive  purposes,  the Fund may invest up to 100%
of its total assets in securities issued or guaranteed by the U.S. government or
its instrumentalities or agencies, certificates of deposit, bankers' acceptances
and other bank obligations,  commercial paper rated in the highest category by a
nationally  recognized  statistical  rating  organization  or other fixed income
securities deemed by the Advisor to be consistent with a defensive  posture,  or
may hold cash. To the extent the Fund implements defensive strategies, it may be
unable to achieve its investment objective.

     Derivatives.  The Fund may, but is not required to, use various derivatives
described  below to earn income,  facilitate  portfolio  management and mitigate
risks. Such derivatives are generally accepted under modern portfolio management
and are regularly used by many mutual funds and other  institutional  investors.
Although the Advisor seeks to use the practices to further the Fund's investment
objective,  no  assurance  can be given that these  practices  will achieve this
result.

     The  Fund  may   purchase   and  sell   derivative   instruments   such  as
exchange-listed  and  over-the-counter  put  and  call  options  on  securities,
financial  futures,  equity,  fixed-income and interest rate indices,  and other
financial instruments, purchase and sell financial futures contracts and options
thereon,  and enter into various interest rate transactions such as swaps, caps,
floors  or  collars.  The Fund also may  purchase  derivative  instruments  that
combine  features  of these  instruments.  Collectively,  all of the  above  are
referred to as  "derivatives."  The Fund generally seeks to use derivatives as a
portfolio  management or hedging  technique to seek to protect against  possible
adverse changes in the market value of securities held in or to be purchased for
the Fund's portfolio, protect the value of the Fund's portfolio,  facilitate the
sale of  certain  securities  for  investment  purposes,  manage  the  effective
interest rate exposure of the Fund, manage the effective maturity or duration of
the Fund's  portfolio,  or establish  positions in the derivatives  markets as a
temporary substitute for purchasing or selling particular  securities.  The Fund
may invest up to 10% of its total  assets in futures and  options on  securities
and  indices  and in other  derivatives.  In  addition,  the Fund may enter into
interest  rate swap  transactions  with  respect to the total amount the Fund is
leveraged in order to hedge against  adverse changes in interest rates affecting
dividends  payable on any  preferred  shares or interest  payable on  borrowings
constituting  leverage.  In connection with any such swap transaction,  the Fund
will  segregate  liquid  securities in the amount of its  obligations  under the
transaction.  The Fund  generally  does not  anticipate  using  derivatives  for
non-hedging  purposes,  but  in the  event  the  Advisor  uses  derivatives  for
non-hedging  purposes,  no more  than 10% of the  Fund's  total  assets  will be
committed to initial margin for derivatives for such purposes.

     Derivatives  have risks,  including the imperfect  correlation  between the
value of such instruments and the underlying assets, the possible default of the
other party to the  transaction or  illiquidity  of the derivative  instruments.
Furthermore,  the  ability  to  successfully  use  derivatives  depends  on  the
Advisor's  ability  to  predict  pertinent  market  movements,  which  cannot be
assured.  Thus, the use of derivatives may result in losses greater than if they
had not been used, may require the Fund to sell or purchase portfolio securities
at inopportune  times or for prices other than current market values,  may limit
the amount of appreciation  the Fund can realize on an investment,  or may cause
the Fund to hold a security that it might otherwise sell. Additionally,  amounts
paid by the Fund as premiums  and cash or other  assets held in margin  accounts
with  respect  to  derivatives  are not  otherwise  available  to the  Fund  for
investment purposes.

     A more complete  discussion of derivatives  and their risks is contained in
the Statement of Additional Information.

     Repurchase  Agreements.  The Fund may enter into repurchase agreements with
broker-dealers,  member banks of the Federal  Reserve System and other financial
institutions.  Repurchase  agreements  are  arrangements  under  which  the Fund
purchases securities and the seller agrees to repurchase the securities within a
specific time and at a specific price.  The repurchase price is generally higher
than the Fund's  purchase price,  with the difference  being income to the Fund.
Under the direction of the Board of Trustees,  the Advisor  reviews and monitors
the creditworthiness of any institution which enters into a repurchase agreement
with the Fund. The counterparty's obligations under the repurchase agreement are
collateralized  with U.S. Treasury and/or agency obligations with a market value
of not less than 100% of the  obligations,  valued daily.  Collateral is held by
the Fund's custodian in a segregated, safekeeping account for the benefit of the
Fund.  Repurchase  agreements  afford the Fund an  opportunity to earn income on
temporarily  available  cash  at low  risk.  In the  event  of  commencement  of
bankruptcy or insolvency  proceedings with respect to the seller of the security
before  repurchase of the security  under a repurchase  agreement,  the Fund may
encounter  delay and incur costs before being able to sell the security.  Such a
delay may involve loss of interest or a decline in price of the  security.  If a
court  characterizes  the transaction as a loan and the Fund has not perfected a
security  interest  in the  security,  the Fund may be  required  to return  the
security to the seller's  estate and be treated as an unsecured  creditor of the
seller.  As an unsecured  creditor,  the Fund would be at risk of losing some or
all of the principal and interest involved in the transaction.

     Lending of Portfolio Securities.  The Fund may lend portfolio securities to
registered  broker-dealers,  or other  institutional  investors,  deemed  by the
Advisor to be  creditworthy  (and approved by the Board of Trustees of the Fund)
under  agreements  which  require  that the  loans be  secured  continuously  by
collateral in cash,  cash  equivalents or U.S.  Treasury  bills  maintained on a
current basis at an amount at least equal to the market value of the  securities
loaned.  The Fund  continues  to  receive  the  equivalent  of the  interest  or
dividends paid by the issuer on the securities  loaned as well as the benefit of
any  increase  and the  detriment  of any  decrease  in the market  value of the
securities loaned and would also receive compensation based on investment of the
collateral.  The Fund  would  not have the right to vote any  securities  having
voting  rights  during  the  existence  of the loan,  but would call the loan in
anticipation of an important vote to be taken among holders of the securities or
of the giving or  withholding  of consent on a  material  matter  affecting  the
investment.

     As with other extensions of credit, there are risks of delay in recovery or
even loss of rights in the collateral should the borrower of the securities fail
financially.  The Fund will lend  portfolio  securities  only to firms that have
been  approved  in advance by the Board of  Trustees,  which  will  monitor  the
creditworthiness of any such firms. At no time would the value of the securities
loaned exceed 35% of the value of the Fund's total assets.

     Portfolio  Turnover.  It is the policy of the Fund not to engage in trading
for short-term  profits although portfolio turnover is not considered a limiting
factor in the execution of investment decisions for the Fund.


     Due to market conditions or otherwise, investments that, in the judgment of
the Advisor,  are  appropriate  investments  for the Fund may not be immediately
available.  Therefore, the Fund expects that there will be an initial investment
period of up to three  months  following  the  completion  of its common  shares
offering before it is fully invested in accordance with its investment objective
and  policies.  Pending  such  investment,  the Fund  anticipates  that all or a
portion of the proceeds will be invested in U.S.  government  securities or high
grade, short-term money market instruments.


     Benefits of Investing in the Fund

     Investment in the Fund offers the  individual  investor  several  potential
benefits. In managing a portfolio of equity securities and debt instruments, the
Advisor  provides  professional  management  which includes the extensive credit
analysis  needed to invest in equity  securities,  high yield  bonds,  corporate
loans,  convertible  securities and preferred shares. The Fund also relieves the
investor  of the  burdensome  administrative  details  involved  in  managing  a
portfolio of such investments. Additionally, the Advisor may seek to enhance the
yield or capital  appreciation  of the Fund's common  shares by  leveraging  the
Fund's capital  structure through the issuance of preferred shares or short-term
debt securities or the borrowing of money. These benefits are at least partially
offset by the expenses involved in running an investment company.  Such expenses
primarily  consist of advisory fees and operational  costs.  The use of leverage
also   involves   certain   expenses   and  risk   considerations.   See   "Risk
Factors--Leverage" and "Leverage."

     The Advisor's Investment Approach

     The Fund combines  investments  in high yield debt  securities  with equity
securities  and  convertible  debentures of utilities  companies.  Each of these
sectors  has its  own  distinct  attributes  that  the  Advisor  believes  could
contribute to the potential  for the Fund to achieve its  investment  objective.
There is no guarantee  that the Fund will obtain its investment  objective.  The
Fund is managed  following a rigorous  investment  process that  emphasizes both
quality and value. The research-driven  approach includes both a top-down review
of  macroeconomic  factors  and  intensive,  bottom-up  scrutiny  of  individual
securities.  The  Advisor  considers  both broad  economic  and issuer  specific
factors in  selecting a  portfolio  which it  believes  will  achieve the Fund's
investment objective. In assessing the appropriate maturity and duration for the
Fund's portfolio and the credit quality parameters and weighting  objectives for
sector  and  industry  of each  portion  of the Fund's  portfolio,  the  Advisor
considers a variety of factors  that are  expected  to  influence  the  economic
environment  and the dynamics of the equity and debt securities  markets.  These
factors include fundamental economic  indicators,  such as interest rate trends,
the rates of economic  growth and inflation,  the performance of equity markets,
commodities prices,  monetary policies in the U.S. and overseas and the relative
value  of the  U.S.  dollar  compared  to other  currencies.  Once  the  Advisor
determines  the  preferable  portfolio  characteristics,  the  Advisor  conducts
further  evaluation to determine  capacity and  inventory  levels in the utility
industry.  The Advisor  considers a number of factors when selecting  individual
utility company stocks: a history of high dividends and profits; the size of the
company's market and market share;  competitive or technological advantages that
may  help  it in the  future;  potential  merger  activity;  and  the  projected
volatility of the company or industry. The stock selection is based on a blended
style  of  equity  management  that  allows  it to  invest  in both  value-  and
growth-oriented   equity   securities.   The  Advisor  also  selects  individual
securities  based upon the terms of the securities  (such as yields  compared to
U.S.  Treasuries or comparable issues),  liquidity and rating. In addition,  the
Advisor  employs due  diligence and  fundamental  research to assess an issuer's
credit  quality,  taking into account  financial  condition  and  profitability,
future  capital needs,  potential for change in rating,  industry  outlook,  the
competitive  environment  and management  ability.  The Advisor uses  extensive,
proprietary  research and broad sector  diversification to help manage risk. The
Advisor  considers both macro- and  microeconomic  factors -- such as inflation,
consumer spending and wages -- that affect the conditions of firms in the Fund's
portfolio.



     The Advisor's analysis of issuers may include, among other things, historic
and  current  financial  conditions,  current  and  anticipated  cash  flow  and
borrowing  requirements,  value of  assets  in  relation  to  historical  costs,
strength of management,  responsiveness to business conditions, credit standing,
the company's leverage versus industry norms and current and anticipated results
of operations.  While the Advisor considers as one factor in its credit analysis
the  ratings  assigned by the rating  services,  the  Advisor  performs  its own
independent credit analysis of issuers and,  consequently,  the Fund may invest,
without limit, in unrated securities. As a result, the Fund's ability to achieve
its  investment  objective  may depend to a greater  extent on the Advisor's own
credit  analysis  than  investment   companies  which  invest  in  higher  rated
securities.  The Advisor's  analysis also includes  quantitative and qualitative
research and modeling designed to evaluate the effects of changing interest rate
and prepayment scenarios and their effect on the performance of the security and
portfolio.

     In  making  portfolio  decisions,  the  Advisor  relies  on the  knowledge,
experience  and  judgment  of its staff  who has  access  to a wide  variety  of
research. Each portfolio management team applies a strict sell discipline to its
portion of the Fund's  portfolio,  which is as important as purchase criteria in
determining  a portfolio  holding's  performance.  The Fund may continue to hold
securities that are downgraded  after the Fund purchases them and will sell such
securities only if, in the Advisor's  judgment,  it is advantageous to sell such
securities.




                                    LEVERAGE

     To  increase  its  assets  available  for  investment,  the Fund  initially
intends,  within  approximately  three months of the  commencement of the Fund's
operations,  to issue  preferred  shares  of  beneficial  interest  representing
approximately 35% of the Fund's capital  immediately  after their issuance.  The
Fund currently does not intend to have multiple  issues of preferred  shares but
reserves  the  right to do so.  The Fund may also  borrow  money  from  banks or
financial  institutions  or issue debt  securities.  The Fund generally will not
issue  preferred  shares or borrow unless the Advisor expects that the Fund will
achieve a greater return on such borrowed  funds than the  additional  costs the
Fund incurs as a result of such  leverage.  The Fund also may borrow  money as a
temporary measure for extraordinary or emergency purposes, including the payment
of dividends and the settlement of securities transactions which otherwise might
require untimely  dispositions of the Fund's  holdings.  The Fund will not issue
preferred  shares or  borrow  money  if,  immediately  after  such  issuance  or
borrowing,  total  leverage for the Fund exceeds 38% of the Fund's total assets.
The Fund may also borrow through reverse repurchase agreements (up to 20% of its
total assets).  Reverse repurchase  agreements involve the sale of a security by
the Fund to another party (generally a bank or dealer) in return for cash and an
agreement  by the Fund to buy the security  back at a specified  price and time.
When the Fund leverages its assets,  the fees paid to the Advisor for investment
advisory  and  management  services  will be  higher  than if the  Fund  did not
leverage  because the Advisor's  fees are  calculated  based on the Fund's total
assets  including the proceeds of the issuance of preferred  shares or any other
amounts representing leverage.  Consequently,  the Fund and the Advisor may have
differing  interests in determining  whether to leverage the Fund's assets.  The
Board of Trustees will monitor this potential conflict.

     The Fund's use of leverage is premised upon the expectation that the Fund's
preferred  share  dividends or borrowing  cost will be lower than the return the
Fund achieves on its investments  with the proceeds of the issuance of preferred
shares or borrowing. Such difference in return may result from the Fund's higher
credit  rating  or the  short-term  nature  of its  borrowings  compared  to the
long-term nature of its  investments.  Because the assets of the Fund (including
the assets obtained from leverage) may be invested in higher yielding  portfolio
investments   or  portfolio   investments   with  the   potential   for  capital
appreciation,  the  holders of common  shares will be the  beneficiaries  of the
incremental  return.  Should the differential  between the underlying assets and
cost of  leverage  narrow,  the  incremental  return  "pick up" will be reduced.
Furthermore,  if long-term rates rise or if the Fund otherwise  incurs losses on
its  investments,  the Fund's net asset value  attributable to its common shares
will reflect the decline in the value of portfolio holdings resulting therefrom.

     Leverage  creates  risks  which may  adversely  affect  the  return for the
holders of common shares, including:

o    the likelihood of greater volatility of net asset value and market price of
     common shares or fluctuations in dividends paid on common shares;

o    fluctuations  in the dividend rates on any preferred  shares or in interest
     rates on borrowings and short-term debt;

o    increased operating costs, which may reduce the Fund's total return; and

o    the  potential  for a decline in the value of an  investment  acquired with
     borrowed funds,  while the Fund's  obligations under such borrowing remains
     fixed.

     To the extent the income or capital  appreciation  derived from  securities
purchased  with funds received from leverage  exceeds the cost of leverage,  the
Fund's return will be greater than if leverage had not been used. Conversely, if
the income or capital appreciation from the securities purchased with such funds
is not  sufficient  to cover the cost of leverage or if the Fund incurs  capital
losses,  the return of the Fund will be less than if leverage had not been used,
and therefore the amount available for distribution to shareholders as dividends
and other distributions will be reduced or potentially  eliminated.  The Advisor
may determine to maintain the Fund's  leveraged  position if it expects that the
long-term  benefits to the Fund's  shareholders  of  maintaining  the  leveraged
position will outweigh the current  reduced  return.  Capital raised through the
issuance of preferred  shares or borrowing will be subject to dividend  payments
or interest costs that may or may not exceed the income and  appreciation on the
assets purchased.  The issuance of classes of preferred shares involves offering
expenses  and other costs and may limit the Fund's  freedom to pay  dividends on
common shares or to engage in other activities. The Fund also may be required to
maintain  minimum  average  balances in connection  with  borrowings or to pay a
commitment  or  other  fee to  maintain  a  line  of  credit;  either  of  these
requirements will increase the cost of borrowing over the stated interest rate.

     The Fund may be subject to certain  restrictions on investments  imposed by
guidelines of one or more nationally  recognized rating  organizations which may
issue ratings for the preferred shares or short-term debt instruments  issued by
the Fund.  These  guidelines may impose asset coverage or portfolio  composition
requirements that are more stringent than those imposed by the 1940 Act. Certain
types of borrowings  may result in the Fund being subject to covenants in credit
agreements,  including  those  relating to asset  coverage,  borrowing  base and
portfolio composition  requirements and additional covenants that may affect the
Fund's  ability to pay dividends and  distributions  on common shares in certain
instances.  The Fund may also be  required  to pledge  its  assets to lenders in
connection with certain types of borrowing. The Advisor does not anticipate that
these covenants or restrictions  will adversely affect its ability to manage the
Fund's  portfolio  in  accordance  with  the  Fund's  investment  objective  and
policies.  Due to these  covenants  or  restrictions,  the Fund may be forced to
liquidate investments at times and at prices that are not favorable to the Fund,
or the Fund may be forced to forgo  investments that the Advisor otherwise views
as favorable.

     Under the 1940 Act,  the Fund is not  permitted to issue  preferred  shares
unless  immediately  after  such  issuance  the net  asset  value of the  Fund's
portfolio is at least 200% of the liquidation value of the outstanding preferred
shares  (i.e.,  such  liquidation  value may not  exceed 50% of the value of the
Fund's total assets). In addition, the Fund is not permitted to declare any cash
dividend or other  distribution on its common shares unless, at the time of such
declaration,  the net asset  value of the  Fund's  portfolio  (determined  after
deducting the amount of such dividend or  distribution) is at least 200% of such
liquidation  value. In the event preferred shares are issued,  the Fund intends,
to the extent possible, to purchase or redeem preferred shares from time to time
to maintain  coverage of any preferred  shares of at least 200%.  Under the 1940
Act, the Fund is not permitted to incur  indebtedness  unless  immediately after
such  borrowing the Fund has an asset coverage of at least 300% of the aggregate
outstanding  principal balance of indebtedness  (i.e., such indebtedness may not
exceed 33 1/3% of the value of the Fund's total assets). Additionally, under the
1940 Act, the Fund may not declare any dividend or other  distribution  upon any
class  of its  shares,  or  purchase  any  such  shares,  unless  the  aggregate
indebtedness  of the  Fund  has,  at the  time of the  declaration  of any  such
dividend or distribution or at the time of any such purchase,  an asset coverage
of at least 300% after deducting the amount of such dividend,  distribution,  or
purchase price, as the case may be.

     If and to the extent  that the Fund  employs  leverage  will depend on many
factors,  the most important of which are investment outlook,  market conditions
and  interest  rates.  Successful  use of a leveraging  strategy  depends on the
Advisor's ability to predict correctly interest rates and market movements.  The
Advisor  generally  expects  to utilize  leverage  when the Fund can borrow at a
lower  rate than the  securities  it  invests  in are likely to return or yield.
There is no assurance that a leveraging  strategy will be successful  during any
period in which it is employed.

     The Fund has the ability to hedge the short-term  interest rate exposure of
the preferred shares. The Fund initially intends to hedge a substantial  portion
of such  short-term  interest  rate exposure  through  engaging in interest rate
swaps or other  investment  techniques.  Since the hedge is  designed to protect
against  adverse  changes to  interest  rates,  the  usefulness  of the hedge is
dependent on the direction of interest rate  movements.  If interest rates fall,
the full value of the hedge may not be obtained.

     Assuming the Fund issues  preferred  shares with a  liquidation  preference
equal to  approximately  35% of the Fund's total  assets and an annual  dividend
rate of 2.13% of such liquidation  preference  (which rate is approximately  the
rate which the Advisor  expects the Fund to pay after  hedging,  based on market
rates as of the date of this  prospectus),  the Fund  would  need to  achieve an
annual  return on its total  assets (net of expenses) of 0.75% in order to cover
such dividend  payments on the preferred  shares.  Of course,  these numbers are
merely estimates,  used for illustration.  Actual preferred share dividend rates
will vary  frequently  and may be  significantly  higher or lower  than the rate
identified above.

     The following table illustrates the hypothetical  effect on the return to a
holder of the Fund's common shares of the leverage obtained by issuing preferred
shares  with a  liquidation  value  equal  to 35% of the  Fund's  total  assets,
assuming  hypothetical  annual  returns of the Fund's  portfolio of minus 10% to
plus  10%.  As the table  shows,  leverage  generally  increases  the  return to
shareholders  when  portfolio  return is positive  and greater  than the cost of
leverage and decreases the return when the portfolio  return is negative or less
than the cost of leverage.  The figures  appearing in the table are hypothetical
and actual returns may be greater or less than those appearing in the table.

                                                                          

     Assumed portfolio return (net of expenses)   (10.00)%     (5.00) %  0.00%   5.00 %  10.00%
     Corresponding common share return            (16.53)%     (8.84) %  (1.15)% 6.55 %  14.24%


     Until the Fund issues preferred shares or borrows, the Fund's common shares
will not be  leveraged,  and the risks and  special  considerations  related  to
leverage  described in this  prospectus  will not apply.  Such leveraging of the
common shares cannot be fully achieved until the proceeds resulting from the use
of leverage have been invested in longer term  securities in accordance with the
Fund's investment objective and policies.




                               RISK FACTORS




     The Fund is a  non-diversified,  closed-end  management  investment company
designed primarily as a long-term  investment and not as a trading tool. Because
the Fund's  investments  include high yield  securities,  an  investment  in the
Fund's  common  shares may be  speculative  in that it involves a high degree of
risk. The Fund should not constitute a complete investment  program.  Due to the
uncertainty  in all  investments,  there can be no assurance  that the Fund will
achieve its investment objective.

     Risk of No  Operating  History.  The Fund is a newly  organized  closed-end
management  investment company and has no operating history or history of public
trading.

     Investment  Risk. An investment in the Fund is subject to investment  risk,
including the possible loss of the entire principal amount that you invest. Your
investment in the Fund represents an indirect investment in the securities owned
by the Fund. The value of these  securities  may increase or decrease,  at times
rapidly and  unexpectedly.  Your  investment in the Fund may at any point in the
future be worth  less than your  original  investment  even  after  taking  into
account the reinvestment of dividends and distributions.

     Concentration   Risk.  An  investment  in  a  fund  that  concentrates  its
investments  in a  single  sector  or  industry  entails  greater  risk  than an
investment in a fund that invests its assets in numerous  sectors or industries.
A Fund  may be  vulnerable  to  any  financial,  economic,  political  or  other
development in its  concentration  sector or industry that may weaken the sector
or industry.  As a result,  the Fund's shares may fluctuate more widely in value
than those of a fund investing in a number of different sectors or industries.

     Non-Diversification  Risk. The Fund will invest  primarily in securities of
utilities (including telecommunications) companies. An investment in a fund that
is  non-diversified  entails  greater risk than an  investment  in a diversified
fund.  When a fund is  non-diversified,  it may invest a greater  percentage  of
assets in a single issuer than may be invested by a  diversified  fund. A higher
percentage of investments among fewer issuers may result in greater  fluctuation
in the total  market  value of the Fund's  portfolio as compared to a fund which
invests in numerous issuers.


     Utility Securities Risk.  Investments in utility sectors include the unique
risks  associated with decreases in the demand for utility company  products and
services,  increased competition resulting from deregulation,  and rising energy
costs,  among others.  Such developments also could cause utility companies such
as water, gas and electric companies,  to reduce the dividends they pay on their
stock,   potentially  decreasing  the  dividends  you  receive  from  the  Fund.
Telecommunications, similar to technology, is highly dependent on innovation and
expansion  of existing  technologies,  such as internet  communications  and the
ability to access  the  internet  through  cellular  phones,  as well as intense
pricing  competition  and  industry  consolidation.   Water,  gas  and  electric
companies typically borrow heavily to support continuing  operations.  Increases
in interest rates could increase these utility companies' borrowing costs, which
could adversely  impact their financial  results and stock price, and ultimately
the value of and total return on your Fund shares.


     Investment Style Risk.  Securities with different  characteristics  tend to
shift in and out of favor depending upon market and economic  conditions as well
as investor sentiment.  The Fund may outperform or underperform other funds that
employ a different style of investing. The Fund may also employ a combination of
styles  that  impact its risk  characteristics.  Examples  of  different  styles
include  growth and value  investing.  Growth  stocks may be more  volatile than
other stocks  because they are more  sensitive  to investor  perceptions  of the
issuing  company's  earnings  growth  potential.   Growth-oriented   funds  will
typically  underperform when value investing is popular.  Value stocks are those
which are  undervalued  in  comparison  to their  peers due to adverse  business
developments or other factors.  Value-oriented funds will typically underperform
when growth investing is popular.

     Stock Market Risk.  Your investment in the Fund will be affected by general
economic conditions such as prevailing  economic growth,  inflation and interest
rates.  When economic  growth slows,  or interest or inflation  rates  increase,
equity  securities  tend to  decline  in value.  Such  events  could  also cause
companies to decrease the dividends they pay. If these events were to occur, the
dividend yield,  total return earned on and the value of your  investment  would
likely decline.  Even if general economic conditions do not change, the dividend
yield,  total return earned on and the value of your investment could decline if
the particular  industries,  companies or sectors in which a Fund invests do not
perform well.

     Market  Capitalization  Risk. The Fund may invest the portion of its assets
invested in  utilities  securities  in  securities  of  companies  of all market
capitalizations.   Stocks   fall  into   three   broad   market   capitalization
categories--large, medium and small. Investing primarily in one category carries
the risk that due to current market conditions that category may be out of favor
with investors.  If valuations of large  capitalization  companies  appear to be
greatly out of  proportion to the  valuations of small or medium  capitalization
companies, investors may migrate to the stocks of small- and mid-sized companies
causing a fund that invests in these companies to increase in value more rapidly
than a fund that invests in larger, fully-valued companies.  Investing in medium
and small  capitalization  companies may be subject to special risks  associated
with  narrower  product  lines,  more  limited  financial   resources,   smaller
management  groups or  greater  dependence  on a few key  employees,  and a more
limited  trading  market for their  stocks as compared to larger  capitalization
companies. As a result, stocks of small and medium capitalization  companies may
decline  significantly  in market  downturns or their value may  fluctuate  more
sharply than other securities.

     Preferred  Stock Risk.  The Fund may purchase  preferred  stock.  Preferred
stock,  unlike  common  stock,  has a  stated  dividend  rate  payable  from the
corporation's   earnings.   Preferred  stock  dividends  may  be  cumulative  or
non-cumulative, participating, or auction rate. "Cumulative" dividend provisions
require all or a portion of prior unpaid dividends to be paid. If interest rates
rise, the fixed dividend on preferred stocks may be less attractive, causing the
price of preferred stocks to decline. Preferred stock may have mandatory sinking
fund provisions, as well as call/redemption  provisions prior to maturity, which
can be a negative  feature when interest rates decline.  The rights of preferred
stock on distribution  of a  corporation's  assets in the event of a liquidation
are generally  subordinate to the rights  associated with a  corporation's  debt
securities.

     Credit Risk.  Credit risk refers to an issuer's ability to make payments of
principal and interest when they are due.  Because the Fund will own  securities
with low credit quality,  it will be subject to a high level of credit risk. The
credit quality of such  securities is considered  speculative by rating agencies
with respect to the issuer's ability to pay interest or principal. The prices of
lower grade  securities are more sensitive to negative  corporate  developments,
such  as a  decline  in  profits,  or  adverse  economic  conditions,  such as a
recession, than are the prices of higher grade securities.  Securities that have
longer  maturities or that do not make regular interest  payments also fluctuate
more in price in response to negative  corporate  or economic  news.  Therefore,
lower grade securities may experience high default rates,  which could mean that
the Fund may lose some of its  investments in such  securities.  If this occurs,
the Fund's net asset  value and  ability to make  distributions  to you would be
adversely affected.  The effects of this default risk are significantly  greater
for the holders of lower grade  securities  because these  securities  often are
unsecured  and  subordinated  to the payment  rights of other  creditors  of the
issuer.

     Interest  Rate and Other Risks.  Fixed income  securities,  including  high
yield securities, are subject to certain common risks, including:

o    If  interest  rates go up,  the  value  of debt  securities  in the  Fund's
     portfolio  generally  will  decline.  This is known as interest  rate risk.
     Although  the Fund's  investment  objective  includes  limiting  the Fund's
     exposure to interest  rate risk,  there is no guarantee  that the Fund will
     meet its investment objective;

o    During periods of declining  interest  rates,  the issuer of a security may
     exercise its option to prepay principal earlier than scheduled, forcing the
     Fund to reinvest  in lower  yielding  securities.  This is known as call or
     prepayment  risk. Debt securities  frequently have call features that allow
     the issuer to  repurchase  the security  prior to its stated  maturity.  An
     issuer may redeem an  obligation  if the issuer can refinance the debt at a
     lower cost due to declining  interest rates or an improvement in the credit
     standing of the issuer;

o    During periods of rising interest rates,  the average life of certain types
     of securities  may be extended  because of slower than  expected  principal
     payments.  This may lock in a below  market  interest  rate,  increase  the
     security's  duration  (the  estimated  period until the security is paid in
     full) and  reduce  the value of the  security.  This is known as  extension
     risk;

o    The  Advisor's  judgment  about  the  attractiveness,   relative  value  or
     potential  appreciation  of a  particular  sector,  security or  investment
     strategy may prove to be incorrect. This is known as management risk; and

o    The Fund will be subject to credit risk with respect to the  counterparties
     to the  derivatives  contracts  purchased  by the Fund.  If a  counterparty
     becomes  bankrupt or  otherwise  fails to perform its  obligations  under a
     derivative contract due to financial difficulties,  the Fund may experience
     significant delays in obtaining any recovery under the derivative  contract
     in a bankruptcy  or other  reorganization  proceeding.  The Fund may obtain
     only a limited  recovery or may obtain no  recovery in such  circumstances.
     This is known as counterparty risk.

     High Yield  Debt  Securities  Risk.  Investment  in high  yield  securities
involves  substantial  risk of loss.  Non-investment  grade debt  securities  or
comparable  unrated  securities are commonly referred to as "junk bonds" and are
considered predominantly speculative with respect to the issuer's ability to pay
interest and principal and are susceptible to default or decline in market value
due to adverse  economic and business  developments.  The market values for high
yield securities tend to be very volatile,  and these securities are less liquid
than investment grade debt securities. For these reasons, your investment in the
Fund is subject to the following specific risks:

o    Increased   price   sensitivity  to  changing   interest  rates  and  to  a
     deteriorating economic environment.

     o Greater risk of loss due to default or declining credit quality.

o    Adverse company specific events are more likely to render the issuer unable
     to make interest and/or principal payments.

o    If a negative  perception of the high yield market develops,  the price and
     liquidity  of  high  yield  securities  may  be  depressed.  This  negative
     perception could last for a significant period of time.

     Debt securities  rated below  investment grade are speculative with respect
to the capacity to pay interest and repay principal in accordance with the terms
of  such  securities.   See  the  Statement  of  Additional  Information  for  a
description of Moody's and S&P's ratings.


     Adverse  changes in  economic  conditions  are more  likely to cause a high
yield issuer to default on principal  and interest  payments  than an investment
grade issuer.  The principal  amount of high yield  securities  outstanding  has
proliferated  in the past decade as an  increasing  number of issuers  have used
high yield  securities  for  corporate  financing.  An economic  downturn  could
severely  affect the ability of highly  leveraged  issuers to service their debt
obligations or to repay their obligations upon maturity. If the national economy
enters into a deeper  recessionary  phase  during  2004 or  interest  rates rise
sharply,  the number of  defaults by high yield  issuers is likely to  increase.
Similarly,  down-turns in profitability  in specific  industries could adversely
affect  the  ability of high yield  issuers  in those  industries  to meet their
obligations.  The market values of lower rated debt  securities  tend to reflect
individual  developments  of the issuer to a greater extent than do higher rated
securities,  which react  primarily  to  fluctuations  in the  general  level of
interest  rates.  Factors  having an adverse impact on the market value of lower
quality  securities may have an adverse effect on the Fund's net asset value and
the  market  value of its  common  shares.  In  addition,  the  Fund  may  incur
additional expenses to the extent it is required to seek recovery upon a default
in payment of  principal  or  interest  on its  portfolio  holdings.  In certain
circumstances,  the Fund may be required to foreclose on an issuer's  assets and
take possession of its property or operations.  In such circumstances,  the Fund
would  incur  additional  costs  in  disposing  of  such  assets  and  potential
liabilities from operating any business acquired.


     The secondary  market for high yield securities may not be as liquid as the
secondary  market for more highly rated  securities,  a factor which may have an
adverse  effect on the Fund's  ability to dispose of a particular  security when
necessary to meet its liquidity needs. There are fewer dealers in the market for
high yield securities than for investment grade  obligations.  The prices quoted
by different  dealers may vary  significantly and the spread between the bid and
ask price is  generally  much larger than for higher  rated  instruments.  Under
adverse  market or  economic  conditions,  the  secondary  market for high yield
securities could contract  further,  independent of any specific adverse changes
in the  condition  of a  particular  issuer,  and these  instruments  may become
illiquid.

     As a result, the Fund could find it more difficult to sell these securities
or may be  able  to sell  the  securities  only  at  prices  lower  than if such
securities were widely traded. Prices realized upon the sale of such lower rated
or unrated securities,  under these  circumstances,  may be less than the prices
used in calculating the Fund's net asset value.

     Since investors  generally perceive that there are greater risks associated
with  lower  rated  debt  securities  of the type in which the Fund may invest a
portion of its  assets,  the yields  and prices of such  securities  may tend to
fluctuate  more than  those for  higher  rated  securities.  In the lower  rated
segments  of the debt  securities  market,  changes in  perceptions  of issuers'
creditworthiness  tend to occur more frequently and in a more pronounced  manner
than do  changes  in  higher  rated  segments  of the  debt  securities  market,
resulting in greater yield and price volatility.


     If the Fund owns high  yield  securities  that are rated CCC or below or if
unrated,  the  equivalent  thereof,  the Fund  will  incur  significant  risk in
addition to the risks  associated with  investments in high yield securities and
corporate loans.  However, the Fund would limit these types of securities to 10%
of the  portion of the Fund that  invests in high yield  securities.  Distressed
securities frequently do not produce income while they are outstanding. The Fund
may purchase  distressed  securities that are in default or the issuers of which
are in  bankruptcy.  The  Fund may be  required  to bear  certain  extraordinary
expenses in order to protect and recover its investment in these securities.


     Issuer Risk. The value of corporate income-producing securities may decline
for a number of reasons which directly relate to the issuer,  such as management
performance,  financial  leverage and reduced  demand for the issuer's goods and
services.

     Reinvestment  Risk.  Reinvestment  risk is the risk  that  income  from the
Fund's bond  portfolio  will  decline if and when the Fund  invests the proceeds
from matured, traded or called bonds at market interest rates that are below the
portfolio's  current  earnings rate. A decline in income could affect the common
shares' market price or their overall returns.

     Foreign (Non-U.S.) Investment Risk. Investing in foreign issuers, including
emerging market  issuers,  may involve unique risks compared to investing in the
securities of U.S. issuers.  Some of these risks do not apply to issuers located
in larger, more developed countries. These risks are more pronounced if the Fund
invests  significantly  in emerging  market  countries  or in one  country.  For
example,  political turmoil and economic instability in the countries in which a
Fund invests could adversely  affect the dividend yield,  total return earned on
and the value of your  investment.  Less information  about non-U.S.  issuers or
markets  may be  available  due  to  less  rigorous  disclosure  and  accounting
standards  or  regulatory  practices.  This may make it harder  to get  accurate
information  about a security or company,  and increase the  likelihood  that an
investment  will not  perform as well as  expected.  Many  non-U.S.  markets are
smaller,  less liquid and more volatile than U.S. markets. In a changing market,
the Advisor may not be able to sell the Fund's  portfolio  securities in amounts
and at prices the Advisor considers reasonable.  Economic,  political and social
developments may  significantly  disrupt the financial markets or interfere with
the Fund's ability to enforce its rights against foreign government issuers. The
value of securities  denominated in foreign  currencies  may fluctuate  based on
changes in the value of those  currencies  relative  to the U.S.  dollar,  and a
decline in  applicable  foreign  exchange  rates could  reduce the value of such
securities  held by the Fund.  Foreign  settlement  procedures  also may involve
additional risks.

     The  ability of a foreign  sovereign  issuer to make  timely  and  ultimate
payments  on its  debt  obligations  will  also be  strongly  influenced  by the
sovereign issuer's balance of payments, including export performance, its access
to international credits and investments, fluctuations of interest rates and the
extent of its foreign  reserves.  A country whose exports are  concentrated in a
few commodities or whose economy depends on certain  strategic  imports could be
vulnerable to  fluctuations  in  international  prices of these  commodities  or
imports.  To the  extent  that a country  receives  payment  for its  exports in
currencies other than dollars,  its ability to make debt payments denominated in
dollars  could be adversely  affected.  If a sovereign  issuer  cannot  generate
sufficient earnings from foreign trade to service its external debt, it may need
to depend on continuing loans and aid from foreign governments, commercial banks
and multinational organizations.

     Additional factors that may influence the ability or willingness to service
debt  include,  but are not  limited to, a country's  cash flow  situation,  the
availability  of sufficient  foreign  exchange on the date a payment is due, the
relative  size of its debt  service  burden to the  economy as a whole,  and its
government's policy towards the International  Monetary Fund ("IMF"),  the World
Bank and  other  international  agencies  to which a  government  debtor  may be
subject.  The cost of servicing  external debt will also  generally be adversely
affected by rising  international  interest  rates  because many  external  debt
obligations  bear interest at rates which are adjusted based upon  international
interest rates.

     There may be less publicly  available  information  about a foreign company
than  about  a U.S.  company,  and  foreign  countries  may  not be  subject  to
accounting,   auditing,  and  financial  reporting  standards  and  requirements
comparable  to or as  uniform  as those of U.S.  companies.  In  addition,  if a
deterioration  occurs in the  country's  balance of  payments,  if could  impose
temporary  restrictions  on  foreign  capital  remittances.  Investing  in local
markets in foreign  countries may require the Fund to adopt special  procedures,
seek  local  governmental  approvals  or take other  actions,  each of which may
involve additional costs to the Fund. Moreover,  brokerage commissions and other
transaction costs on foreign  securities  exchanges are generally higher than in
the United States.

     Currency  Devaluations  and  Fluctuations  Risk.  The  Fund may  invest  in
non-dollar-denominated  investments.  The Fund may be limited in its  ability to
hedge  the  value of its  non-dollar-denominated  investments  against  currency
fluctuations.  As a result,  a decline in the value of  currencies  in which the
Fund's  investments  are  denominated  against  the  dollar  will  result  in  a
corresponding  decline in the dollar value of the Fund's assets.  These declines
will in turn affect the Fund's income and net asset value. The Fund will compute
its income on the date of its receipt by the Fund at the exchange rate in effect
with respect to the relevant currency on that date. If the value of the currency
declines  relative to the dollar between the date income is accrued and the date
the Fund makes a  distribution,  the amount  available for  distribution  to the
Fund's shareholders would be reduced. If the exchange rate against the dollar of
a currency in which a portfolio  security  of the Fund is  denominated  declines
between the time the Fund accrues  expenses in dollars and the time expenses are
paid, the amount of the currency  required to be converted into dollars in order
to pay  expenses in dollars will be greater  than the  equivalent  amount in the
currency of the expenses at the time they are  incurred.  A decline in the value
of  non-U.S.  currencies  relative  to the  dollar  may also  result in  foreign
currency losses that will reduce distributable net investment income.

     Foreign  currency  exchange  rates may fluctuate  significantly  over short
periods of time. A forward foreign currency exchange contract reduces the Fund's
exposure to changes in the value of the currency it will  deliver and  increases
its  exposure  to changes in the value of the  currency it will  exchange  into.
Contracts to sell foreign  currency will limit any potential gain which might be
realized by the Fund if the value of the hedged currency increases.  In the case
of forward contracts entered into for the purpose of increasing return, the Fund
may sustain losses which will reduce its gross income.  Forward foreign currency
exchange  contracts  also  involve  the risk that the party  with which the Fund
enters  the  contract  may fail to  perform  its  obligations  to the Fund.  The
purchase and sale of foreign currency futures contracts and the purchase of call
and put options on foreign currency futures contracts and on foreign  currencies
involve certain risks associated with derivatives.

     Convertible  Securities  Risk.  The Fund may  invest up to 35% of its total
assets in convertible securities.  Convertible fixed income securities generally
offer lower  interest or dividend  yields  than  non-convertible  securities  of
similar  quality.  As with all fixed  income  securities,  the market  values of
convertible   securities  tend  to  decline  as  interest  rates  increase  and,
conversely,  to increase as interest  rates  decline.  However,  when the market
price  of the  common  stock  underlying  a  convertible  security  exceeds  the
conversion price, the convertible  security tends to reflect the market price of
the underlying  common stock. As the market price of the underlying common stock
declines,  the convertible security tends to trade increasingly on a yield basis
and thus may not  decline in price to the same extent as the  underlying  common
stock.


     Corporate Loans Risk. The Fund may acquire interests in loans made by banks
or other financial institutions to corporate issuers or participation  interests
in  such  loans  (up to 10%  of  the  Fund's  total  assets).  By  purchasing  a
participation  interest in a loan, the Fund acquires some or all of the interest
of a bank or other  lending  institution  in a loan to a corporate or government
borrower.  The  participations  typically  will  result  in the  Fund  having  a
contractual  relationship only with the lender, not the borrower.  The Fund will
have the right to receive payments of principal,  interest and any fees to which
it is  entitled  only from the lender  selling the  participation  and only upon
receipt by the lender of the payments from the borrower.


     Corporate loan obligations are frequently  secured by security interests in
the assets of the borrower and the holders of corporate loans are frequently the
beneficiaries of debt service subordination provisions imposed on the borrower's
bondholders.  If the Fund only  acquires a  participation  in the loan made by a
third  party,  the Fund may not be able to control the  exercise of any remedies
that  the  lender  would  have  under  the  corporate  loan.  Such  third  party
participations  are  designed  to give  corporate  loan  investors  preferential
treatment  over high  yield  investors  in the event of a  deterioration  in the
credit quality of the issuer. Even when these arrangements exist, however, there
can be no assurance  that the principal and interest owed on the corporate  loan
will be repaid in full. The secondary dealer market for certain  corporate loans
may not be as well  developed  as the  secondary  dealer  market  for bonds and,
therefore,  presents  increased  market risk  relating to liquidity  and pricing
concerns.

     Derivatives  Risk.  Even a  small  investment  in  derivatives  can  have a
significant  impact on the Fund's  exposure to interest  rates.  If changes in a
derivative's value do not correspond to changes in the value of the Fund's other
investments,  the Fund may not fully  benefit  from or could  lose  money on the
derivative position.  In addition,  some derivatives involve risk of loss if the
person who issued the derivative defaults on its obligation. Certain derivatives
may be less liquid and more difficult to value.

     Leverage  Risk.  The  Fund  initially  intends  to issue  preferred  shares
representing  approximately  35% of the Fund's capital  immediately  after their
issuance.  The  Fund may  also  borrow  money  from  banks  or  other  financial
institutions or issue debt securities with a liquidation preference or principal
amount up to the maximum  extent  permitted  by the 1940 Act.  The Fund will not
issue preferred  shares or borrow money if,  immediately  after such issuance or
borrowing,  total  leverage  for the Fund exceeds 38% of the Fund's total assets
immediately  after such issuance or borrowing.  Leverage creates risks which may
adversely affect the return for the holders of common shares, including:

o    the likelihood of greater  volatility of net asset value, the market price,
     or the dividend rate of common shares or  fluctuations in the dividend paid
     to the Fund;

o    fluctuations  in the dividend rates on any preferred  shares or in interest
     rates on borrowings and short-term debt;

o    increased operating costs, which may reduce the Fund's total return; and

o    the  potential  for a decline in the value of an  investment  acquired with
     borrowed funds,  while the Fund's  obligations  under such borrowing remain
     fixed.

     To the extent the income or capital  appreciation  derived from  securities
purchased  with funds received from leverage  exceeds the cost of leverage,  the
Fund's return will be greater than if leverage had not been used. Conversely, if
the income or capital appreciation from the securities purchased with such funds
is not  sufficient  to cover the cost of leverage or if the Fund incurs  capital
losses,  the return of the Fund will be less than if leverage had not been used,
and therefore the amount available for distribution to shareholders as dividends
and other distributions will be reduced or potentially eliminated.

     Certain  types of  borrowings  may  result  in the Fund  being  subject  to
covenants in credit  agreements,  including  those  relating to asset  coverage,
borrowing base and portfolio  composition  requirements and additional covenants
that may affect the Fund's ability to pay dividends and  distributions on common
shares in certain instances.  The Fund may also be required to pledge its assets
to the lenders in connection  with certain  types of borrowing.  The Fund may be
subject to certain  restrictions on investments  imposed by guidelines of one or
more nationally  recognized rating organizations which may issue ratings for the
preferred  shares or  short-term  debt  instruments  issued  by the Fund.  These
guidelines may impose asset coverage or portfolio composition  requirements that
are more stringent than those imposed by the 1940 Act.

     Because the Advisor's  fee is a percentage of the Fund's Total Assets,  the
Advisor's  fee will be higher if the Fund is leveraged and the Advisor will have
an incentive to be more aggressive and leverage the Fund.

     Market Price of Shares Risk.  Whether investors will realize a gain or loss
upon the sale of the Fund's  common  shares will depend upon  whether the market
value of the shares at the time of sale is above or below the price the investor
paid, taking into account  transaction costs, for the shares and is not directly
dependent  upon the  Fund's net asset  value.  Because  the market  value of the
Fund's shares will be determined by factors such as the relative  demand for and
supply of the shares in the market,  general market conditions and other factors
beyond the  control of the Fund,  the Fund  cannot  predict  whether  its common
shares  will  trade at,  below or above net asset  value,  or below or above the
initial offering price for the shares.

     Market  Disruption and Geopolitical  Risk. The war with Iraq, its aftermath
and the continuing occupation of Iraq are likely to have a substantial impact on
the U.S. and the world economies and securities markets.  The nature,  scope and
duration of the occupation  cannot be predicted  with any  certainty.  Terrorist
attacks on the World Trade Center and Pentagon on September 11, 2001 closed some
of the U.S.  securities  markets  for a four-day  period and the  occurrence  of
similar  events in the  future  cannot  be ruled  out.  The war and  occupation,
terrorism and related  geopolitical  risks have led, and may in the future lead,
to increased short-term market volatility and may have adverse long-term effects
on the U.S. and world economies and markets  generally.  Those events could also
have an acute  effect on  individual  issuers  or  related  groups  of  issuers,
securities markets, interest rates, auctions, secondary trading, ratings, credit
risk, inflation and other factors relating to the common shares. Inflation Risk.
Inflation  risk is the risk that the value of assets or income  from the  Fund's
investments will be worth less in the future as inflation decreases the value of
money. As inflation  increases,  the real, or  inflation-adjusted,  value of the
common  shares and  distributions  can decline and the dividend  payments on the
Fund's preferred  shares,  if any, or interest  payments on Fund borrowings,  if
any, may increase.  Market Discount Risk.  Shares of closed-end funds frequently
trade at prices lower than their net asset value.  This is commonly  referred to
as "trading at a discount." This characteristic of shares of closed-end funds is
a risk  separate and distinct  from the risk that the Fund's net asset value may
decrease. Investors who sell their shares within a relatively short period after
completion  of the  public  offering  are  likely to be  exposed  to this  risk.
Accordingly,  the Fund is designed primarily for long-term  investors and should
not be  considered  a vehicle  for  trading  purposes.  Net asset  value will be
reduced  following the offering by the  underwriting  discount and the amount of
offering expenses paid by the Fund.

     Tender  Offers  (Evergreen   Enhanced  Liquidity  Plan)  Risk.  The  Fund's
potential  quarterly  tender  offers for common shares may prevent the Fund from
taking advantage of attractive investment  opportunities.  Moreover, if the Fund
does not generate sufficient cash flow from operations, it may be forced to sell
investments at disadvantageous  times, and in amounts that the Advisor would not
otherwise contemplate,  or to borrow money, in order to make such tender offers.
If the Fund borrows money, rather than liquidate  investments,  to fund a tender
offer,  it is subject to the risk that  investment  return on the common  shares
will be  reduced  to the extent  the cost of  borrowings  exceeds  income on the
retained investments.

     Liquidity Risk. The Fund does not intend to purchase  illiquid  securities,
which are  securities  that  cannot be  disposed  of  within  seven  days in the
ordinary  course of  business at  approximately  the value at which the Fund has
valued the securities.  However,  the Fund is not required to sell or dispose of
any debt security  that becomes  illiquid  subsequent to its purchase.  Illiquid
securities may be subject to wide  fluctuations in market value. The Fund may be
subject to significant delays in disposing of illiquid securities.  Accordingly,
the Fund may be forced to sell these  securities  at less than fair market value
or may not be able to sell them when the Advisor  believes  that it is desirable
to do so. Illiquid  securities also may entail  registration  expenses and other
transaction costs that are higher than those for liquid securities.


     Anti-takeover  Provisions  Risk.  The Fund's  Agreement and  Declaration of
Trust and  By-laws  include  provisions  that could  limit the  ability of other
entities or persons to acquire  control of the Fund or to change the composition
of  its  Board  of  Trustees.   Such  provisions  could  limit  the  ability  of
shareholders to sell their shares at a premium over prevailing  market prices by
discouraging  a third party from  seeking to obtain  control of the Fund.  These
provisions  include  staggered terms of office for the Trustees,  advance notice
requirements for shareholder  proposals,  and super-majority voting requirements
for certain  transactions  with  affiliates,  open-ending  the Fund or a merger,
liquidation, asset sales and similar transactions. See "Anti-takeover Provisions
of the Agreement and Declaration of Trust."


     Other Regulatory Matters Risk. Governmental and self-regulatory authorities
have instituted  numerous  ongoing  investigations  of various  practices in the
securities and mutual fund industries, including those relating to market-timing
and late trading.  The  investigations  cover advisory companies to mutual funds
(including  the  Advisor),  broker-dealers,  hedge  funds and  others.  Wachovia
Corporation (the Advisor's parent) and/or certain of its subsidiaries (including
the Advisor) have  received  subpoenas  and/or other  requests for documents and
testimony  relating to the  investigations,  are attempting to comply with those
requests, and are cooperating with the investigations.  Wachovia Corporation and
its  subsidiaries,  including  the Advisor,  are  continuing  their own internal
review of policies, practices, procedures and personnel, and are taking remedial
actions  where  appropriate.  Wachovia  Corporation  also  is  cooperating  with
governmental  and  self-regulatory   authorities  in  matters  relating  to  the
brokerage operations of Prudential that were included in Wachovia  Corporation's
retail  brokerage   combination  with  Prudential.   Under  the  terms  of  that
transaction,  Wachovia  Corporation is indemnified by Prudential for liabilities
relating to those matters.

     Based on  information  currently  available,  advice of counsel,  available
insurance coverage and established reserves,  Wachovia Corporation believes that
the eventual  outcome of the actions  against  Wachovia  Corporation  and/or its
subsidiaries,  including the matters described above, will not,  individually or
in the  aggregate,  have a material  adverse  effect on  Wachovia  Corporation's
consolidated financial position or results of operations or on its subsidiaries,
including the Advisor.  However, in the event of unexpected future developments,
it is possible that the ultimate  resolution of those matters,  if  unfavorable,
may be  material  to  Wachovia  Corporation's  results  of  operations  for  any
particular period, including for that of the Advisor.


                             MANAGEMENT OF THE FUND




Trustees and Officers
     The Fund's Board of Trustees provides broad supervision over the affairs of
the Fund. The officers of the Fund are  responsible  for the Fund's  operations.
The Trustees and officers of the Fund, together with their principal occupations
during  the  past  five  years,  are  listed  in  the  Statement  of  Additional
Information.  Each of the  Trustees  serves as a Trustee  of each of the 94 U.S.
registered  investment  portfolios  for which the Advisor  serves as  investment
adviser.

Investment Adviser
     Evergreen  Investment  Management  Company,  LLC (previously defined as the
"Advisor")  will act as the Fund's  investment  adviser.  The  Advisor  has been
managing mutual funds and private  accounts since 1932 and, with its affiliates,
managed  over $247  billion in assets as of December  31,  2003.  The Advisor is
located at 200 Berkeley Street, Boston, Massachusetts 02116-5034. The Advisor is
a wholly owned subsidiary of Wachovia Bank, N.A. Wachovia Bank, N.A., located at
201 South College Street, Charlotte,  North Carolina 28288-0630, is a subsidiary
of Wachovia Corporation, formerly First Union Corporation.

     As the  Fund's  investment  adviser,  the  Advisor  provides  the Fund with
investment  research,  advice and  supervision  and  furnishes  the Fund with an
investment program consistent with the Fund's investment objective and policies,
subject to the supervision of the Fund's Trustees.  The Advisor  determines what
portfolio  securities  will be  purchased  or sold,  arranges for the placing of
orders for the  purchase or sale of  portfolio  securities,  selects  brokers or
dealers to place those orders,  maintains  books and records with respect to the
Fund's  securities  transactions,  and  reports  to the  Trustees  on the Fund's
investments and performance.

Compensation and Expenses
     Under the management contract, the Fund will pay to the Advisor monthly, as
compensation  for the services  rendered and expenses  paid by it, an annual fee
equal to 0.60% of the Fund's average daily Total Assets. Because the fee paid to
the Advisor is determined on the basis of the Fund's Total Assets, the Advisor's
interest  in  determining  whether  to  leverage  the Fund may  differ  from the
interests of the Fund.

     The Fund's  average  daily Total Assets are  determined  for the purpose of
calculating  the  management  fee  by  taking  the  average  of  all  the  daily
determinations  of Total  Assets  during a given  calendar  month.  The fees are
payable for each  calendar  month as soon as  practicable  after the end of that
month.

     Under the terms of its management  contract with the Fund, the Advisor pays
all the  operating  expenses,  including  executive  salaries  and the rental of
office space,  relating to its services for the Fund,  with the exception of the
following,  which are to be paid by the  Fund:  (a)  charges  and  expenses  for
bookkeeping;  (b) the charges  and  expenses  of  auditors;  (c) the charges and
expenses of any custodian,  transfer agent, and registrar appointed by the Fund;
(d)  issue  and  transfer  taxes  chargeable  to the  Fund  in  connection  with
securities  transactions to which the Fund is a party; (e) trust fees payable by
the Fund to federal, state or other governmental agencies; (f) fees and expenses
involved in registering  and  maintaining  registrations  of the Fund and/or its
shares with federal regulatory  agencies,  state or blue sky securities agencies
and  foreign  jurisdictions,  including  the  preparation  of  prospectuses  and
statements  of   additional   information   for  filing  with  such   regulatory
authorities;  (g) all expenses of  shareholders'  and Trustees'  meetings and of
preparing, printing and distributing prospectuses, notices, proxy statements and
all  reports to  shareholders  and to  governmental  agencies;  (h)  charges and
expenses of legal  counsel to the Fund and the  Trustees;  (i)  compensation  of
those Trustees of the Fund who are not  affiliated  with the Advisor or the Fund
(as  defined  under  the  1940  Act)  other  than as  Trustees;  (j) the cost of
preparing and printing share  certificates;  and (k) the fees and other expenses
of listing the Fund's shares on any national stock  exchange.  In addition,  the
Fund will pay all brokers' and underwriting  commissions  chargeable to the Fund
in connection with securities transactions to which the Fund is a party.

     The  Fund has also  entered  into an  administration  agreement  with  EIS,
pursuant to which EIS provides certain  administrative and accounting  services.
The Fund will pay EIS a monthly  fee  computed at an annual rate of 0.05% of the
Fund's average daily Total Assets.

Portfolio Manager
     Day-to-day  management  of the  portion  of the  Fund's  portfolio  that is
described  as the  utility  and  telecommunications  portion  under  "Investment
Objective and Principal Investment  Strategies - Principal Investment Strategies
-  Utility  Securities"  above  is the  responsibility  of a team  of  portfolio
management professionals from the Advisor's Value Equity team. Together the team
managed  more than $250 billion in assets  under  management  as of December 31,
2003.  The  team is led by  Timothy  O'Brien,  who has  more  than 19  years  of
investment  experience.  Mr.  O'Brien has been with the Advisor since April 2002
and currently serves as a managing director and senior portfolio manager.


     Day-to-day  management  of the  portion  of the  Fund's  portfolio  that is
described  as the U.S.  high yield debt  securities  portion  under  "Investment
Objective and Principal Investment  Strategies - Principal Investment Strategies
- U.S. High Yield Debt Securities" is the  responsibility of a team of portfolio
management  professionals  from the Advisor's Select High Yield Bond team, which
includes specialized  industry analysts  responsible for various sectors.  Among
the portfolios the team manages is the open-end Evergreen Select High Yield Bond
Fund. The Select High Yield team is led by Richard  Cryan,  who has more than 25
years  of  fixed  income  investment  experience.  Mr.  Cryan  has been a senior
portfolio  manager  with the Advisor  since 1992.  Mr. Cryan is part of the team
that manages the closed-end Evergreen Income Advantage Fund and a portion of the
closed-end  Evergreen  Managed Income Fund.  Together the team managed more than
$4.5 billion in high yield securities as of December 31, 2003.





                           DIVIDENDS AND DISTRIBUTIONS




     The Fund  intends to  distribute  dividends  of all or a portion of its net
investment  income  monthly to holders of common  shares.  It is  expected  that
initial   distributions   to  common   shareholders   will  be  declared  within
approximately  45 days and  that the Fund  will  commence  paying  dividends  to
holders of common  shares  within  approximately  60 to 90 days from the date of
this prospectus.  However, investments that, in the judgment of the Advisor, are
appropriate   investments  for  the  Fund  may  not  be  immediately  available.
Therefore,  the Fund expects that there will be an initial  investment period of
up to three months following the completion of its common shares offering before
it is fully invested in accordance  with its investment  objective and policies.
Pending  such  investment,  the Fund  anticipates  that all or a portion  of the
proceeds will be invested in typically lower-yielding U.S. government securities
or high grade, short-term money market instruments.

     Dividends and distributions  may be payable in cash or common shares,  with
the option to receive  cash in lieu of the shares.  The Fund may at times in its
discretion pay out less than the entire amount of net  investment  income earned
in any particular period and may at times pay out such accumulated undistributed
income in addition to net investment  income earned in other periods in order to
permit the Fund to maintain a more stable level of  distributions.  As a result,
the  dividend  paid by the Fund to holders of common  shares for any  particular
period may be more or less than the amount of net  investment  income  earned by
the Fund during such period. The Fund is not required to maintain a stable level
of distributions to shareholders. For federal tax purposes, the Fund is required
to distribute  substantially all of its net investment income for each year. All
net  realized  capital  gains,  if  any,  will  be  distributed  to  the  Fund's
shareholders at least annually. While the Fund will attempt to maintain a stable
level of  distributions,  the Fund will still  comply with  Subchapter  M of the
Code. The Fund intends to seek an exemptive order from the Commission that would
allow it to  distribute  capital gains monthly to further allow it to maintain a
stable level of distributions to shareholders.

     Under the 1940 Act, the Fund is not permitted to incur indebtedness  unless
immediately  after such  incurrence  the Fund has an asset  coverage of at least
300%  of  the  aggregate   outstanding   principal   balance  of   indebtedness.
Additionally, under the 1940 Act, the Fund may not declare any dividend or other
distribution  upon any class of its capital shares, or purchase any such capital
shares,  unless the aggregate  indebtedness  of the Fund has, at the time of the
declaration  of any such  dividend  or  distribution  or at the time of any such
purchase,  an asset coverage of at least 300% after deducting the amount of such
dividend, distribution, or purchase price, as the case may be.

     While any preferred  shares are  outstanding,  the Fund may not declare any
cash dividend or other distribution on its common shares,  unless at the time of
such declaration, (1) all accumulated preferred dividends have been paid and (2)
the net asset value of the Fund's  portfolio  (determined  after  deducting  the
amount  of  such  dividend  or  other  distribution)  is at  least  200%  of the
liquidation  value of the outstanding  preferred shares (expected to be equal to
the original  purchase price per share plus any accumulated and unpaid dividends
thereon).

     In addition to the  limitations  imposed by the 1940 Act  described  above,
certain lenders may impose  additional  restrictions on the payment of dividends
or  distributions  on the common  shares in the event of a default on the Fund's
borrowings.  If the Fund's ability to make distributions on its common shares is
limited, such limitation could under certain circumstances impair the ability of
the Fund to maintain its  qualification  for taxation as a regulated  investment
company,  which  would have  adverse  tax  consequences  for  shareholders.  See
"Leverage" and "U.S. Federal Income Tax Matters."

     See "Automatic Dividend  Reinvestment Plan" for information  concerning the
manner  in which  dividends  and  distributions  to common  shareholders  may be
automatically  reinvested in common shares.  Dividends and  distributions may be
taxable to  shareholders  whether they are  reinvested  in shares of the Fund or
received in cash.

     The yield on the  Fund's  common  shares  will  vary from  period to period
depending  on factors  including,  but not limited to,  market  conditions,  the
timing  of  the  Fund's  investment  in  portfolio  securities,  the  securities
comprising the Fund's portfolio,  changes in interest rates including changes in
the  relationship  between  short-term rates and long-term rates, the amount and
timing of the use of borrowings  and other  leverage by the Fund, the effects of
leverage on the common shares  discussed  above under  "Leverage," the timing of
the  investment  of leverage  proceeds in portfolio  securities,  the Fund's net
assets and its operating expenses.  Consequently,  the Fund cannot guarantee any
particular  yield on its  shares  and the yield  for any given  period is not an
indication or representation of future yields on the Fund's shares.



                      AUTOMATIC DIVIDEND REINVESTMENT PLAN




     Pursuant to the Fund's Plan,  unless a shareholder  is ineligible or elects
otherwise,  all cash dividends and capital gains distributions are automatically
reinvested  by EquiServe  Trust  Company,  N.A.,  as agent for  shareholders  in
administering the Plan ("Plan Agent"),  in additional common shares of the Fund.
In the event a dividend or capital gains distribution is declared in shares with
the option to take cash and the shares are  trading at a "market  discount,"  as
described below,  the Plan provides that its distribution  will be taken in cash
and reinvested in accordance with the Plan.  Shareholders  who are ineligible or
who  elect  not to  participate  in the Plan  will  receive  all  dividends  and
distributions  payable in cash paid by check mailed  directly to the shareholder
of record (or, if the shares are held in street or other nominee  name,  then to
such nominee) by EquiServe Trust Company,  N.A., as dividend paying agent.  Such
shareholders  may  elect  not to  participate  in the  Plan and to  receive  all
distributions  of  dividends  and  capital  gains  in  cash by  sending  written
instructions to EquiServe Trust Company,  N.A., as dividend paying agent, at the
address set forth below.  Participation in the Plan is completely  voluntary and
may be  terminated or resumed at any time without  penalty by written  notice if
received by the Plan Agent not less than ten days prior to any  dividend  record
date;  otherwise,  such  termination  will  be  effective  with  respect  to any
subsequently declared dividend or capital gains distribution.

     Whenever the Fund  declares an ordinary  income  dividend or a capital gain
dividend  (collectively  referred to as "dividends") payable either in shares or
in cash, non-participants in the Plan will receive cash, and participants in the
Plan will receive the  equivalent in common  shares.  The shares are acquired by
the Plan Agent for the participant's  account,  depending upon the circumstances
described  below,   either  (i)  through  receipt  of  additional  unissued  but
authorized  common  shares  from the Fund  ("newly  issued  shares")  or (ii) by
purchase of outstanding common shares on the open market (open-market purchases)
on the American  Stock  Exchange or  elsewhere.  If, on the payment date for any
dividend or distribution,  the net asset value per share of the common shares is
equal to or less than the market price per common share plus estimated brokerage
commissions (such condition being referred to herein as "market  premium"),  the
Plan Agent will  invest the amount of such  dividend  or  distribution  in newly
issued  shares on behalf of the  participant.  The number of newly issued common
shares  to be  credited  to the  participant's  account  will be  determined  by
dividing  the dollar  amount of the dividend by the net asset value per share on
the date the shares are issued, provided that the maximum discount from the then
current  market price per share on the date of issuance may not exceed 5%. If on
the  dividend  payment  date the net asset  value per share is greater  than the
market  value or market  premium  (such  condition  being  referred to herein as
"market  discount"),  the Plan Agent will invest the  dividend  amount in shares
acquired on behalf of the  participant  in open-market  purchases.  Prior to the
time common shares commence trading on the American Stock Exchange, participants
in the Plan will receive any dividends in newly issued shares.

     In the event of a market  discount on the payment  date for any dividend or
distribution,  the Plan  Agent has until the last  business  day before the next
date on which the  shares  trade on an  "ex-dividend"  basis or in no event more
than 30 days after the dividend  payment date (last purchase date) to invest the
dividend amount in shares acquired in open-market purchases.  It is contemplated
that the Fund will pay monthly income  dividends.  Therefore,  the period during
which open-market  purchases can be made will exist only from the record date of
the dividend through the date before the next ex-dividend  date, which typically
will be  approximately  ten days.  If,  before the Plan Agent has  completed its
open-market purchases,  the market price of a common share exceeds the net asset
value per share, the average per share purchase price paid by the Plan Agent may
exceed the net asset value of the Fund's shares, resulting in the acquisition of
fewer shares than if the  dividend  had been paid in newly issued  shares on the
dividend  record  date.  Because of the  foregoing  difficulty  with  respect to
open-market  purchases,  the Plan  provides  that if the Plan Agent is unable to
invest the full dividend  amount in  open-market  purchases  during the purchase
period or if the market  discount shifts to a market premium during the purchase
period, the Plan Agent may cease making open-market purchases and may invest the
uninvested portion of the dividend amount in newly issued shares at the close of
business on the last  purchase  date.  In that case,  the number of newly issued
common shares to be credited to the participant's  account will be determined by
dividing  the dollar  amount of the dividend by the net asset value per share on
the date the shares are issued, provided that the maximum discount from the then
current market price per share on the date of issuance may not exceed 5%.

     The  Plan  Agent  maintains  all  shareholders'  accounts  in the  Plan and
furnishes  written  confirmation of all  transactions in the account,  including
information  needed by shareholders  for tax records.  Dividend  reinvestment is
confirmed quarterly. Shares in the account of each Plan participant will be held
by the Plan Agent in non-certificated  form in the name of the participant,  and
each  shareholder's  proxy will  include  those  shares  purchased  or  received
pursuant  to the Plan.  The Plan  Agent  will  forward  all  proxy  solicitation
materials to participants  and vote proxies for shares held pursuant to the Plan
in accordance with the instructions of the participants.

     In the case of shareholders  such as banks,  brokers or nominees which hold
shares for others who are the beneficial  owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
record  shareholders as representing  the total amount  registered in the record
shareholder's  name and held for the  account  of  beneficial  owners who are to
participate in the Plan.

     There will be no brokerage  charges with respect to shares issued  directly
by the Fund as a result of  dividends  or capital  gains  distributions  payable
either in shares or in cash. However, each participant will pay a pro rata share
of brokerage  commissions  incurred with respect to the Plan Agent's open-market
purchases in connection with the reinvestment of dividends.

     The automatic  reinvestment of dividends and distributions will not relieve
participants  of any federal,  state or local income tax that may be payable (or
required  to be  withheld)  on such  dividends.  See "U.S.  Federal  Income  Tax
Matters."

     Shareholders  participating  in the Plan may receive benefits not available
to  shareholders  not  participating  in the  Plan.  If the  market  price  plus
commissions   of  the  Fund's  shares  is  higher  than  the  net  asset  value,
participants in the Plan will receive shares of the Fund at less than they could
otherwise  purchase them and will have shares with a cash value greater than the
value of any cash  distribution they would have received on their shares. If the
market price plus commissions is below the net asset value, participants receive
distributions  of shares  with a net asset value  greater  than the value of any
cash distribution they would have received on their shares.  However,  there may
be insufficient  shares available in the market to make  distributions in shares
at prices  below the net asset value.  Also,  since the Fund does not redeem its
shares, the price on resale may be more or less than the net asset value.

     Experience  under  the  Plan  may  indicate  that  changes  are  desirable.
Accordingly,  the Fund reserves the right to amend or terminate the Plan.  There
is no direct  service  charge to  participants  in the Plan;  however,  the Fund
reserves the right to amend the Plan to include a service  charge payable by the
participants.

     All correspondence concerning the Plan should be directed to the Plan Agent
at P.O. Box 43010, Providence, Rhode Island 02940-3010.




                            CLOSED-END FUND STRUCTURE




     The  Fund  is a newly  organized,  non-diversified,  closed-end  management
investment company (commonly referred to as a closed-end fund). Closed-end funds
differ from open-end funds (which are generally  referred to as mutual funds) in
that  closed-end  funds  generally  list  their  shares  for  trading on a stock
exchange and do not redeem their shares at the request of the shareholder.  This
means that if you wish to sell your shares of a  closed-end  fund you must trade
them on the market like any other stock at the  prevailing  market price at that
time.  In a mutual fund, if the  shareholder  wishes to sell shares of the fund,
the mutual fund will redeem or buy back the shares at "net asset  value."  Also,
mutual funds generally offer new shares on a continuous  basis to new investors,
and closed-end  funds  generally do not. The continuous  inflows and outflows of
assets in a mutual fund can make it difficult to manage the fund's  investments.
By comparison,  closed-end  funds are generally able to stay more fully invested
in securities that are consistent with their investment objectives and also have
greater  flexibility  to make certain  types of  investments  and to use certain
investment  strategies,  such as financial  leverage and investments in illiquid
securities (although the Advisor does not currently intend to invest in illiquid
securities).

     Shares of  closed-end  funds  frequently  trade at a discount  to their net
asset value. Common shares of closed-end  investment  companies have in the past
during  some  periods  traded at prices  higher than their net asset value (at a
"premium")  and during other periods traded at prices lower than their net asset
value (at a  "discount").  This is in part because the market price reflects the
dividend yield on the common  shares.  When the yield on the net asset value per
share is higher than yields  generally  available  in the market for  comparable
securities,  the market price will tend to reflect  this by trading  higher than
the net asset value per share to adjust the yield to a  comparable  market rate.
The Board of Trustees has  determined  that it would be in the best interests of
shareholders  of the Fund to take  action to  attempt to reduce or  eliminate  a
market value  discount from net asset value.  To that end, the Board of Trustees
has determined that quarterly  tender offers may help reduce any market discount
that may develop. Accordingly, the Board of Trustees is committed to make tender
offers for the Fund's common shares under certain  circumstances  and subject to
certain conditions described below under "Tender Offers". In addition, the Board
of Trustees may consider  from time to time open market  purchases of the Fund's
outstanding common shares.




                         U.S. FEDERAL INCOME TAX MATTERS




     The following is a summary  discussion of certain U.S.  federal  income tax
consequences  that may be relevant to a shareholder  of  acquiring,  holding and
disposing of common shares of the Fund.  This  discussion  only  addresses  U.S.
federal income tax  consequences to U.S.  shareholders  who hold their shares as
capital  assets  and  does  not  address  all of the  U.S.  federal  income  tax
consequences  that may be relevant to particular  shareholders in light of their
individual  circumstances.  This  discussion  also  does  not  address  the  tax
consequences  to  shareholders  who are  subject  to special  rules,  including,
without limitation,  financial  institutions,  insurance  companies,  dealers in
securities or foreign currencies, foreign holders, persons who hold their shares
as or in a hedge  against  currency  risk, a  constructive  sale,  or conversion
transaction,  holders  who  are  subject  to the  alternative  minimum  tax,  or
tax-exempt  or  tax-deferred  plans,  accounts,  or entities.  In addition,  the
discussion does not address any state,  local, or foreign tax consequences,  and
it does not address any federal tax consequences  other than U.S. federal income
tax  consequences.  The  discussion  reflects  applicable tax laws of the United
States  as of the date of this  prospectus,  which  tax laws may be  changed  or
subject to new  interpretations  by the courts or the Internal  Revenue  Service
("IRS") retroactively or prospectively. No attempt is made to present a detailed
explanation of all U.S.  federal income tax concerns  affecting the Fund and its
shareholders,  and the  discussion  set forth  herein  does not  constitute  tax
advice.  Investors  are urged to consult their own tax advisers to determine the
specific  tax  consequences  to them of  investing  in the Fund,  including  the
applicable  federal,  state,  local and foreign tax consequences to them and the
effect of possible changes in tax laws.

     The Fund  intends  to elect to be  treated  and to  qualify  each year as a
"regulated investment company" under Subchapter M of the Code and to comply with
applicable  distribution  requirements  so that it  generally  will not pay U.S.
federal income tax on income and capital gains  distributed to shareholders.  In
order  to  qualify  as a  regulated  investment  company,  which  the  following
discussion assumes,  the Fund must satisfy certain tests regarding the nature of
its income and the  diversification  of its assets.  If the Fund  qualifies as a
regulated  investment  company and, for each taxable year, it distributes to its
shareholders  an  amount  equal  to or  exceeding  the  sum  of  (i)  90% of its
"investment  company  taxable income" as that term is defined in the Code (which
includes, among other things, dividends, taxable interest, and the excess of any
net short-term  capital gains over net long-term  capital losses,  as reduced by
certain deductible  expenses) without regard to the deduction for dividends paid
and (ii) 90% of the  excess  of its  gross  tax-exempt  interest,  if any,  over
certain  disallowed  deductions,  the Fund  generally  will be  relieved of U.S.
federal income tax on any income of the Fund, including long-term capital gains,
distributed to shareholders. However, if the Fund retains any investment company
taxable  income or "net capital gain" (the excess of net long-term  capital gain
over net short-term  capital loss), it generally will be subject to U.S. federal
income tax at regular  corporate rates on the amount retained.  The Fund intends
to  distribute  at least  annually all or  substantially  all of its  investment
company taxable income,  net tax-exempt  interest,  and net capital gain. If for
any taxable year the Fund did not qualify as a regulated  investment company, it
would be treated as a corporation  subject to U.S.  federal  income tax, and all
distributions out of its current or accumulated  earnings and profits (including
distributions  of net capital gain) would be taxed to  shareholders  as ordinary
dividend income.

     Unless a shareholder is ineligible to participate or elects otherwise, cash
distributions  will be automatically  reinvested in additional  common shares of
the Fund pursuant to the Plan. For U.S.  federal  income tax purposes,  assuming
the Fund has  sufficient  current or  accumulated  earnings  and  profits,  such
distributions  generally are taxable whether a shareholder takes them in cash or
shares or they are reinvested  pursuant to the Plan in additional  shares of the
Fund. In general,  dividends from investment  company taxable income are taxable
as ordinary income, and designated  dividends from net capital gain, if any, are
taxable as long-term  capital gains for U.S. federal income tax purposes without
regard to the length of time the  shareholder  has held shares of the Fund.  For
taxable years beginning on or before December 31, 2008, however,  dividends that
are  designated by the Fund as derived from  qualified  dividend  income will be
taxable to  individuals at a maximum  federal  income tax rate of 15%,  provided
holding period and other requirements are satisfied. A distribution of an amount
in excess of the Fund's  current or  accumulated  earnings  and profits  will be
treated  by a  shareholder  as a return  of  capital  to the  extent  of (and in
reduction of) the shareholder's tax basis in its shares,  and any such amount in
excess of that  basis  will be  treated  as gain from the sale of the  shares as
discussed below. The U.S. federal income tax status of all distributions will be
reported to shareholders annually.

     If the Fund  retains  any net  capital  gain,  the Fund may  designate  the
retained amount as undistributed  capital gains in a notice to shareholders who,
if subject to U.S.  federal income tax on long-term  capital gains,  (i) will be
required to include in income for U.S. federal income tax purposes, as long-term
capital gain, their proportionate shares of such undistributed amount, (ii) will
be entitled to credit their proportionate  shares of the tax paid by the Fund on
the undistributed  amount against their U.S. federal income tax liabilities,  if
any, and to claim refunds to the extent the credit exceeds such liabilities, and
(iii)  will be  entitled  to  increase  the tax  basis  of their  shares  by the
difference between their proportionate shares of such includible gains and their
proportionate shares of the tax deemed paid.

     Sales and other  dispositions  of the Fund's  shares  generally are taxable
events for  shareholders  that are subject to tax.  Shareholders  should consult
their own tax advisers  with  reference  to their  individual  circumstances  to
determine  whether any  particular  transaction in the Fund's shares is properly
treated as a sale for tax purposes, as the following discussion assumes, and the
tax  treatment  of any  gains or  losses  recognized  in such  transactions.  In
general,  if shares of the Fund are sold, the shareholder will recognize gain or
loss equal to the  difference  between  the amount  realized on the sale and the
shareholder's  adjusted basis in the shares. Such gain or loss generally will be
treated as long-term gain or loss if the shares were held for more than one year
and otherwise  generally  will be treated as short-term  gain or loss.  Any loss
recognized by a shareholder upon the sale or other  disposition of shares with a
tax  holding  period  of six  months  or less  generally  will be  treated  as a
long-term  capital loss to the extent of any amounts treated as distributions of
long-term  capital gain with  respect to such  shares.  Losses on sales or other
dispositions of shares may be disallowed under "wash sale" rules in the event of
other  investments in the Fund (including those made pursuant to reinvestment of
dividends  and/or  capital  gains  distributions)  within  a  period  of 61 days
beginning 30 days before and ending 30 days after a sale or other disposition of
the original shares.

     Federal law requires that the Fund withhold (as "backup  withholding") at a
current rate of 28% on reportable payments, including dividends and capital gain
distributions  paid to  certain  shareholders  who  have not  complied  with IRS
regulations.  In order to avoid this withholding requirement,  shareholders must
certify on their  account  applications,  or on separate IRS Forms W-9, that the
Social Security Number or other Taxpayer  Identification  Number they provide is
their  correct  number  and  that  they  are not  currently  subject  to  backup
withholding,  or that they are  exempt  from  backup  withholding.  The Fund may
nevertheless be required to withhold if it receives notice from the IRS that the
number provided is incorrect or backup  withholding is applicable as a result of
previous underreporting of income. Similar backup withholding rules may apply to
a  shareholder's  broker  with  respect  to  the  proceeds  of  sales  or  other
dispositions of the Fund's shares by such shareholder. Backup withholding is not
an additional tax. Any amounts  withheld from payments made to a shareholder may
be refunded or credited  against  such  shareholder's  U.S.  federal  income tax
liability,  if any,  provided that the required  information  is provided to the
IRS.

     The tender offer of the Fund's  common  shares may result in a taxable gain
or loss to the tendering  shareholder,  depending on whether the amount received
is greater or less than such  shareholder's  adjusted  tax basis in the  shares.
Different tax consequences may apply for tendering and nontendering shareholders
in connection with a tender offer,  and these  consequences are disclosed in the
Statement of Additional Information. For example, if a shareholder tenders fewer
than all of his or her common shares,  such  repurchase may not be treated as an
exchange for federal income tax purposes and may result in deemed  distributions
to non-tendering shareholders. On the other hand, shareholders who tender all of
their common shares (including common shares deemed owned by shareholders  under
constructive ownership rules) will be treated as having sold their common shares
and generally will realize a capital gain or loss.

     The foregoing is a general and abbreviated summary of the provisions of the
Code and the  Treasury  regulations  in  effect  as they  generally  affect  the
taxation of the Fund and its shareholders.  As noted above, these provisions are
subject to change by legislative,  judicial or  administrative  action,  and any
such change may be retroactive.  A further discussion of the U.S. federal income
tax rules  applicable  to the Fund can be found in the  Statement of  Additional
Information   which  is   incorporated   by  reference  into  this   prospectus.
Shareholders  are  urged  to  consult  their  tax  advisers  regarding  specific
questions as to U.S. federal, foreign, state, and local income or other taxes.


                                 NET ASSET VALUE




     The Fund  calculates a net asset value for its common  shares every day the
New York Stock Exchange is open when regular trading closes  (normally 4:00 p.m.
Eastern  time).  For  purposes  of  determining  the net asset value of a common
share,  the  value of the  securities  held by the  Fund  plus any cash or other
assets  (including  interest accrued but not yet received) minus all liabilities
(including  accrued  expenses and  indebtedness)  and the aggregate  liquidation
value of any  outstanding  preferred  shares is divided  by the total  number of
common shares outstanding at such time. Expenses,  including the fees payable to
the Advisor,  are accrued  daily.  Currently,  the net asset values of shares of
publicly traded  closed-end  investment  companies  investing in equity and debt
securities  are  published  in Barron's,  the Monday  edition of The Wall Street
Journal and the Monday and Saturday editions of The New York Times.

     The Fund  generally  values its portfolio  securities  using closing market
prices  or  readily  available  market  quotations.  The Fund may use a  pricing
service or a pricing  matrix to value some of its assets.  When  closing  market
prices or market  quotations  are not available or are considered by the Advisor
to be unreliable,  the Fund may use a security's  fair value.  Fair value is the
valuation  of a security  determined  on the basis of factors  other than market
value in accordance with procedures  approved by the Fund's  Trustees.  The Fund
also may use the fair value of a security,  including a non-U.S.  security, when
the Advisor  determines  that the closing  market price on the primary  exchange
where the  security  is traded no longer  accurately  reflects  the value of the
security due to factors affecting one or more relevant securities markets or the
specific  issuer.  The use of fair  value  pricing by the Fund may cause the net
asset  value of its  shares to differ  from the net asset  value  that  would be
calculated using closing market prices.  International securities markets may be
open on days when the U.S. markets are closed. For this reason, the value of any
international  securities owned by the Fund could change on a day you cannot buy
or sell shares of the Fund.

     Debt securities with remaining  maturities of 60 days or less are valued at
amortized  cost,  which is a method of  estimating  market  value.  The value of
interest rate swaps,  caps and floors is determined in accordance with a formula
and then  confirmed  periodically  by obtaining a bank  quotation.  Positions in
options are valued at the last sale price on the market where any such option is
principally traded.  Positions in futures contracts are valued at closing prices
for  such  contracts  established  by the  exchange  on which  they are  traded.
Repurchase agreements are valued at cost plus accrued interest.



                TENDER OFFERS (EVERGREEN ENHANCED LIQUIDITY PLAN)

     The  market  price per  common  share may be greater or less than net asset
value per common share.  Common shares of closed-end  investment  companies,  in
some cases trade at a premium, but frequently trade at a discount from net asset
value.  This  characteristic  of  common  shares of  closed-end  funds is a risk
separate  and  distinct  from the risk  that the  Fund's  net  asset  value  may
decrease.  The market price of the Fund's  common shares also may be affected by
trading volume of the common shares,  general market and economic conditions and
other factors beyond the control of the Fund.

     The Board of Trustees has determined that it would be in the best interests
of  shareholders  of the Fund to take action to attempt to reduce or eliminate a
market value  discount from net asset value.  To that end, the Board of Trustees
has determined that quarterly  tender offers may help reduce any market discount
that may develop.

     Accordingly,  the Board of Trustees has committed to make tender offers for
the Fund's  common  shares under  certain  circumstances  and subject to certain
conditions.  Beginning  six to eight  months  after the Fund's  commencement  of
operations (for a total of eight consecutive  calendar  quarters),  in the event
that the common shares trade at a discount to net asset value of greater than 5%
for fifteen of twenty days during a specific  measurement  period (initially the
twenty-first  through  fortieth  trading  days of a quarter)  (the  "measurement
period"), the Fund, under normal circumstances,  will make offers to purchase up
to 5% of its  outstanding  common  shares  at their  net  asset  value  from all
beneficial  shareholders.  The Fund  will not  undertake  a tender  offer if the
Fund's common shares are not trading at a discount. The Fund will make its first
tender  offer within the first six to eight  months of the  commencement  of the
Fund's operations and for the following seven quarters after such initial tender
offer if the discount  exists  during the  measurement  period for the number of
days  specified  above.  The Board of Trustees  reserves the right to modify the
conditions described in this paragraph in light of experience.  In addition, the
Board of Trustees may consider from time to time open market  repurchases of the
Fund's outstanding common shares.

     Under  certain  circumstances  described  below,  the Board of Trustees may
determine  not to undertake a tender offer even if the  conditions  described in
the preceding  paragraph are met.  Moreover,  there can be no assurance that any
such tender  offers  would cause the common  shares to trade at a price equal to
their net asset value or reduce the spread  between the market price and the net
asset value per common share.  Although the Board of Trustees generally believes
that tender offers are in the best interests of shareholders, the acquisition of
common  shares  by the Fund  will  decrease  the  total  assets of the Fund and,
therefore, will have the effect of increasing the Fund's expense ratio.

     The Fund will purchase all outstanding common shares tendered in accordance
with the terms of the offer  unless the Board of Trustees  determined  to accept
none of them  (based upon the  circumstances  set forth  below).  If more common
shares are  tendered  for  repurchase  than the Fund has offered to  repurchase,
common  shares will be  repurchased  on a pro-rata  basis.  If authorized by the
Commission,  the Fund may make as a condition  of each tender  offer that no one
shareholder may receive more than 10% of the amount purchased by the Fund in the
tender offer.  There can be no assurance that the  Commission  will approve this
condition.  Thus,  shareholders  may be  unable  to  liquidate  all  or a  given
percentage of their common shares and some  shareholders  may tender more shares
than they wish to have  repurchased in order to ensure  repurchase of at least a
specific  number of common shares.  Shareholders  may withdraw  tendered  common
shares at any time prior to the tender offer deadline.

     Tender offers and the need to fund  repurchase  obligations  may affect the
ability of the Fund to be fully invested,  which may reduce  returns.  Moreover,
diminution in the size of the Fund through  repurchases  without  offsetting new
sales of common shares may result in untimely sales of portfolio  securities and
a higher expense ratio,  and may limit the ability of the Fund to participate in
new investment  opportunities.  Repurchases resulting in portfolio turnover will
result in additional  expenses  being borne by the Fund.  The Fund may borrow to
meet repurchase  obligations,  which entails certain risks and costs.  See "Risk
Factors- Tender Offers (Evergreen Enhanced Liquidity Plan)."

     Although the Board of Trustees has  committed to conduct  quarterly  tender
offers  beginning in the Fund's first six to eight months of  operations  if the
conditions  described  above are met,  it is the policy of the Board of Trustees
(which may be changed by the Board),  not to cause the Fund to  purchase  shares
pursuant to a tender offer if (1) such purchases  would impair the Fund's status
as a regulated investment company under the Federal tax laws; (2) the Fund would
not be able to liquidate  portfolio  securities  in a manner that is orderly and
consistent  with  the  Fund's  investment  objective  and  policies  in order to
purchase  tendered  common  shares;  (3) such  action  would  result in the Fund
failing to satisfy the American Stock Exchange's  minimum listing  requirements;
or (4) there is, in the judgment of the Board of Trustees,  any (a) legal action
or proceeding instituted or threatened challenging the tender offer or otherwise
materially adversely affecting the Fund, (b) declaration of a banking moratorium
by Federal or state  authorities  or any  suspension  of payment by banks in the
United States,  which is material to the Fund, (c) limitation imposed by Federal
or state  authorities  on the extension of credit by lending  institutions,  (d)
commencement  of war,  armed  hostilities  or other  international  or  national
calamity directly or indirectly involving the United States which is material to
the Fund,  or (e) other event or  condition  that would have a material  adverse
effect on the Fund or its shareholders if tendered common shares were purchased.
Thus, there can be no assurance that the Board of Trustees will proceed with any
tender  offer.  The Board of Trustees  may modify these  conditions  in light of
circumstances existing at the time.

     If the Fund's common shares are purchased  pursuant to a tender offer, such
purchases  could reduce  significantly  the asset  coverage of any  borrowing or
outstanding  senior  securities.  The Fund may not purchase common shares to the
extent such  purchases  would result in the asset  coverage with respect to such
borrowing  or  senior   securities   being  reduced  below  the  asset  coverage
requirement  set forth in the 1940 Act.  Accordingly,  in order to purchase  all
common  shares  tendered,  the Fund  may  have to repay  all or part of any then
outstanding  borrowing  or  redeem  all or part of any then  outstanding  senior
securities to maintain the required asset coverage.  In addition,  the amount of
common  shares  for which  the Fund  makes any  particular  tender  offer may be
limited for the reasons set forth above or in respect of other concerns  related
to liquidity of the Fund's portfolio.

     Any  tender  offer  will be made  and  shareholders  will  be  notified  in
accordance with the requirements of the Securities  Exchange Act of 1934 and the
1940 Act, either by publication or mailing or both. The offering  documents will
contain  information  prescribed  by such  laws and the  rules  thereunder.  The
repurchase  of tendered  shares by the Fund will be a taxable  event.  See "U.S.
Federal Income Tax Matters." The Fund will pay all costs and expenses associated
with the making of any tender offer.





                              DESCRIPTION OF SHARES




     The Fund is  authorized  to issue an  unlimited  number of  common  shares,
without par value. The Fund is also authorized to issue preferred shares.  After
the  completion  of this  offering,  the  Fund  will  only  have  common  shares
outstanding.  The Board of Trustees is authorized to classify and reclassify any
issued shares into one or more additional classes or series of shares. The Board
of Trustees may establish,  designate and change such series or class, including
preferred  shares,  from time to time by setting or  changing in any one or more
respects the preferences,  voting powers, rights, duties and business purpose of
such  shares and to divide or  combine  the shares of any series or class into a
greater or lesser number. See "Leverage." The Fund may issue preferred shares.

Common Shares

     Common  shares,  when  issued  and  outstanding,  will be  fully  paid  and
non-assessable  and will  have no  pre-emptive  rights or  conversion  rights or
rights to cumulative voting.  Shareholders are entitled to share pro rata in the
net assets of the Fund available for  distribution to common  shareholders  upon
liquidation of the Fund.  Common  shareholders are entitled to one vote for each
share held.  The common  shares are expected to be listed on the American  Stock
Exchange,  and the Fund will hold  annual  meetings  so long as  required by the
American Stock Exchange.

     In the  event  that the Fund  issues  preferred  shares  and so long as any
shares of the Fund's preferred shares are outstanding,  holders of common shares
will not be entitled to receive  any net income of or other  distributions  from
the Fund unless all  accumulated  dividends on preferred  shares have been paid,
and unless asset coverage (as defined in the 1940 Act) with respect to preferred
shares would be at least 200% after  giving  effect to such  distributions.  See
"Leverage."

     The Fund will send  unaudited  reports at least  semiannually  and  audited
annual financial statements to all of its shareholders.

     As of March 15, 2004, Evergreen Financing Company, LLC, an affiliate of the
Advisor,  provided the initial  capital for the Fund by purchasing  5,000 common
shares of the Fund for $100,000.  As of the date of this  prospectus,  Evergreen
Financing Company,  LLC owned 100% of the outstanding  common shares.  Evergreen
Financing  Company,  LLC may be deemed to control the Fund until such time as it
owns less  than 25% of the  outstanding  shares of the Fund or until the  public
offering of the shares is completed.

Preferred Shares
     The Fund in the future may elect to issue  preferred  shares as part of its
leverage  strategy.  The Board of Trustees reserves the right to issue preferred
shares to the  extent  permitted  by the 1940 Act,  which  currently  limits the
aggregate  liquidation  preference of all outstanding preferred shares to 50% of
the  value  of  the  Fund's  total  assets  less  the  Fund's   liabilities  and
indebtedness.  Although the terms of any preferred  shares,  including  dividend
rate, liquidation  preference and redemption  provisions,  will be determined by
the  Board  of  Trustees,  subject  to  applicable  law  and the  Agreement  and
Declaration of Trust, it is likely that the preferred  shares will be structured
to carry a relatively  short-term  dividend rate  reflecting  interest  rates on
short-term bonds by providing for the periodic  redetermination  of the dividend
rate at relatively  short  intervals  through an auction,  remarketing  or other
procedure.  The Fund  also  believes  that it is  likely  that  the  liquidation
preference, voting rights and redemption provisions of the preferred shares will
be similar to those stated below.

     In the event of any voluntary or  involuntary  liquidation,  dissolution or
winding up of the Fund,  the  holders of  preferred  shares  will be entitled to
receive a preferential liquidating distribution,  which is expected to equal the
original  purchase price per preferred share plus accrued and unpaid  dividends,
whether or not declared, before any distribution of assets is made to holders of
common shares. After payment of the full amount of the liquidating  distribution
to which they are entitled, the holders of preferred shares will not be entitled
to any further participation in any distribution of assets by the Fund.


     The 1940 Act  requires  that the holders of any  preferred  shares,  voting
separately as a single  class,  have the right to elect at least two Trustees at
all times.  The  remaining  Trustees will be elected by holders of common shares
and preferred shares, voting together as a single class. In addition, subject to
the prior rights, if any, of the holders of any other class of senior securities
outstanding,  the  holders  of any  preferred  shares  have the right to elect a
majority  of the  Trustees  at any time two years'  dividends  on any  preferred
shares are unpaid.  The 1940 Act also requires that, in addition to any approval
by shareholders that might otherwise be required, the approval of the holders of
a majority of any outstanding  preferred  shares,  voting separately as a class,
would be required to (1) adopt any plan of  reorganization  that would adversely
affect  the  preferred  shares,  and (2) take  any  action  requiring  a vote of
security  holders under Section  13(a) of the 1940 Act,  including,  among other
things,  changes  in the Fund's  subclassification  as a  closed-end  investment
company  or   changes   in  its   fundamental   investment   restrictions.   See
"Anti-takeover  Provisions  in  the  Agreement  and  Declaration  of  Trust  and
By-laws." As a result of these  voting  rights,  the Fund's  ability to take any
such  actions may be impeded to the extent that there are any  preferred  shares
outstanding.  The Board of Trustees  presently intends that, except as otherwise
indicated in this prospectus and except as otherwise required by applicable law,
holders of preferred shares will have equal voting rights with holders of common
shares (one vote per share,  unless otherwise required by the 1940 Act) and will
vote together with holders of common shares as a single class.


     The  affirmative  vote of the  holders  of a  majority  of the  outstanding
preferred shares,  voting as a separate class, will be required to amend,  alter
or repeal  any of the  preferences,  rights or powers of  holders  of  preferred
shares so as to affect  materially  and adversely  such  preferences,  rights or
powers,  or to increase or decrease the authorized  number of preferred  shares.
The class vote of holders of preferred  shares described above will in each case
be in addition to any other vote required to authorize the action in question.

     The terms of the preferred shares are expected to provide that (i) they are
redeemable  by the Fund in whole or in part at the original  purchase  price per
share plus accrued dividends per share, (ii) the Fund may tender for or purchase
preferred  shares,  and (iii) the Fund may  subsequently  resell  any  shares so
tendered for or purchased. Any redemption or purchase of preferred shares by the
Fund will reduce the leverage applicable to the common shares,  while any resale
of shares by the Fund will increase that leverage.

     The discussion above describes the possible offering of preferred shares by
the Fund. If the Board of Trustees  determines to proceed with such an offering,
the terms of the  preferred  shares may be the same as, or different  from,  the
terms  described  above,  subject  to  applicable  law  and  the  Agreement  and
Declaration of Trust. The Board of Trustees, without the approval of the holders
of common shares, may authorize an offering of preferred shares or may determine
not to authorize such an offering, and may fix the terms of the preferred shares
to be offered.




 ANTI-TAKEOVER PROVISIONS OF THE AGREEMENT AND DECLARATION OF TRUST AND BY-LAWS




     The Fund's  Agreement and  Declaration  of Trust includes  provisions  that
could have the effect of limiting  the  ability of other  entities or persons to
acquire  control  of the  Fund or to  change  the  composition  of its  Board of
Trustees and could have the effect of depriving  shareholders  of an opportunity
to sell their shares at a premium over prevailing  market prices by discouraging
a third party from seeking to obtain control of the Fund.

     The Board of Trustees is divided into three classes of approximately  equal
size.  The terms of the Trustees of the different  classes are staggered so that
approximately one-third of the Board of Trustees is elected by shareholders each
year.

     A Trustee may be removed from office with or without cause by a majority of
Trustees if such removal is approved by a vote of the holders of at least 75% of
the shares entitled to be voted on the matter.

     In addition,  the Agreement and Declaration of Trust requires the favorable
vote of the holders of at least 75% of the Fund's  shares to  approve,  adopt or
authorize the following:

o    a merger or  consolidation or statutory share exchange of the Fund with any
     other corporations;

o    a sale of all or substantially  all of the Fund's assets (other than in the
     regular course of the Fund's investment activities); or

o    a liquidation or dissolution of the Fund

     unless  such  action  has  been  approved,  adopted  or  authorized  by the
affirmative  vote of at least  75% of the  total  number  of  Trustees  fixed in
accordance with the by-laws, in which case the affirmative vote of a majority of
the Fund's shares is required. Following any issuance of preferred shares by the
Fund, it is  anticipated  that the approval,  adoption or  authorization  of the
foregoing  also would  require  the  favorable  vote of a majority of the Fund's
shares of  preferred  shares  then  entitled  to be voted,  voting as a separate
class.

     In addition, conversion of the Fund to an open-end investment company would
require an amendment  to the Fund's  Agreement  and  Declaration  of Trust.  The
amendment would have to be declared  advisable by the Board of Trustees prior to
its submission to  shareholders.  Such an amendment  would require the favorable
vote of the holders of at least 75% of the Fund's  outstanding shares (including
any  preferred  shares)  entitled to be voted on the matter,  voting as a single
class (or a majority of such shares if the  amendment was  previously  approved,
adopted or authorized by 75% of the total number of Trustees fixed in accordance
with the By-laws).  Such a vote also would satisfy a separate requirement in the
1940 Act that the change be approved  by the  shareholders.  Shareholders  of an
open-end  investment  company may require the company to redeem  their shares of
common stock at any time (except in certain  circumstances  as  authorized by or
under the 1940 Act) at their net asset value,  less such redemption  charge,  if
any, as might be in effect at the time of a redemption.  All redemptions will be
made in cash.  If the Fund is converted to an open-end  investment  company,  it
could be  required  to  liquidate  portfolio  securities  to meet  requests  for
redemption,  and the  common  shares  would no longer be listed on the  American
Stock Exchange.

     Conversion to an open-end  investment company would also require changes in
certain  of the  Fund's  investment  policies  and  restrictions,  such as those
relating to the borrowing of money.

     In addition,  the Agreement and Declaration of Trust requires the favorable
vote of a majority of the Trustees followed by the favorable vote of the holders
of at least 75% of the  outstanding  shares of each affected  class or series of
the Fund, voting separately as a class or series, to approve, adopt or authorize
certain  transactions  with 5% or greater holders of a class or series of shares
and their  associates,  unless the transaction has been approved by at least 75%
of the Trustees, in which case "a majority of the outstanding voting securities"
(as  defined in the 1940 Act) of the Fund shall be  required.  For  purposes  of
these  provisions,  a 5% or  greater  holder  of a class or  series of shares (a
"Principal   Shareholder")  refers  to  any  person  who,  whether  directly  or
indirectly  and whether alone or together with its  affiliates  and  associates,
beneficially owns 5% or more of the outstanding shares of any class or series of
shares of beneficial interest of the Fund. The 5% holder transactions subject to
these special approval requirements are:

o    the merger or  consolidation of the Fund or any subsidiary of the Fund with
     or into any Principal Shareholder;

o    the issuance of any securities of the Fund to any Principal Shareholder for
     cash;

o    the sale, lease or exchange of all or any substantial part of the assets of
     the Fund to any  Principal  Shareholder,  except assets having an aggregate
     fair market value of less than  $1,000,000,  aggregating for the purpose of
     such  computation  all assets  sold,  leased or  exchanged in any series of
     similar transactions within a 12-month period; or

o    the sale,  lease or exchange to the Fund or any  subsidiary of the Fund, in
     exchange  for  securities  of the  Fund,  of any  assets  of any  Principal
     Shareholder,  except assets  having an aggregate  fair market value of less
     than  $1,000,000,  aggregating for purposes of such  computation all assets
     sold,  leased or exchanged in any series of similar  transactions  within a
     12-month period.

     The Agreement and  Declaration of Trust and By-laws  provide that the Board
of Trustees has the power, to the extent the By-laws do not reserve the right to
the  shareholders,  to make, alter or repeal any of the By-laws,  subject to the
requirements  of  applicable  law.  Neither this  provision of the Agreement and
Declaration of Trust, nor any of the foregoing  provisions thereof requiring the
affirmative  vote of 75% of  outstanding  shares of the Fund,  can be amended or
repealed except by the vote of such required number of shares.

     The Fund's  By-laws  generally  require that advance notice be given to the
Fund in the event a shareholder desires to nominate a person for election to the
Board of  Trustees  or to transact  any other  business at an annual  meeting of
shareholders.  With  respect to an annual  meeting  following  the first  annual
meeting of  shareholders,  notice of any such  nomination  or  business  must be
delivered to or received at the principal executive offices of the Fund not less
than 90 calendar days nor more than 120 calendar  days prior to the  anniversary
date of the prior year's annual meeting (subject to certain exceptions).  In the
case of the first annual  meeting of  shareholders,  the notice must be given no
later than the tenth  calendar day following  public  disclosure as specified in
the  by-laws of the date of the  meeting.  Any notice by a  shareholder  must be
accompanied by certain information as provided in the By-laws.




                                  UNDERWRITING





     Citigroup Global Markets Inc., A.G.  Edwards & Sons,  Inc.,  Merrill Lynch,
Pierce,  Fenner & Smith  Incorporated,  Wachovia Capital  Markets,  LLC, Advest,
Inc., Ferris,  Baker Watts,  Incorporated,  Janney Montgomery Scott LLC, KeyBanc
Capital Markets, A Division of McDonald Investments Inc., Quick & Reilly, Inc. A
FleetBoston  Financial  Company  and Wells Fargo  Securities,  LLC are acting as
representatives of the underwriters.  Subject to the terms and conditions stated
in the  underwriting  agreement  dated as of the date hereof,  each  underwriter
named below has severally agreed to purchase, and the Fund has agreed to sell to
such  underwriter,  the number of common  shares set forth  opposite the name of
such underwriter.


                                                                        Number
                 Underwriter                                          of Shares
                 ----------                                      --------------

                 Citigroup Global Markets Inc........................   _

                 A.G. Edwards & Sons, Inc............................   _

                 Merrill Lynch, Pierce Fenner & Smith................   _
                               Incorporated

                 Wachovia Capital Markets, LLC.......................   _

                 Advest, Inc.........................................   _

                 Ferris, Baker Watts, Incorporated...................   _

                 Janney Montgomery Scott LLC  .......................   _


                 KeyBanc Capital Markets, A Division of McDonald Investments
                  Inc.



                 Quick & Reilly, Inc. A FleetBoston Financial Company

                 Wells Fargo Securities, LLC.........................   _

                                                                    ----------
                                Total................................   _
                                                                   ==========

     The  underwriting  agreement  provides that the  obligations of the several
underwriters to purchase the common shares included in this offering are subject
to approval of certain legal matters by counsel and to certain other conditions.
The  underwriters  are  obligated to purchase all the common  shares (other than
those covered by the over-allotment option described below) if they purchase any
of the common shares.


     The underwriters propose to offer some of the common shares directly to the
public at the offering price set forth on the cover page of this  prospectus and
some of the common shares to certain dealers at the public offering price less a
concession not to exceed  $__________ per common share.  The sales load the Fund
will pay of  $__________  per share is equal to ______% of the initial  offering
price. The  underwriters  may allow, and such dealers may reallow,  a concession
not to exceed  $_______ per common share on sales to certain other  dealers.  If
all of the  common  shares  are not  sold at the  initial  offering  price,  the
representatives  may change the public  offering  price and other selling terms.
Investors  must pay for any common  shares  purchased on or before  ___________,
2004. The  representatives  have advised the Fund that the  underwriters  do not
intend  to  confirm  any  sales  to  any  accounts   over  which  they  exercise
discretionary authority.



     The Advisor (and not the Fund) has agreed to pay certain underwriters a Fee
     at an annual rate of up to 0.15% of the Fund's managed assets  attributable
     to common shares sold by such  underwriter.  This fee and any reimbursement
     of expenses paid to these  underwriters  in connection  therewith  will not
     exceed ____% of the total  initial price to the public of the common shares
     offered  hereby and will be payable in arrears at the end of each  calendar
     quarter during the  continuance of the investment  management  agreement or
     other  advisory  agreement  between the Advisor and the Fund. In return for
     such fee these  underwriters have agreed (i) to provide services related to
     the sale and  distribution  of the common shares,  (ii) to provide  certain
     after-market  support  services  designed to maintain the visibility of the
     Fund on an ongoing basis, (iii) to provide relevant information, studies or
     reports regarding general trends in the closed-end  investment  company and
     asset management industries, if reasonably obtainable,  and to consult with
     representatives of the Advisor in connection  therewith and (iv) to provide
     information  to and consult  with the Advisor  with  respect to  applicable
     strategies   designed  to  address   market   value   discounts,   if  any.
     Additionally,  within 60 days of closing, the Advisor will pay to Citigroup
     Global  Markets Inc. from its own  resources a  structuring  fee for advice
     relating to the  structure and design of the Fund and  organization  of the
     Fund as well as services related to the sale and distribution of the Fund's
     common shares in an amount equal to  _____________,  which in the aggregate
     is _____% of the total  initial  price to the public of the  common  shares
     offered  hereby,   including   reimbursement   of  expenses  in  connection
     therewith.   In  addition,   the  Fund  has  agreed  to  reimburse  certain
     underwriter  expenses in an amount equal to $0.0067 per common share, which
     amount,  along  with  the  reimbursement  of  expenses  pursuant  t tot  he
     structuring fee agreement and the additional  compensation  agreements will
     not exceed ___________,  or _____% of the total initial price to the public
     of the common shares offered hereby. The sum of the structuring fee paid to
     Citigroup Global Markets Inc, the fees paid to certain other  underwriters,
     the amounts paid by the Fund to  reimburse  certain  underwriter  and other
     expenses and the sales load to be paid by the Fund will not exceed 9.00% of
     the total price to the public of the common shares offered hereby.


     The Fund has granted to the underwriters an option, exercisable for 45 days
from the date of this prospectus,  to purchase up to      additional  common
shares at the public  offering price less the sales load. The  underwriters  may
exercise such option solely for the purpose of covering over-allotments, if any,
in connection with this offering.  To the extent such option is exercised,  each
underwriter  will be  obligated,  subject to certain  conditions,  to purchase a
number  of  additional  common  shares   approximately   proportionate  to  such
underwriter's initial purchase commitment.

     The Fund and the Advisor  have agreed  that,  for a period of 180 days from
the date of this prospectus, they will not, without the prior written consent of
Citigroup  Global  Markets  Inc., on behalf of the  underwriters,  dispose of or
hedge any common shares or any securities  convertible  into or exchangeable for
common  shares.  Citigroup  Global  Markets  Inc., in its sole  discretion,  may
release any of the  securities  subject to these  agreements at any time without
notice.

     Prior to the  offering,  there has been no  public  market  for the  common
shares.  Consequently,  the initial public  offering price for the common shares
was   determined   by   negotiation   among  the  Fund,   the  Advisor  and  the
representatives. There can be no assurance, however, that the price at which the
common  shares will sell in the public  market after this  offering  will not be
lower  than  the  price at which  they are sold by the  underwriters  or that an
active  trading market in the common shares will develop and continue after this
offering. We expect the common shares to be approved for listing on the American
Stock Exchange under the symbol "ERH," subject to notice of issuance.


     The  following  table  shows the sales  load that the Fund is to pay to the
underwriters in connection with this offering.  These amounts are shown assuming
both no  exercise  and full  exercise  of the  underwriters'  option to purchase
additional common shares: _


                                             Paid by the Fund
                                      No Exercise      Full Exercise
                                      ---------------------------
     Per Share....................... $              $
     Total........................... $              $
                                                    ----


     The  Fund and the  Advisor  have  each  agreed  to  indemnify  the  several
underwriters  or  contribute  to  losses  arising  out of  certain  liabilities,
including liabilities, under the Securities Act of 1933, as amended.

     The  Advisor  has  agreed  to pay (i) all  organization  expenses  and (ii)
offering costs (other than sales load) that exceed $ per share. In addition, the
Fund has agreed to reimburse the underwriters  for certain expenses  incurred by
the underwriters in the offering.

     Certain  underwriters  may make a market in the common shares after trading
in  the  common  shares  has  commenced  on  the  American  Stock  Exchange.  No
underwriter is, however,  obligated to conduct market-making  activities and any
such  activities may be  discontinued  at any time without  notice,  at the sole
discretion of the underwriter. No assurance can be given as to the liquidity of,
or the trading  market for, the common  shares as a result of any  market-making
activities  undertaken by any underwriter.  This prospectus is to be used by any
underwriter  in connection  with the offering and,  during the period in which a
prospectus  must be  delivered,  with  offers and sales of the common  shares in
market-making  transactions in the over-the-counter  market at negotiated prices
related to prevailing market prices at the time of the sale.

     The underwriters have advised the Fund that, pursuant to Regulation M under
the Securities Exchange Act of 1934, as amended,  certain persons  participating
in the offering may engage in transactions, including stabilizing bids, covering
transactions  or the  imposition of penalty  bids,  which may have the effect of
stabilizing or maintaining the market price of the common shares on the American
Stock Exchange at a level above that which might  otherwise  prevail in the open
market.  A  "stabilizing  bid" is a bid for or purchase of the common  shares on
behalf of an underwriter  for the purposes of fixing or maintaining the price of
the common  shares.  A  "covering  transaction"  is a bid for or purchase of the
common shares on behalf of an underwriter to reduce a short position incurred by
the  underwriters  in  connection  with  the  offering.  A  "penalty  bid"  is a
contractual arrangement whereby if, during a specified period after the issuance
of the common shares, the underwriters purchase common shares in the open market
for the account of the  underwriting  syndicate and the common shares  purchased
can be traced to a particular  underwriter or member of the selling  group,  the
underwriting  syndicate may require the  underwriter  or selling group member in
question  to  purchase  the common  shares in  question at the cost price to the
syndicate or may recover from (or decline to pay to) the  underwriter or selling
group member in question any or all compensation  (including,  with respect to a
representative,  the  applicable  syndicate  management  fee)  applicable to the
common shares in question.  As a result,  an underwriter or selling group member
and, in turn,  brokers may lose the fees that they  otherwise  would have earned
from a sale of the common  shares if their  customer  resells the common  shares
while the penalty bid is in effect.  The underwriters are not required to engage
in any of  these  activities,  and any such  activities,  if  commenced,  may be
discontinued at any time.

     The  underwriting  agreement  provides  that  it may be  terminated  in the
absolute discretion of the representatives  without liability on the part of the
underwriters to the Fund or the Advisor if, prior to the delivery of and payment
for the common  shares,  (i) trading in the Fund's common shares shall have been
suspended by the  Securities  and  Exchange  Commission  or the  American  Stock
Exchange or trading in securities generally on the American Stock Exchange shall
have been  suspended  or  limited or minimum  prices for  trading in  securities
generally  shall have been  established on the American Stock  Exchange,  (ii) a
commercial  banking moratorium shall have been declared by either federal or New
York state  authorities  or (iii)  there  shall have  occurred  any  outbreak or
escalation  of  hostilities,  declaration  by the  United  States of a  national
emergency  or war, or other  calamity or crisis the effect of which on financial
markets in the United  States is such as to make it, in the sole judgment of the
representatives,  impracticable  or  inadvisable to proceed with the offering or
delivery of the common shares as  contemplated  by the prospectus  (exclusive of
any supplement thereto).

     A  prospectus  in  electronic  format  may  be  available  on  the  website
maintained by one or more of the underwriters.  The representatives may agree to
allocate a number of common shares to the  underwriters for sale to their online
brokerage account holders.  The  representatives  will allocate common shares to
the underwriters that may make internet distributions on the same basis as other
allocations.  In  addition,  common  shares may be sold by the  underwriters  to
securities dealers who resell common shares to online brokerage account holders.

     The Fund anticipates that from time to time certain of the underwriters may
act as  brokers  or  dealers  in  connection  with the  execution  of the Funds'
portfolio transactions after they have ceased to be Underwriters and, subject to
certain restrictions, may act as brokers while they are underwriters.

     The underwriters  have performed  investment  banking and advisory services
for the  Advisor  and its  affiliates  from time to time,  for  which  they have
received  customary fees and expenses.  The underwriters may, from time to time,
engage in transactions  with or perform services for the Advisor in the ordinary
course of business.

     Prior to the public offering of common shares, the Advisor purchased common
shares  from the Fund in an  amount  satisfying  the net worth  requirements  of
Section 14(a) of the Investment Company Act.

     The  principal  business  address of Citigroup  Global  Markets Inc. is 388
Greenwich Street, New York, New York 10013.


       CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR




     The Fund's  securities  and cash are held under a custodian  agreement with
State  Street  Bank  and  Trust   Company,   2  Avenue  de  Lafayette,   Boston,
Massachusetts 02111. EquiServe Trust Company, N.A. is the Fund's transfer agent,
registrar,  shareholder  servicing agent and dividend  disbursing  agent for the
Fund's  shares.  EquiServe  Trust  Company,  N.A.'s  address is P.O.  Box 43010,
Providence, Rhode Island 02940-3010.




                            VALIDITY OF COMMON SHARES





     Certain  legal  matters in connection  with the shares  offered  hereby are
passed on for the Fund by Sullivan & Worcester  LLP,  Washington,  D.C.  Certain
matters have been passed upon for the underwriters by Simpson Thacher & Bartlett
LLP.  Sullivan & Worcester LLP and Simpson Thacher & Bartlett LLP may rely as to
certain  matters of Delaware  law on the opinion of  Richards,  Layton & Finger,
P.A.










            TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION

                                                                          Page
                                                                           ---

Fund History............................................................     3
Use of Proceeds.........................................................     3
Investment Objective and Policies.......................................     3
Investment Restrictions.................................................    20
Management of the Fund..................................................    23
The Advisor, Administrator and Transfer Agent...........................    31
Portfolio Transactions..................................................    35
Tender Offers...........................................................    36
U.S. Federal Income Tax Matters.........................................    39
Performance-Related, Comparative and Other Information..................    46
Experts.................................................................    50
Additional Information..................................................    50
Financial Statements and Independent Auditors' Report...................    51
Appendix A--Description of Ratings......................................   A-1
Appendix B--Proxy Voting Policy and Procedures..........................   B-1











--------------------------------------------------------------------------------



--------------------------------------------------------------------------------

--------------------------------------------------------------------------------


                               ____________ Shares

                          Evergreen Utilities and High
                                   Income Fund

                                  Common Shares


                                [EVERGREEN LOGO]
                                  ------------

                                   PROSPECTUS

                                     , 2004
                                  ------------


                                    Citigroup
                            A.G. Edwards & Sons, Inc.
                               Merrill Lynch & Co.
                               Wachovia Securities
                                  Advest, Inc.
                               Ferris, Baker Watts
                                  Incorporated
                           Janney Montgomery Scott LLC


                             KeyBanc Capital Markets

                              Quick & Reilly, Inc.
                           Wells Fargo Securities, LLC

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------







                    EVERGREEN UTILITIES AND HIGH INCOME FUND

                       STATEMENT OF ADDITIONAL INFORMATION



     THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE
AND MAY BE CHANGED. THIS STATEMENT OF ADDITIONAL  INFORMATION IS NOT AN OFFER TO
SELL THESE  SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

     Evergreen Utilities and High Income Fund (the "Fund") is a newly organized,
non-diversified,  closed-end  management  investment company.  This Statement of
Additional   Information  relating  to  common  shares  does  not  constitute  a
prospectus,  but  should be read in  conjunction  with the  prospectus  relating
thereto dated ________,  2004. This Statement of Additional Information does not
include all  information  that a prospective  investor  should  consider  before
purchasing  common shares,  and investors  should obtain and read the prospectus
prior to  purchasing  such  shares.  A copy of the  prospectus  may be  obtained
without charge by calling 1-800-730-6001.

     The prospectus and this Statement of Additional Information are part of the
registration  statement  filed with the Securities and Exchange  Commission (the
"Commission"), Washington, D.C., which includes additional information regarding
the Fund. The  registration  statement may be obtained from the Commission  upon
payment of the fee prescribed, inspected at the Commission's office at no charge
or inspected on the Commission's website at http://www.sec.gov.




         TABLE OF CONTENTS

         Fund History.........................................................3

         Use of Proceeds......................................................3

         Investment Objective and Policies....................................3

         Investment Restrictions.............................................20


         Management of the Fund..............................................23


         The Advisor, Administrator and Transfer Agent.......................31

         Portfolio Transactions   ...........................................35

         Tender Offers.......................................................36

         U.S. Federal Income Tax Matters.....................................39

         Performance-Related, Comparative and Other Information..............46

         Experts.............................................................50

         Additional Information..............................................50


         Financial Statement and Independent Auditors' Report................51
                    .


         Appendix A--Description of Ratings.................................A-1

         Appendix B--Proxy Voting Policy and Procedures.....................B-1



         This Statement of Additional Information is dated ______________, 2004.






         SUBJECT TO COMPLETION, DATED APRIL 19, 2004.









                                  FUND HISTORY

     The Fund is a  non-diversified,  closed-end  management  investment company
organized  as a  statutory  trust under the laws of Delaware on February 4, 2004
and registered  under the Investment  Company Act of 1940, as amended (the "1940
Act").  Much of the  information  contained  in  this  statement  of  additional
information  expands on subjects  discussed in the prospectus.  Unless otherwise
defined herein,  capitalized  terms used in this document have the same meanings
given them in the prospectus.



                                 USE OF PROCEEDS

     The Fund will invest the net  proceeds of the offering in  accordance  with
the Fund's  investment  objective and policies as soon as practicable  after the
closing of this  offering.  However,  investments  that,  in the judgment of the
Advisor,  are  appropriate  investments  for the  Fund  may  not be  immediately
available.  Therefore, the Fund expects that there will be an initial investment
period of up to three  months  following  the  completion  of its common  shares
offering before it is invested in accordance  with its investment  objective and
policies. Pending such investment, the Fund anticipates that all or a portion of
the  proceeds  will be  invested in  typically  lower-yielding  U.S.  government
securities or high grade, short-term money market instruments.



                        INVESTMENT OBJECTIVE AND POLICIES

     The  prospectus  presents  the  investment   objective  and  the  principal
investment  strategies  and  risks of the Fund.  This  section  supplements  the
disclosure in the Fund's prospectus and provides  additional  information on the
Fund's investment  policies or restrictions.  Capitalized terms have the meaning
defined in the prospectus unless otherwise defined herein.

     Restrictions  or  policies  stated as a maximum  percentage  of the  Fund's
assets are only applied  immediately  after a portfolio  investment to which the
policy or restriction is applicable  (other than the limitations on borrowing or
the  asset  coverage  requirements  of the  1940  Act  for  senior  securities).
Accordingly,  any later increase or decrease  resulting from a change in values,
net assets or other  circumstances will not be considered in determining whether
the investment complies with the Fund's restrictions and policies.

         Primary Investments

     Under normal  market  conditions,  the Fund will invest at least 80% of its
net  assets  (defined  as net  assets  plus  the  amount  of any  borrowing  for
investment  purposes) in securities of utilities companies (water, gas, electric
and telecommunications companies) and in U.S. dollar-denominated  non-investment
grade debt  securities.  The Fund  allocates  its assets  between  two  separate
investment  strategies.  Under  normal  market  conditions,  the Fund  allocates
approximately 70% of its total assets to an investment  strategy that focuses on
common, preferred and convertible preferred stocks and convertible debentures of
utility companies (water, gas, electric and telecommunications  companies),  and
approximately 30% of its total assets to an investment  strategy that focuses on
U.S. dollar-denominated non-investment grade bonds, debentures, and other income
obligations.  The Fund's  investment  adviser reserves the discretion based upon
market conditions to reallocate the proportions of total assets invested in each
investment  strategy.  Shareholders will be provided with at least 60-days prior
written  notice of any  changes  in the 80%  investment  policy.  The  utilities
portion of the Fund may invest up to 5% of its assets in the  securities  of oil
companies such as oil pipeline companies.

Securities

     EURODOLLAR  INSTRUMENTS AND YANKEE BONDS. The Fund may invest in Eurodollar
instruments and Yankee bonds.  Eurodollar instruments are bonds of corporate and
government  issuers  that pay interest  and  principal  in U.S.  dollars but are
issued in markets outside the United States,  primarily in Europe.  Yankee bonds
are U.S.  dollar-denominated  bonds  typically  issued in the U.S.  by  non-U.S.
governments and their agencies and non-U.S. banks and corporations. The Fund may
also invest in Eurodollar  Certificates  of Deposit  ("ECDs"),  Eurodollar  Time
Deposits  ("ETDs") and Yankee  Certificates of Deposit ("Yankee CDs").  ECDs are
U.S.  dollar-denominated  certificates of deposit issued by non-U.S. branches of
domestic banks; ETDs are U.S.  dollar-denominated  deposits in a non-U.S. branch
of a U.S. bank or in a non-U.S. bank; and Yankee CDs are U.S. dollar-denominated
certificates of deposit issued by a U.S.  branch of a non-U.S.  bank and held in
the U.S. These investments  involve risks that are different from investments in
securities issued by U.S. issuers, including potential unfavorable political and
economic developments,  non-U.S. withholding or other taxes, seizure of non-U.S.
deposits,   currency  controls,   interest  limitations  or  other  governmental
restrictions which might affect payment of principal or interest.

     INVESTMENTS  IN  DEPOSITARY  RECEIPTS.  The  Fund may  hold  securities  of
non-U.S. issuers in the form of American Depositary Receipts ("ADRs"),  European
Depositary  Receipts  ("EDRs"),  Global  Depositary  Receipts ("GDRs") and other
similar instruments.  Generally, ADRs in registered form are designed for use in
U.S. securities markets,  and EDRs and GDRs and other similar global instruments
in bearer form are designed for use in non-U.S. securities markets.

     ADRs are denominated in U.S. dollars and represent an interest in the right
to  receive  securities  of  non-U.S.  issuers  deposited  in  a  U.S.  bank  or
correspondent  bank. ADRs do not eliminate all the risk inherent in investing in
the securities of non-U.S.  issuers.  However,  by investing in ADRs rather than
directly in equity securities of non-U.S.  issuers, the Fund will avoid currency
risks during the settlement  period for either purchases or sales. The Fund does
not  count  investments  in  ADRs  towards  the  Fund's  25%  limit  in  foreign
securities.  However,  it does limit its overall investment in ADRs to 10%. EDRs
and GDRs are not necessarily  denominated in the same currency as the underlying
securities which they represent. Investments in EDRs and GDRs will be subject to
the Fund's 25% limit in foreign securities.

     For purposes of the Fund's investment  policies,  investments in ADRs, GDRs
and  similar  instruments  will be deemed to be  investments  in the  underlying
equity securities of non-U.S.  issuers. The Fund may acquire depositary receipts
from banks that do not have a  contractual  relationship  with the issuer of the
security  underlying the depositary  receipt to issue and secure such depositary
receipt. To the extent the Fund invests in such unsponsored  depositary receipts
there may be an  increased  possibility  that the Fund may not  become  aware of
events  affecting  the  underlying  security  and thus the value of the  related
depositary receipt. In addition, certain benefits (i.e., rights offerings) which
may be associated  with the security  underlying the depositary  receipt may not
inure to the benefit of the holder of such depositary receipt.

     CORPORATE LOANS AND PARTICIPATIONS. The Fund may invest directly or through
a private  investment  fund in corporate  loans or  participations  in corporate
loans  (collectively,  "corporate loans").  The Fund may invest up to 10% of its
total  assets in  corporate  loans.  Corporate  loans are  generally  subject to
liquidity risks because they are traded in an over-the-counter market.

     Corporate loans, like most other debt obligations,  are subject to the risk
of default.  While all investments involve some amount of risk,  corporate loans
generally  involve less risk than equity  instruments of the same issuer because
the payment of principal of and interest on debt  instruments  is a  contractual
obligation  of the issuer that, in most  instances,  takes  precedence  over the
payment of dividends, or the return of capital, to the issuer's shareholders.

     Although  the  Fund  may  invest  in  corporate  loans  that  will be fully
collateralized with assets with a market value that, at the time of acquisition,
equals or exceeds the principal  amount of the corporate  loan, the value of the
collateral  may  decline  below  the  principal  amount  of the  corporate  loan
subsequent  to the Fund's  investment  in such bank loan.  In  addition,  to the
extent that collateral  consists of stock of the borrower or its subsidiaries or
affiliates,  the Fund will be subject to the risk that this stock may decline in
value,  be  relatively  illiquid,  or may lose all or  substantially  all of its
value,  causing the bank loan to be  undercollateralized.  There is no assurance
that the sale of  collateral  would raise enough cash to satisfy the  borrower's
payment obligation or that the collateral can or will be liquidated. Some or all
of the bank loans held by the Fund may not be  secured  by any  collateral,  and
such bank loans entail greater risk than secured bank loans.

     Corporate  loans  are also  subject  to the risk of  default  of  scheduled
interest  or  principal  payments.  In the event of a failure  to pay  scheduled
interest or  principal  payments on corporate  loans held by the Fund,  the Fund
could  experience a reduction in its income,  would  experience a decline in the
market value of the particular corporate loan so affected,  and may experience a
decline in the net asset value of its shares or the amount of its dividends. The
risk of  default  will  increase  in the  event  of an  economic  downturn  or a
substantial increase in interest rates. To the extent that the Fund's investment
is in a corporate loan acquired from another lender,  the Fund may be subject to
certain credit risks with respect to that lender.

     The Fund may acquire corporate loans of borrowers that are experiencing, or
are more likely to experience,  financial difficulty,  including corporate loans
issued in highly leveraged transactions. The Fund may even acquire and retain in
its  portfolio  corporate  loans of  borrowers  that have  filed for  bankruptcy
protection or that have had involuntary  bankruptcy petitions filed against them
by creditors.

     In  the  event  of  the  bankruptcy,   receivership,  or  other  insolvency
proceeding of a borrower,  the Fund could experience  delays or limitations with
respect to its ability to collect the principal of and interest on the corporate
loan and with respect to its ability to realize the  benefits of the  collateral
securing the corporate  loan, if any.  Among the credit risks involved in such a
proceeding are the avoidance of the corporate  loan as a fraudulent  conveyance,
the   restructuring  of  the  payment   obligations  under  the  corporate  loan
(including,  without  limitation,  the  reduction of the principal  amount,  the
extension of the maturity,  and the reduction of the interest rate thereof), the
avoidance  of  the  pledge  of  collateral  securing  the  corporate  loan  as a
fraudulent conveyance or preferential  transfer, the discharge of the obligation
to repay  that  portion  of the  corporate  loan that  exceeds  the value of the
collateral,  and the  subordination  of the Fund's rights to the rights of other
creditors of the borrower under applicable law. Similar delays or limitations of
the Fund's  ability to collect the  principal of and  interest on the  corporate
loan and with respect to its ability to realize the  benefits of the  collateral
securing  the  corporate  loan  may  arise  in  the  event  of  the  bankruptcy,
receivership, or other insolvency proceeding of an original lender or an agent.

     The Advisor  anticipates that investment  decisions on corporate loans will
be based largely on the credit  analysis  performed by the Advisor's  investment
personnel and not on analysis  prepared by rating agencies or other  independent
parties,  and such  analysis may be difficult to perform for many  borrowers and
issuers.  The Advisor may also utilize information  prepared and supplied by the
agent or other lenders. Information about interests in corporate loans generally
will not be in the public domain, and interests are often not currently rated by
any  nationally  recognized  rating  service.  Many  borrowers  have not  issued
securities  to the public and are not subject to  reporting  requirements  under
federal securities laws. Generally,  borrowers are required to provide financial
information  to lenders,  including the Fund, and  information  may be available
from other  corporate loan  participants  or agents that originate or administer
corporate  loans.  There can be no assurance  that the  Advisor's  analysis will
disclose  factors  that may  impair  the value of a  corporate  loan.  A serious
deterioration  in the  credit  quality  of a borrower  could  cause a  permanent
decrease in the Fund's net asset value.

     There is no minimum rating or other independent evaluation of a borrower or
its securities limiting the Fund's investments, except that, with respect to the
portion of the Fund's  assets that are  invested in high yield  securities,  the
Fund may not purchase  securities  with a rating of CCC or below.  However,  the
Fund may hold such  securities as a result of a downgrade in ratings  subsequent
to their  purchase,  although  no more than 10% of that  portion  of the  Fund's
assets may be invested in securities  that are unrated or rated CCC.  Although a
corporate  loan  often is not  rated by any  rating  agency at the time the Fund
purchases the corporate loan,  rating agencies have become more active in rating
an  increasing  number of  corporate  loans and at any given time a  substantial
portion of the corporate  loans in the Fund's  portfolio may be rated.  Although
the Advisor may consider such ratings when  evaluating a corporate loan, it does
not view such ratings as a determinative factor in its investment decisions. The
lack of a rating may not  necessarily  imply that a corporate  loan is of lesser
investment  quality.  The Fund may invest its assets in  corporate  loans  rated
below investment grade or that are unrated but of comparable quality.

     While  debt  instruments  generally  are  subject to the risk of changes in
interest  rates,  the interest  rates of  corporate  loans in which the Fund may
invest would adjust with a specified  interest rate.  Thus the risk that changes
in  interest  rates would  affect the market  value of such  corporate  loans is
significantly decreased, but is not eliminated.

     WHEN-ISSUED  AND  DELAYED  DELIVERY  SECURITIES.   The  Fund  may  purchase
securities,  including U.S. government securities, on a when-issued basis or may
purchase or sell securities for delayed delivery. In such transactions, delivery
of the securities occurs beyond the normal settlement  period, but no payment or
delivery  is made by the Fund  prior to the  actual  delivery  or payment by the
other  party  to the  transaction.  The  Fund  will  not  earn  income  on these
securities  until  delivered.  The purchase of securities  on a  when-issued  or
delayed  delivery  basis  involves  the risk  that the  value of the  securities
purchased will decline prior to the settlement  date. The sale of securities for
delayed  delivery  involves the risk that the prices  available in the market on
the delivery  date may be greater than those  obtained in the sale  transaction.
The  Fund's  obligations  with  respect  to  when-issued  and  delayed  delivery
transactions will be fully  collateralized  by segregating  liquid assets with a
value equal to the Fund's obligations. See "Asset Segregation."

     PREFERRED  SHARES.  Preferred shares are equity  securities,  but they have
many  characteristics  of  fixed  income  securities,  such as a fixed  dividend
payment  rate and/or a liquidity  preference  over the issuer's  common  shares.
However,  because  preferred  shares  are  equity  securities,  they may be more
susceptible to risks  traditionally  associated with equity investments than the
Fund's fixed income investments.

     OTHER INVESTMENT COMPANIES.  The Fund may invest in the securities of other
investment companies to the extent that such investments are consistent with the
Fund's  investment  objective and policies and permissible  under the Investment
Company Act of 1940,  as amended (the "1940 Act").  Under the 1940 Act, the Fund
may not  acquire  the  securities  of  other  domestic  or  non-U.S.  investment
companies if, as a result, (i) more than 10% of the Fund's total assets would be
invested in securities of other investment  companies,  (ii) such purchase would
result in more than 3% of the total  outstanding  voting  securities  of any one
investment  company  being held by the Fund, or (iii) more than 5% of the Fund's
total assets would be invested in any one investment company.  These limitations
do not apply to the purchase of shares of any  investment  company in connection
with a merger, consolidation, reorganization or acquisition of substantially all
the assets of another investment company. Notwithstanding the foregoing, subject
to receiving no-action  assurance from the Commission,  the Fund may invest cash
balances in shares of other money market funds advised by the Fund's  Advisor or
its affiliates in amounts up to 25% of the Fund's total assets.

     The Fund, as a holder of the securities of other investment companies, will
bear its pro rata portion of the other investment companies' expenses, including
advisory  fees.  These  expenses  are in addition to the direct  expenses of the
Fund's own operations.

     MONEY  MARKET  INSTRUMENTS.   Money  market  instruments  are  high-quality
instruments  that present minimal credit risk. They may include U.S.  government
obligations,  commercial paper and other short-term corporate  obligations,  and
certificates  of  deposit,  bankers'  acceptances,   bank  deposits,  and  other
financial institution obligations. These instruments may carry fixed or variable
interest rates.


     PAYMENT-IN-KIND  SECURITIES.  The Fund may invest in payment-in-kind  (PIK)
securities.  PIK securities are debt  obligations  which provide that the issuer
may,  at its  option,  pay  interest  on such  bonds  in cash or in the  form of
additional debt  obligations,  for a specified  period of time. Such investments
benefit the issuer by  mitigating  its need for cash to meet debt  service,  but
also  require a higher  rate of return to attract  investors  who are willing to
defer receipt of such cash.


     The issuer's option to pay in additional  securities  typically ranges from
one to six years,  compared to an average  maturity  for all PIK  securities  of
eleven years.  Call protection and sinking fund features are comparable to those
offered on traditional debt issues.


     PIKs, like zero coupon bonds, are designed to give an issuer flexibility in
managing cash flow.  Some PIKs are senior debt.  In other cases,  where PIKs are
subordinated, most senior lenders view them as equity equivalents.

     An advantage of PIKs for the issuer -- as with zero coupon securities -- is
that interest payments are automatically  compounded  (reinvested) at the stated
coupon rate, which is not the case with cash-paying  securities.  However,  PIKs
are  gaining  popularity  over zero  coupon  bonds  since  interest  payments in
additional securities can be monetized and are more tangible than accretion of a
discount.

     Generally,  PIK  bonds  trade  without  accrued  interest.  Their  price is
expected  to reflect an amount  representing  accreted  interest  since the last
payment.  PIKs  generally  trade at higher  yields than  comparable  cash-paying
securities of the same issuer.  Their premium yield is usually the result of the
lesser desirability of non-cash interest, the more limited audience for non-cash
paying  securities  and the fact  that  many  PIKs  have  been  issued to equity
investors who do not normally own or hold such securities.


     Calculating  the true yield on a PIK security  requires a  discounted  cash
flow analysis if the security is trading at a premium or a discount  because the
realizable value of additional  payments is equal to the current market value of
the underlying security, not par.


     Regardless  of whether PIK  securities  are senior or deeply  subordinated,
issuers are generally  highly  motivated to retire them because they are usually
their most costly form of capital.


Derivatives

         INTEREST RATE TRANSACTIONS

     Interest Rate Swaps,  Collars, Caps and Floors. In order to hedge the value
of the Fund's  portfolio  against  interest rate  fluctuations or to enhance the
Fund's income, the Fund may, but is not required to, enter into various interest
rate  transactions  such as  interest  rate  swaps and the  purchase  or sale of
interest  rate caps and  floors.  To the extent  that the Fund enters into these
transactions, the Fund expects to do so primarily to preserve a return or spread
on a particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund  anticipates  purchasing at a later
date. The Fund intends to use these transactions primarily as a hedge and not as
a  speculative  investment.  However,  the Fund also may invest in interest rate
swaps to enhance  income or to increase the Fund's  yield,  for example,  during
periods of steep  interest rate yield curves  (i.e.,  wide  differences  between
short-term and long-term  interest rates). The Fund is not required to hedge its
portfolio  and may  choose  not to do so.  The Fund  cannot  guarantee  that any
hedging strategies it uses will work.

     In an interest  rate swap,  the Fund  exchanges  with  another  party their
respective  commitments to pay or receive  interest  (e.g., an exchange of fixed
rate payments for floating rate payments). For example, if the Fund holds a debt
instrument  with an interest rate that is reset only once each year, it may swap
the right to  receive  interest  at this  fixed  rate for the  right to  receive
interest  at a rate that is reset  every  week.  This  would  enable the Fund to
offset a decline  in the  value of the debt  instrument  due to rising  interest
rates but would also limit its ability to benefit from falling  interest  rates.
Conversely,  if the Fund holds a debt  instrument  with an interest rate that is
reset  every  week and it would  like to lock in what it  believes  to be a high
interest  rate for one year,  it may swap the right to receive  interest at this
variable  weekly rate for the right to receive  interest at a rate that is fixed
for one year.  Such a swap would  protect the Fund from a reduction in yield due
to falling  interest rates and may permit the Fund to enhance its income through
the positive  differential  between one week and one year  interest  rates,  but
would preclude it from taking full advantage of rising interest rates.

     The Fund usually will enter into  interest rate swaps on a net basis (i.e.,
the two payment streams are netted out with the Fund receiving or paying, as the
case may be,  only the net  amount of the two  payments).  The net amount of the
excess, if any, of the Fund's  obligations over its entitlements with respect to
each interest rate swap will be accrued on a daily basis,  and an amount of cash
or liquid  instruments having an aggregate net asset value at least equal to the
accrued  excess  will  be  maintained  in a  segregated  account  by the  Fund's
custodian. If the interest rate swap transaction is entered into on other than a
net basis, the full amount of the Fund's  obligations will be accrued on a daily
basis,  and the full amount of the Fund's  obligations  will be  maintained in a
segregated account by the Fund's custodian.

     The Fund  also may  engage in  interest  rate  transactions  in the form of
purchasing  or  selling  interest  rate caps or  floors.  The Fund will not sell
interest  rate caps or floors that it does not own.  The purchase of an interest
rate cap entitles the purchaser,  to the extent that a specified index exceeds a
predetermined  interest  rate,  to receive  payments  of  interest  equal to the
difference  of the  index and the  predetermined  rate on a  notional  principal
amount (i.e.,  the reference  amount with respect to which interest  obligations
are determined  although no actual exchange of principal  occurs) from the party
selling such interest rate cap. The purchase of an interest rate floor  entitles
the purchaser,  to the extent that a specified index falls below a predetermined
interest  rate, to receive  payments of interest at the  difference of the index
and the predetermined rate on a notional principal amount from the party selling
such interest  rate floor.  The Fund will not enter into caps or floors if, on a
net  basis,  the  aggregate  notional  principal  amount  with  respect  to such
agreements exceeds the net assets of the Fund.

     Typically,  the parties with which the Fund will enter into  interest  rate
transactions will be broker-dealers and other financial  institutions.  The Fund
will not enter into any interest rate swap, cap or floor transaction  unless the
unsecured senior debt or the claims-paying ability of the other party thereto is
rated investment grade quality by at least one nationally recognized statistical
rating  organization  at the time of  entering  into such  transaction  or whose
creditworthiness  is believed by the Advisor to be equivalent to such rating. If
there is a default by the other party to such a transaction,  the Fund will have
contractual remedies pursuant to the agreements related to the transaction.  The
swap market has grown substantially in recent years with a large number of banks
and investment  banking firms acting both as principals and as agents  utilizing
standardized  swap  documentation.  As a  result,  the swap  market  has  become
relatively  liquid in comparison  with other similar  instruments  traded in the
interbank market. Caps and floors,  however, are less liquid than swaps. Certain
federal  income  tax  requirements  may limit the  Fund's  ability  to engage in
interest rate swaps.

     FUTURES  CONTRACTS  AND  OPTIONS ON  FUTURES  CONTRACTS.  To hedge  against
changes in securities  prices or currency  exchange rates or to seek to increase
total return, the Fund may purchase and sell various kinds of futures contracts,
and  purchase  and write  (sell)  call and put  options  on any of such  futures
contracts.  The Fund may also enter into closing purchase and sale  transactions
with respect to any of such contracts and options.  The futures contracts may be
based on various  securities (such as U.S.  government  securities),  securities
indices,  non-U.S.  currencies and other financial  instruments and indices. The
Fund will  engage in futures  and  related  options  transactions  for bona fide
hedging and  non-hedging  purposes as  described  below.  All futures  contracts
entered  into by the Fund are traded on U.S.  exchanges  or boards of trade that
are licensed and  regulated by the Commodity  Futures  Trading  Commission  (the
CFTC) or on non-U.S. exchanges.

     Futures  Contracts.  A futures  contract  may  generally be described as an
agreement between two parties to buy and sell particular  financial  instruments
for an agreed  price  during a  designated  month (or to deliver  the final cash
settlement  price,  in the case of a contract  relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).

     When interest rates are rising or securities  prices are falling,  the Fund
can seek to offset a decline in the value of its  current  portfolio  securities
through  the sale of  futures  contracts.  When  interest  rates are  falling or
securities  prices  are  rising,  the Fund,  through  the  purchase  of  futures
contracts,  can  attempt to secure  better  rates or prices  than might later be
available in the market when it effects anticipated  purchases.  Similarly,  the
Fund can sell  futures  contracts on a specified  currency to protect  against a
decline  in the  value  of such  currency  and a  decline  in the  value  of its
portfolio  securities  which  are  denominated  in such  currency.  The Fund can
purchase futures contracts on a non-U.S. currency to establish the price in U.S.
dollars of a security denominated in such currency that the Fund has acquired or
expects to acquire.

     Positions  taken in the futures  markets are not normally  held to maturity
but are instead liquidated through offsetting transactions which may result in a
profit or a loss. While futures contracts on securities or currency will usually
be  liquidated in this manner,  the Fund may instead make, or take,  delivery of
the  underlying   securities  or  currency  whenever  it  appears   economically
advantageous  to do so. A clearing  corporation  associated with the exchange on
which  futures on securities  or currency are traded  guarantees  that, if still
open, the sale or purchase will be performed on the settlement date.

     Hedging  Strategies.  Hedging,  by  use  of  futures  contracts,  seeks  to
establish with more certainty the effective  price,  rate of return and currency
exchange  rate on  portfolio  securities  and  securities  that the Fund owns or
proposes to acquire.  The Fund may, for example,  take a "short" position in the
futures  market  by  selling  futures  contracts  in order to hedge  against  an
anticipated  rise in  interest  rates or a decline in market  prices or non-U.S.
currency  rates that would  adversely  affect the value of the Fund's  portfolio
securities. Such futures contracts may include contracts for the future delivery
of securities  held by the Fund or securities  with  characteristics  similar to
those of the Fund's portfolio securities.  Similarly,  the Fund may sell futures
contracts  in  a  non-U.S.  currency  in  which  its  portfolio  securities  are
denominated  or in one currency to hedge  against  fluctuations  in the value of
securities  denominated  in a  different  currency  if there  is an  established
historical pattern of correlation between the two currencies. If, in the opinion
of the Advisor, there is a sufficient degree of correlation between price trends
for the  Fund's  portfolio  securities  and  futures  contracts  based  on other
financial  instruments,  securities indices or other indices,  the Fund may also
enter into such futures  contracts as part of its hedging  strategies.  Although
under some  circumstances  prices of securities  in the Fund's  portfolio may be
more or less  volatile than prices of such futures  contracts,  the Advisor will
attempt to estimate the extent of this volatility difference based on historical
patterns and compensate for any such  differential by having the Fund enter into
a greater or lesser number of futures contracts or by attempting to achieve only
a partial hedge against price changes affecting the Fund's portfolio securities.
When hedging of this character is successful,  any  depreciation in the value of
portfolio  securities will be substantially  offset by appreciation in the value
of the futures position.  On the other hand, any  unanticipated  appreciation in
the value of the Fund's portfolio  securities would be substantially offset by a
decline in the value of the futures position.

     On other  occasions,  the Fund may  take a "long"  position  by  purchasing
futures contracts.  This may be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency  exchange  rates then available in the applicable
market to be less favorable than prices or rates that are currently available.

     Options on Futures  Contracts.  The  acquisition of put and call options on
futures  contracts will give the Fund the right (but not the  obligation)  for a
specified  price to sell or to purchase,  respectively,  the underlying  futures
contract at any time during the option period.  As the purchaser of an option on
a futures  contract,  the Fund  obtains the  benefit of the futures  position if
prices move in a favorable direction but limits its risk of loss in the event of
an unfavorable price movement to the loss of the premium and transaction costs.

     The  writing of a call  option on a futures  contract  generates  a premium
which may  partially  offset a decline  in the value of the  Fund's  assets.  By
writing a call option, the Fund becomes obligated,  in exchange for the premium,
to sell a futures contract (if the option is exercised),  which may have a value
higher than the  exercise  price.  Conversely,  the writing of a put option on a
futures  contract  generates a premium which may partially offset an increase in
the price of  securities  that the Fund intends to purchase.  However,  the Fund
becomes  obligated to purchase a futures  contract (if the option is  exercised)
which may have a value lower than the exercise price. Thus, the loss incurred by
the Fund in writing  options on futures is potentially  unlimited and may exceed
the amount of the premium  received.  The Fund will incur  transaction  costs in
connection with the writing of options on futures.

     The holder or writer of an option on a futures  contract may  terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee  that such  closing  transactions  can be  effected.  The Fund's
ability to establish  and close out positions on such options will be subject to
the development and maintenance of a liquid market.

     Other  Considerations.  The Fund will engage in futures and related options
transactions  only for bona fide hedging or  non-hedging  purposes in accordance
with  CFTC  regulations  which  permit  principals  of  an  investment   company
registered under the 1940 Act to engage in such transactions without registering
as commodity pool operators. The Fund will determine that the price fluctuations
in the futures  contracts  and options on futures used for hedging  purposes are
substantially  related to price  fluctuations  in securities held by the Fund or
which the Fund expects to purchase.  Except as stated below,  the Fund's futures
transactions  will be  entered  into  for  traditional  hedging  purposes--i.e.,
futures  contracts  will be sold to  protect  against a decline  in the price of
securities (or the currency in which they are  denominated)  that the Fund owns,
or futures  contracts  will be purchased to protect the Fund against an increase
in the price of securities  (or the currency in which they are  denominated)  it
intends to purchase.  As evidence of this hedging intent,  the Fund expects that
on 75% or more of the  occasions  on  which it takes a long  futures  or  option
position  (involving  the  purchase  of futures  contracts),  the Fund will have
purchased,  or will be in the  process  of  purchasing,  equivalent  amounts  of
related  securities or assets  denominated  in the related  currency in the cash
market at the time when the futures or option  position is closed out.  However,
in particular cases, when it is economically advantageous for the Fund to do so,
a long futures  position may be terminated  or an option may expire  without the
corresponding purchase of securities or other assets.

     As an  alternative  to  literal  compliance  with  the  bona  fide  hedging
definition,  a CFTC  regulation  permits  the  Fund to elect  to  comply  with a
different test, under which the sum of the amounts of initial margin deposits on
the Fund's existing  non-hedging futures contracts and premiums paid for options
on  futures  entered  into  for  non-hedging  purposes  (net of the  amount  the
positions  are "in the  money")  would not exceed 5% of the market  value of the
Fund's total assets.  The Fund does not use derivatives as a primary  investment
technique and generally does not anticipate  using  derivatives  for non-hedging
purposes.  In the event the Fund uses derivatives for non-hedging  purposes,  no
more than 3% of the Fund's total assets will be committed to initial  margin for
derivatives  for such purposes.  The Fund will engage in transactions in futures
contracts  and  related  options  only  to  the  extent  such  transactions  are
consistent with the  requirements of the Code for maintaining its  qualification
as a regulated investment company for federal income tax purposes.

     Futures  contracts and related options  involve  brokerage  costs,  require
margin deposits and, in the case of contracts and options obligating the Fund to
purchase securities or currencies, require the Fund to segregate assets to cover
such contracts and options.

     While  transactions in futures  contracts and options on futures may reduce
certain risks,  such transactions  themselves entail certain other risks.  Thus,
while the Fund may  benefit  from the use of futures  and  options  on  futures,
unanticipated changes in interest rates,  securities prices or currency exchange
rates may result in a poorer overall performance for the Fund than if it had not
entered into any futures contracts or options  transactions.  In the event of an
imperfect  correlation between a futures position and a portfolio position which
is intended to be protected,  the desired protection may not be obtained and the
Fund may be exposed to risk of loss.

     Options on Securities and Securities Indices. The Fund may purchase put and
call options on any security in which it may invest or options on any securities
index based on securities in which it may invest. The Fund would also be able to
enter into  closing  sale  transactions  in order to realize  gains or  minimize
losses on options it has purchased.

     Writing Call and Put Options on  Securities.  A call option  written by the
Fund obligates the Fund to sell specified securities to the holder of the option
at a  specified  price  if the  option  is  exercised  at any  time  before  the
expiration  date. All call options written by the Fund are covered,  which means
that the Fund will own the  securities  subject  to the  options  as long as the
options are outstanding, or the Fund will use the other methods described below.
The Fund's purpose in writing  covered call options is to realize greater income
than would be realized on portfolio securities  transactions alone. However, the
Fund may forgo the opportunity to profit from an increase in the market price of
the underlying security.

     A put  option  written  by the Fund  would  obligate  the Fund to  purchase
specified  securities  from the option holder at a specified price if the option
is exercised at any time before the expiration  date. All put options written by
the Fund would be  covered,  which  means  that the Fund  would have  segregated
assets with a value at least equal to the exercise price of the put option.  The
purpose of writing such options is to generate  additional  income for the Fund.
However, in return for the option premium, the Fund accepts the risk that it may
be  required  to purchase  the  underlying  security at a price in excess of its
market value at the time of purchase.

     Call and put  options  written  by the Fund will also be  considered  to be
covered to the extent that the Fund's  liabilities under such options are wholly
or partially  offset by its rights  under call and put options  purchased by the
Fund. In addition,  a written call option or put may be covered by entering into
an offsetting  forward contract and/or by purchasing an offsetting option or any
other option which,  by virtue of its exercise  price or otherwise,  reduces the
Fund's net exposure on its written option position.

     Writing Call and Put Options on Securities Indices. The Fund may also write
(sell)  covered  call  and put  options  on any  securities  index  composed  of
securities in which it may invest.  Options on securities indices are similar to
options on  securities,  except that the exercise of  securities  index  options
requires  cash  payments  and does not  involve  the actual  purchase or sale of
securities. In addition,  securities index options are designed to reflect price
fluctuations  in a group of  securities  or  segments of the  securities  market
rather than price fluctuations in a single security.

     The Fund may cover call options on a securities index by owning  securities
whose price changes are expected to be similar to those of the underlying index,
or by having an absolute and immediate right to acquire such securities  without
additional cash  consideration (or for additional  consideration if cash in such
amount is  segregated)  upon  conversion or exchange of other  securities in its
portfolio.  The Fund may cover  call and put  options on a  securities  index by
segregating assets with a value equal to the exercise price.

     Purchasing  Call and Put Options.  The Fund would  normally  purchase  call
options in  anticipation of an increase in the market value of securities of the
type in which it may invest.  The  purchase of a call option  would  entitle the
Fund,  in return for the premium  paid,  to purchase  specified  securities at a
specified price during the option period.  The Fund would  ordinarily  realize a
gain if, during the option period, the value of such securities exceeded the sum
of the exercise  price,  the premium paid and transaction  costs;  otherwise the
Fund would realize either no gain or a loss on the purchase of the call option.

     The Fund would normally  purchase put options in  anticipation of a decline
in the market value of  securities in its  portfolio  ("protective  puts") or in
securities  in which it may invest.  The purchase of a put option would  entitle
the Fund, in exchange for the premium paid,  to sell  specified  securities at a
specified  price during the option  period.  The purchase of protective  puts is
designed to offset or hedge  against a decline in the market value of the Fund's
holdings.  Put  options  may also be  purchased  by the Fund for the  purpose of
affirmatively benefiting from a decline in the price of securities which it does
not own. The Fund would ordinarily  realize a gain if, during the option period,
the  value of the  underlying  securities  decreased  below the  exercise  price
sufficiently to more than cover the premium and transaction costs; otherwise the
Fund would  realize  either no gain or a loss on the purchase of the put option.
Gains and losses on the  purchase of  protective  put  options  would tend to be
offset  by  countervailing  changes  in the  value of the  underlying  portfolio
securities.

     The Fund may terminate its obligations under an exchange-traded call or put
option by purchasing an option identical to the one it has written.  Obligations
under  over-the-counter  options  may be  terminated  only by  entering  into an
offsetting  transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."

     Risks of Trading  Options.  There is no assurance  that a liquid  secondary
market on an  options  exchange  will exist for any  particular  exchange-traded
option,  or at any  particular  time.  If the Fund is unable to effect a closing
purchase  transaction  with respect to covered options it has written,  the Fund
will not be able to sell the underlying  securities or dispose of its segregated
assets  until the options  expire or are  exercised.  Similarly,  if the Fund is
unable to effect a closing  sale  transaction  with  respect  to  options it has
purchased,  it will have to exercise  the options in order to realize any profit
and will  incur  transaction  costs  upon  the  purchase  or sale of  underlying
securities.

     Reasons for the absence of a liquid secondary market on an exchange include
the  following:  (i) there  may be  insufficient  trading  interest  in  certain
options;  (ii)  restrictions may be imposed by an exchange on opening or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options; (iv) unusual
or unforeseen  circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or the Options Clearing  Corporation (OCC) may not
at all times be adequate to handle current trading  volume;  or (vi) one or more
exchanges could,  for economic or other reasons,  decide or be compelled at some
future date to  discontinue  the trading of options  (or a  particular  class or
series of options),  in which event the secondary market on that exchange (or in
that class or series of  options)  would  cease to exist,  although  outstanding
options on that exchange, if any, that had been issued by the OCC as a result of
trades on that exchange  would  continue to be  exercisable  in accordance  with
their terms.

     The Fund may  purchase  and sell both  options  that are traded on U.S. and
options  traded over the counter with  broker-dealers  who make markets in these
options. The ability to terminate  over-the-counter options is more limited than
with  exchange-traded  options  and may  involve  the risk  that  broker-dealers
participating in such transactions will not fulfill their obligations.

     Transactions  by the Fund in  options on  securities  and  indices  will be
subject to limitations established by each of the exchanges,  boards of trade or
other trading  facilities  governing the maximum number of options in each class
which may be written or  purchased  by a single  investor or group of  investors
acting in  concert.  Thus,  the  number of  options  which the Fund may write or
purchase may be affected by options  written or  purchased  by other  investment
advisory  clients of the Advisor.  An exchange,  board of trade or other trading
facility may order the  liquidations of positions found to be in excess of these
limits, and it may impose certain other sanctions.

     The writing and purchase of options is a highly specialized  activity which
involves  investment  techniques and risks different from those  associated with
ordinary  portfolio  securities  transactions.  The successful use of protective
puts for hedging  purposes  depends in part on the Advisor's  ability to predict
future price fluctuations and the degree of correlation  between the options and
securities markets.

     The hours of trading for options may not conform to the hours  during which
the  underlying  securities are traded.  To the extent that the options  markets
close  before the  markets  for the  underlying  securities,  significant  price
movements can take place in the  underlying  markets that cannot be reflected in
the options markets.

     In  addition  to the risks of  imperfect  correlation  between  the  Fund's
portfolio and the index underlying the option,  the purchase of securities index
options  involves  the risk that the premium and  transaction  costs paid by the
Fund in  purchasing  an option  will be lost.  This  could  occur as a result of
unanticipated movements in the price of the securities comprising the securities
index on which the option is based.

         FOREIGN CURRENCY TRANSACTIONS.

     Foreign  Currency  Exchange  Transactions.  The Fund may  engage in foreign
currency  exchange  transactions to protect against  uncertainty in the level of
future  exchange  rates.  The  Advisor may engage in foreign  currency  exchange
transactions  in connection  with the purchase and sale of portfolio  securities
("transaction  hedging"),  and  to  protect  the  value  of  specific  portfolio
positions ("position hedging").

     The Fund may engage in "transaction hedging" to protect against a change in
the foreign currency  exchange rate between the date on which the Fund contracts
to purchase or sell the security and the  settlement  date,  or to "lock in" the
U.S. dollar  equivalent of a dividend or interest payment in a foreign currency.
For that purpose, the Fund may purchase or sell a foreign currency on a spot (or
cash) basis at the  prevailing  spot rate in connection  with the  settlement of
transactions in portfolio  securities  denominated in or exposed to that foreign
currency.

     If conditions  warrant,  the Fund may also enter into contracts to purchase
or sell foreign  currencies at a future date ("forward  contracts") and purchase
and sell  foreign  currency  futures  contracts  as a hedge  against  changes in
foreign  currency  exchange  rates  between  the trade and  settlement  dates on
particular  transactions  and not for  speculation.  A foreign  currency forward
contract is a negotiated  agreement  to exchange  currency at a future time at a
rate or rates that may be higher or lower than the spot rate.  Foreign  currency
futures  contracts are  standardized  exchange-traded  contracts and have margin
requirements.

     For   transaction   hedging   purposes,   the  Fund   may   also   purchase
exchange-listed  and  over-the-counter  call and put options on foreign currency
futures contracts and on foreign currencies.  A put option on a futures contract
gives the Fund the  right to assume a short  position  in the  futures  contract
until  expiration  of the option.  A put option on  currency  gives the Fund the
right to sell a  currency  at an  exercise  price  until the  expiration  of the
option. A call option on a futures contract gives the Fund the right to assume a
long position in the futures contract until the expiration of the option. A call
option on  currency  gives  the Fund the right to  purchase  a  currency  at the
exercise price until the expiration of the option.

     The Fund may engage in "position  hedging" to protect  against a decline in
the value  relative to the U.S.  dollar of the currencies in which its portfolio
securities are denominated, or quoted or exposed (or an increase in the value of
currency  for  securities  which the Fund  intends  to buy,  when it holds  cash
reserves and short-term  investments).  For position hedging purposes,  the Fund
may purchase or sell foreign  currency  futures  contracts and foreign  currency
forward  contracts,  and may purchase  put or call  options on foreign  currency
futures contracts and on foreign currencies on exchanges or in  over-the-counter
markets. In connection with position hedging, the Fund may also purchase or sell
foreign currency on a spot basis.

     The  precise  matching  of  the  amounts  of  foreign   currency   exchange
transactions  and the  value  of the  portfolio  securities  involved  will  not
generally  be  possible  since the future  value of such  securities  in foreign
currencies  will change as a  consequence  of market  movements  in the value of
those  securities  between  the dates the  currency  exchange  transactions  are
entered into and the dates they mature.

     It is impossible  to forecast with  precision the market value of portfolio
securities  at the  expiration  or  maturity  of a forward or futures  contract.
Accordingly,  it may be necessary  for the Fund to purchase  additional  foreign
currency  on the spot  market  (and bear the  expense of such  purchase)  if the
market value of the security or securities  being hedged is less than the amount
of foreign  currency  the Fund is obligated to deliver and if a decision is made
to sell the security or securities  and make  delivery of the foreign  currency.
Conversely,  it may be  necessary to sell on the spot market some of the foreign
currency  received upon the sale of the portfolio  security or securities if the
market  value of such  security  or  securities  exceeds  the  amount of foreign
currency the Fund is obligated to deliver.

     Hedging  transactions  involve costs and may result in losses. The Fund may
write covered call options on foreign  currencies to offset some of the costs of
hedging those  currencies.  The Fund's  ability to engage in hedging and related
option transactions may be limited by tax considerations.

     Transaction  and  position  hedging do not  eliminate  fluctuations  in the
underlying  prices of the securities  which the Fund owns or intends to purchase
or sell. They simply  establish a rate of exchange which one can achieve at some
future point in time.  Additionally,  although these techniques seek to minimize
the risk of loss due to a decline in the value of the hedged currency, they seek
to limit any potential gain which might result from the increase in the value of
such currency.

     Currency Forward and Futures Contracts. A forward foreign currency exchange
contract  involves an  obligation  to purchase or sell a specific  currency at a
future date, which may be any fixed number of days from the date of the contract
as agreed by the  parties,  at a price set at the time of the  contract.  In the
case of a cancelable  forward  contract,  the holder has the unilateral right to
cancel the  contract at maturity by paying a specified  fee. The  contracts  are
traded in the interbank  market  conducted  directly  between  currency  traders
(usually  large  commercial  banks)  and their  customers.  A  forward  contract
generally  has no deposit  requirement,  and no  commissions  are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified  amount of a foreign currency at a future
date at a  price  set at the  time of the  contract.  Foreign  currency  futures
contracts  traded in the U.S. are designed by and traded on exchanges  regulated
by the CFTC, such as the New York Mercantile  Exchange.

     The Advisor  anticipates  that forward  contracts will be used primarily by
the  Advisor  to adjust the  foreign  exchange  exposure  of the Fund to protect
against  uncertainty in the level of future foreign exchange rates, and the Fund
might  be  expected   to  enter  into  such   contracts   under  the   following
circumstances:

     Lock In. When the Advisor  desires to lock in the U.S.  dollar price on the
purchase or sale of a security denominated in a foreign currency.

     Cross  Hedge.  If a  particular  currency is  expected to decrease  against
another  currency,  the Fund may sell the  currency  expected  to  decrease  and
purchase a currency  which is expected to increase  against the currency sold in
an amount  approximately equal to some or all of the Fund's holdings denominated
in the currency sold.

     Direct Hedge.  If the Advisor wants to eliminate  substantially  all of the
risk of owning a particular currency, and/or if the Advisor thinks that the Fund
can benefit from price appreciation in a given country's bonds but does not want
to hold the currency, it may employ a direct hedge back into the U.S. dollar. In
either case,  the Fund would enter into a forward  contract to sell the currency
in which a portfolio  security is  denominated  and purchase U.S.  dollars at an
exchange rate established at the time it initiated the contract. The cost of the
direct hedge  transaction  may offset most,  if not all, of the yield  advantage
offered by the  foreign  security,  but the Fund  would hope to benefit  from an
increase (if any) in value of the bond.

     Proxy Hedge.  The Advisor  might choose to use a proxy hedge,  which may be
less costly than a direct  hedge.  In this case,  the Fund,  having  purchased a
security,  will sell a currency  whose value is believed to be closely linked to
the currency in which the security is denominated.  Interest rates prevailing in
the country  whose  currency was sold would be expected to be closer to those in
the U.S. and lower than those of securities  denominated  in the currency of the
original holding.  This type of hedging entails greater risk than a direct hedge
because it is  dependent  on a stable  relationship  between the two  currencies
paired as proxies and the relationships can be very unstable at times.

     Forward foreign  currency  exchange  contracts differ from foreign currency
futures  contracts  in certain  respects.  For example,  the maturity  date of a
forward  contract  may be any fixed number of days from the date of the contract
agreed upon by the parties, rather than a predetermined date in any given month.
Forward  contracts may be in any amounts  agreed upon by the parties rather than
predetermined  amounts.  Also,  forward  foreign  exchange  contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.

     At the  maturity  of a forward  or  futures  contract,  the Fund may either
accept or make  delivery of the  currency  specified in the  contract,  or at or
prior to maturity  enter into a closing  transaction  involving  the purchase or
sale of an offsetting  contract.  Closing  transactions  with respect to forward
contracts are usually  effected  with the currency  trader who is a party to the
original  forward  contract.   Closing  transactions  with  respect  to  futures
contracts  are  effected  on a  commodities  exchange;  a  clearing  corporation
associated  with  the  exchange  assumes  responsibility  for  closing  out such
contracts.

     Positions in foreign currency  futures  contracts may be closed out only on
an  exchange  or  board of trade  which  provides  a  secondary  market  in such
contracts.  Although  the Fund  intends to  purchase  or sell  foreign  currency
futures contracts only on exchanges or boards of trade where there appears to be
an active secondary market, there can be no assurance that a secondary market on
an exchange or board of trade will exist for any  particular  contract or at any
particular  time.  In such  event,  it may not be  possible  to close a  futures
position and, in the event of adverse price  movements,  the Fund would continue
to be required to make daily cash payments of variation margin.

     Foreign Currency Options.  Options on foreign  currencies operate similarly
to  options on  securities,  and are traded  primarily  in the  over-the-counter
market,  although  options on foreign  currencies  have  recently been listed on
several exchanges. The Advisor anticipates that foreign currency options will be
purchased or written only when it believes that a liquid secondary market exists
for such options.  There can be no assurance that a liquid secondary market will
exist  for a  particular  option  at  any  specific  time.  Options  on  foreign
currencies are affected by all of those factors which influence foreign exchange
rates and investments generally.

     The value of a foreign  currency  option is dependent upon the value of the
foreign  currency  and the  U.S.  dollar  and may  have no  relationship  to the
investment merits of a foreign security.  Because foreign currency  transactions
occurring in the interbank  market  involve  substantially  larger  amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying  foreign  currencies at
prices that are less favorable than for round lots.

     There is no  systematic  reporting  of last sale  information  for  foreign
currencies  and there is no regulatory  requirement  that  quotations  available
through  dealers or other market  sources be firm or revised on a timely  basis.
Available  quotation  information  is  generally  representative  of very  large
transactions in the interbank market and thus may not reflect relatively smaller
transactions  (less than $1  million)  where  rates may be less  favorable.  The
interbank market in foreign currencies is a global,  around-the-clock market. To
the extent that the U.S.  options  markets are closed  while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.

     Foreign  Currency  Conversion.  Although  foreign  exchange  dealers do not
charge a fee for  currency  conversion,  they do  realize a profit  based on the
difference  (the  "spread")  between prices at which they are buying and selling
various  currencies.  Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate,  while  offering  a lesser  rate of  exchange  should the Fund
desire to resell that currency to the dealer.

Asset Segregation

     The 1940 Act requires that the Fund  segregate  assets in  connection  with
certain types of transactions  that may have the effect of leveraging the Fund's
portfolio. If the Fund enters into a transaction requiring segregation,  such as
a forward commitment,  the custodian or the Advisor will segregate liquid assets
in an amount required to comply with the 1940 Act. Such  segregated  assets will
be valued at market daily.  If the  aggregate  value of such  segregated  assets
declines below the aggregate value necessary to satisfy  requirements  under the
1940 Act, additional liquid assets will be segregated.

Downgrades in Fixed Income Debt Securities

     The Advisor does not intend to purchase  illiquid or restricted  securities
(securities  that the Fund cannot  easily  resell  within  seven days at current
value or that have  contractual or legal  restrictions  on resale) or distressed
securities  (securities  which are the  subject  of  bankruptcy  proceedings  or
otherwise  in  default  as to the  repayment  of  principal  and/or  payment  of
interest).  However,  the Fund is not  required  to sell or  dispose of any debt
security that falls into either category subsequent to its purchase.

     If a security held by the Fund  subsequently  is categorized as illiquid or
restricted, the Fund may be unable to quickly resell the security quickly or may
be able to sell it only at a price  below  current  market  value or could  have
difficulty valuing this holding precisely.  Distressed  securities frequently do
not produce income while they are  outstanding  and may require the Fund to bear
certain  extraordinary  expenses in order to protect and recover its investment.
Therefore, the Fund's ability to achieve current income may be diminished.  Such
securities  are also subject to  uncertainty  as to when, in what manner and for
what  value the  obligations  evidenced  by the  distressed  securities  will be
satisfied.

The Advisor's Investment Process


     The Fund combines  investments in high yield debt  securities  with common,
preferred  and  convertible  preferred  stocks  and  convertible  debentures  of
utilities companies.  Each of these sectors has its own distinct attributes that
the Advisor  believes could  contribute to the potential for the Fund to achieve
its  investment  objective.  There is no guarantee that the Fund will obtain its
investment objective.


     As discussed in the  prospectus,  the Fund is managed  following a rigorous
investment  process that emphasizes both quality and value.  Each portion of the
Fund's assets is managed by its  respective  portfolio  management  team,  whose
investment strategies are summarized as follows.

     U.S. High Yield Debt  Securities.  The high yield team  emphasizes  quality
companies with stable or improving financial situations.  Extensive, proprietary
research  helps manage  risk,  as does broad  sector  diversification.  The team
considers both macro- and  microeconomic  factors - such as inflation,  consumer
spending and wages - that affect the conditions of firms in the portfolio.

     Utilities  Securities.  The value equity team considers a number of factors
when selecting utility company stocks,  which include among others: a history of
high dividends and profits;  the size of the company's  market and market share;
competitive  or  technological  advantages  that  may  help  it in  the  future;
potential  merger  activity;  and the  projected  volatility  of the  company or
industry.  The  team's  stock  selection  is based on a blended  style of equity
management  that allows it to invest in both value- and  growth-oriented  equity
securities.

Proxy Voting Policy and Procedures

     The Fund has adopted Proxy Voting Policies and Procedures which the Advisor
uses  to  determine  how  to  vote  proxies  relating  to the  Fund's  portfolio
securities. A copy of the Fund's Proxy Voting Policy and Procedures are attached
as Appendix B to this Statement of Additional Information.

                             INVESTMENT RESTRICTIONS

     The Fund has  adopted the  fundamental  investment  restrictions  set forth
below  which may not be changed  without  the vote of "a  majority of the Fund's
outstanding  shares",  as defined  in the 1940 Act.  If the Fund were to issue a
class of preferred  shares,  the  investment  restrictions  could not be changed
without  the  approval  of a majority of the  outstanding  common and  preferred
shares,  voting  together  as a class,  and the  approval  of a majority  of the
outstanding  preferred shares,  voting separately by class. Where necessary,  an
explanation  beneath a fundamental  policy  describes the Fund's  practices with
respect to that policy, as allowed by current law. If the law governing a policy
changes, the Fund's practices may change accordingly without a shareholder vote.
Unless otherwise  stated,  all references to the assets of the Fund are in terms
of current market value.

1.       Non-Diversification

         The Fund is a non-diversified investment company under the 1940 Act.

         Further Explanation of Non-Diversification Policy:

     A non-diversified  investment  company is not limited by the 1940 Act as to
the amount of assets that may be invested in any one issuer.  However,  in order
to qualify as a regulated investment company for tax purposes, the Fund may have
no more that 25% of its total  assets  invested  in the  securities  (other than
securities of the U.S.  government,  its agencies or  instrumentalities,  or the
shares of other regulated investment  companies) of any one issuer. In addition,
with respect to 50% of its total assets, the Fund may not invest more than 5% of
its  total  assets,  determined  at market  or other  fair  value at the time of
purchase,   in  the  securities  (other  than  securities  issued  by  the  U.S.
government,  its agencies or  instrumentalities) of any one issuer, or invest in
more than 10% of the voting securities (other than securities issued by the U.S.
government,  its agencies or instrumentalities) of any one issuer, determined at
the time of purchase.

2.       Concentration

     The Fund  will  concentrate  its  investments  (invests  25% or more of its
assets)  in the  securities  of  issuers  engaged in the  utility  (water,  gas,
electric and  telecommunications)  sector.  The Fund will not concentrate in any
other industries.

3.       Issuing Senior Securities

     Except  as  permitted  under the 1940  Act,  the Fund may not issue  senior
securities.

         Further Explanation of Senior Securities Policy:

     The Fund may not  issue  any  class of  senior  security,  or sell any such
security of which it is the issuer,  unless (i) if such class of senior security
represents  an  indebtedness,  immediately  after such issuance or sale, it will
have an asset coverage of at least 300% or (ii) if such class of senior security
is a  stock,  immediately  after  such  issuance  or sale it will  have an asset
coverage of at least 200%.

4.       Borrowing

     The Fund may not borrow money, except to the extent permitted by applicable
law.

         Further Explanation of Borrowing Policy:

     The Fund may borrow from banks and enter into reverse repurchase agreements
in an amount up to 33 1/3% of its total assets,  taken at market value. The Fund
intends to limit its borrowing  through reverse  repurchase  agreements to up to
20% of its total assets.  The Fund may also borrow up to an additional 5% of its
total assets from banks or others.  The Fund may purchase  securities  on margin
and engage in short sales to the extent permitted by applicable law.

5.       Underwriting

     The Fund may not underwrite securities of other issuers,  except insofar as
the Fund may be deemed to be an underwriter in connection  with the  disposition
of its portfolio securities.

6.       Real Estate

     The Fund may not purchase or sell real estate,  except that,  to the extent
permitted  by  applicable  law, the Fund may invest in (a)  securities  that are
directly or  indirectly  secured by real  estate,  or (b)  securities  issued by
issuers that invest in real estate.

7.       Commodities

     The Fund may not purchase or sell  commodities or contracts on commodities,
except to the extent that the Fund may engage in financial futures contracts and
related options and currency  contracts and related options and may otherwise do
so in accordance with applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act.

8.       Lending

     The Fund may not make loans to other persons, except that the Fund may lend
its portfolio  securities in accordance  with applicable law. The acquisition of
investment securities or other investment  instruments shall not be deemed to be
the making of a loan.

         Further Explanation of Lending Policy:

     To  generate  income  and  offset  expenses,  the Fund  may lend  portfolio
securities to broker-dealers and other financial institutions in an amount up to
33 1/3% of its total assets,  taken at market  value.  While  securities  are on
loan,  the borrower will pay the Fund any income  accruing on the security.  The
Fund may invest any collateral it receives in additional  portfolio  securities,
such  as  U.S.  Treasury  notes,  certificates  of  deposit,  other  high-grade,
short-term  obligations  or interest  bearing  cash  equivalents.  Increases  or
decreases  in the market  value of a security  lent will affect the Fund and its
shareholders.

     When the Fund lends its  securities,  it will  require the borrower to give
the Fund  collateral  in cash or  government  securities.  The Fund will require
collateral  in an amount  equal to at least 100% of the current  market value of
the securities lent, including accrued interest.  The Fund has the right to call
a loan and obtain the  securities  lent any time on notice of not more than five
business days. The Fund may pay reasonable  fees in connection  with such loans.
The risk in lending  portfolio  securities,  as with other extensions of secured
credit, consist of possible delay in receiving additional collateral,  or in the
recovery of the securities or possible loss of rights in their collateral should
the borrower fail financially.

     All  other  investment  policies  of the Fund in the  prospectus  under the
heading "Investment  Objective and Principal Investment  Strategies" and in this
statement of additional  information under the heading "Investment Objective and
Policies"  are  considered  non-fundamental  and may be  changed by the Board of
Trustees without prior approval of the Fund's outstanding voting shares provided
they are given at least 60 days prior written notice.

     Under the 1940 Act,  the Fund may  invest up to 10% of its total  assets in
the aggregate in shares of other investment  companies and up to 5% of its total
assets in any one investment company, provided the investment does not represent
more than 3% of the voting stock of the acquired  investment company at the time
such shares are purchased.  As a shareholder in any investment company, the Fund
will bear its ratable share of that  investment  company's  expenses,  and would
remain  subject to payment of the Fund's  advisory fees and other  expenses with
respect to assets so  invested.  Holders of common  shares  would  therefore  be
subject  to  duplicative  expenses  to the  extent  the  Fund  invests  in other
investment companies.  In addition, the securities of other investment companies
may also be leveraged and will  therefore be subject to the same leverage  risks
described  herein and in the  prospectus.  As described in the prospectus in the
section  entitled  "Risks,"  the net asset value and market  value of  leveraged
shares  will be more  volatile  and  the  yield  to  shareholders  will  tend to
fluctuate more than the yield generated by unleveraged shares.

     In addition, to comply with federal tax requirements for qualification as a
"regulated  investment  company,"  the Fund's  investments  will be limited in a
manner such that at the close of each quarter of each tax year, (a) no more than
25% of the value of the Fund's  total  assets  are  invested  in the  securities
(other than United States government securities or securities of other regulated
investment  companies) of a single  issuer or two or more issuers  controlled by
the Fund and engaged in the same,  similar or related  trades or businesses  and
(b) with regard to at least 50% of the Fund's total  assets,  no more than 5% of
its total  assets are  invested in the  securities  (other  than  United  States
government  securities or securities of other regulated investment companies) of
a single issuer. These tax-related limitations may be changed by the Trustees to
the extent appropriate in light of changes to applicable tax requirements.

                             MANAGEMENT OF THE FUND

Trustees of the Fund

     The Fund's Board of Trustees  provides  broad  supervision  over the Fund's
affairs.  The  Trustees  meet  periodically  throughout  the year to oversee the
Fund's activities, reviewing, among other things, the Fund's performance and its
contractual arrangements with various service providers.  Each Trustee is paid a
fee for his or her services.  The officers of the Fund are  responsible  for the
Fund's operations.  The Fund's Trustees and officers are listed below,  together
with their principal occupations during the past five years.

     The Trustees are not required to  contribute  to the capital of the Fund or
to hold shares in the Fund.  A majority of the  Trustees are persons who are not
"interested persons" (as defined in the 1940 Act) of the Fund (collectively, the
"Disinterested Trustees").

     The Fund has an Executive  Committee which consists of Michael S. Scofield,
K. Dun Gifford and Russell A. Salton III, M.D.,  each of whom is a Disinterested
Trustee. The Executive Committee recommends Trustees to fill vacancies, prepares
the agenda for Board of Trustees  meetings and acts on routine  matters  between
scheduled Board of Trustees. The Executive Committee may solicit suggestions for
persons to fill  vacancies  on the Board of Trustees  from such  sources as they
deem appropriate, including the Advisor. Nominations by shareholders will not be
considered.  The Trustees will consider such  nominations  at the next regularly
scheduled Board of Trustees meeting.

     The Fund has an Audit  Committee  which  consists  of Charles A. Austin III
(Chairperson),  Shirley L. Fulton, K. Dun Gifford, Gerald M. McDonnell,  William
W. Pettit and Russell A. Salton III, M.D. The purpose of the Audit  Committee is
to evaluate  financial  management,  meet with the  auditors and deal with other
matters of a financial nature that they deem appropriate. The Audit Committee is
comprised entirely of Disinterested Trustees.

     The Fund has a  Performance  Committee  which  consists of Richard J. Shima
(Chairperson), Leroy Keith, Jr., Richard K. Wagoner and David M. Richardson. The
Performance Committee reviews all activities involving investment-related issues
and activities of the Advisor to the Fund,  reviews the performance of the other
service providers to the Fund, and assesses the performance of the Fund.

     Set forth below are the Trustees of the Fund.  Unless otherwise  indicated,
the address  for each  Trustee is 200  Berkeley  Street,  Boston,  Massachusetts
02116.











                                                                                                          

Disinterested Trustees:


-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
                                                                                                   Number of           Other
        Name and                                                                                   Portfolios      Trusteeships
                            Position      Beginning                                               Overseen in      held outside
      Date of Birth           with      Year of Term     Principal Occupations for Last Five       Evergreen       of Evergreen
                              Fund       of Office*                     Years                    Funds complex     Funds complex
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
Charles A. Austin III        Trustee        2004       Investment Counselor, Anchor Capital            94              None
                                                       Advisors, Inc. (investment advice);
                                                       Director, The Andover Companies
                                                       (insurance); Trustee, Arthritis
                                                       Foundation of New England; Director,
                                                       The Francis Ouimet Society; Former
                                                       Investment Counselor, Appleton
DOB: 10/23/34                                          Partners, Inc. (investment advice);
                                                       Former Director, Health Development
                                                       Corp. (fitness-wellness centers);
                                                       Former Director, Mentor Income Fund,
                                                       Inc.; Former Trustee, Mentor Funds and
                                                       Cash Resource Trust.
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
Shirley L. Fulton            Trustee        2004       Partner, Helms, Henderson & Fulton,             94              None
                                                       P.A. (2003-Present); Senior Resident
DOB: 1/10/52                                           Superior Court Judge, Charlotte, North
                                                       Carolina (1997-2003).
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
                                                       Chairman and President, Oldways
                                                       Preservation and Exchange Trust
                                                       (education); Trustee, Treasurer and
                                                       Chairman of the Finance Committee,
                                                       Cambridge College; Former Managing
                                                       Partner, Roscommon Capital Corp.;
K. Dun Gifford                                         Former Chairman of the Board, Director,
DOB: 10/23/38                Trustee        2004       and Executive Vice President, The               94              None
                                                       London Harness Company (leather goods
                                                       purveyor); Former Chairman, Gifford,
                                                       Drescher & Associates (environmental
                                                       consulting); Former Director, Mentor
                                                       Income Fund, Inc.; Former Trustee,
                                                       Mentor Funds and Cash Resource Trust.
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
                                                       Partner, Stonington Partners, Inc.
                                                       (private investment firm); Trustee of
                                                       Phoenix Series Fund, Phoenix
                                                       Multi-Portfolio Fund, and The Phoenix
                                                       Big Edge Series Fund; Former Chairman                     Trustee, Phoenix
                                                       of the Board and Chief Executive                          Series Fund,
                                                       Officer, Carson Products Company                          Phoenix
Leroy Keith, Jr.             Trustee        2004       (manufacturing); Former Director of             94        Multi-Portfolio
DOB: 2/14/39                                           Phoenix Total Return Fund and Equifax,                    Fund, and The
                                                       Inc. (worldwide information                               Phoenix Big Edge
                                                       management); Former President,                            Series Fund
                                                       Morehouse College; Former Director,
                                                       Mentor Income Fund, Inc.; Former
                                                       Trustee, Mentor Funds and Cash Resource
                                                       Trust.
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
                                                       Sales Manager, SMI STEEL - South
                                                       Carolina (steel producer); Former Sales
Gerald M. McDonnell                                    and Marketing Management, Nucor Steel
DOB: 7/14/39                 Trustee        2004       Company; Former Director, Mentor Income         94              None
                                                       Fund, Inc.; Former Trustee, Mentor
                                                       Funds and Cash Resource Trust.
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
                                                       Partner and Vice President in the law
                                                       firm of Kellam & Pettit, P.A.; Former
William Walt Pettit          Trustee        2004       Director, Mentor Income Fund, Inc.;             94              None
DOB: 8/26/55                                           Former Trustee, Mentor Funds and Cash
                                                       Resource Trust.
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
                                                       President, Richardson, Runden & Company
                                                       (new business development/consulting
                                                       company); Managing Director, Kennedy
                                                       Information, Inc. (executive
                                                       recruitment information and research
                                                       company); Trustee, NDI Technologies,
                                                       LLP (communications); Director, J&M
David M. Richardson          Trustee        2004       Cumming Paper Co. (paper                        94              None
DOB: 9/19/41                                           merchandising); Columnist, Commerce and
                                                       Industry Association of New Jersey;
                                                       Former Vice Chairman, DHR
                                                       International, Inc. (executive
                                                       recruitment); Former Director, Mentor
                                                       Income Fund, Inc.; Former Trustee,
                                                       Mentor Funds and Cash Resource Trust.
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
                                                       President/CEO, AccessOne MedCard;
                                                       Former Medical Director, Healthcare
                                                       Resource Associates, Inc.; Former
Russell A. Salton, III MD                              Medical Director, U.S. Health
DOB: 6/2/47                  Trustee        2004       Care/Aetna Health Services; Former              94              None
                                                       Director, Mentor Income Fund, Inc.;
                                                       Former Trustee, Mentor Funds and Cash
                                                       Resource Trust.
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------






-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
                                                       Attorney, Law Offices of Michael S.
Michael S. Scofield                                    Scofield; Former Director, Mentor
DOB: 2/20/43                 Trustee        2004       Income Fund, Inc.; Former Trustee,              94              None
                                                       Mentor Funds and Cash Resource Trust.
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------
Richard J. Shima             Trustee        2004       Independent Consultant; Director, Trust         94              None
                                                       Company of CT; Trustee, Saint Joseph
                                                       College (CT); Director of Hartford
                                                       Hospital, Old State House Association;
                                                       Trustee, Greater Hartford YMCA; Former
                                                       Director of Enhance Financial Services,
DOB: 8/11/39                                           Inc.; Former Director of CTG Resources,
                                                       Inc. (natural gas); Former Director
                                                       Middlesex Mutual Assurance Company;
                                                       Former Director, Mentor Income Fund,
                                                       Inc.; Former Trustee, Mentor Funds and
                                                       Cash Resource Trust.
-------------------------- ------------ -------------- ----------------------------------------- --------------- ------------------

Interested Trustee:


------------------------ -------------- ----------- -------------------------------------------- --------------- ------------------
Richard K. Wagoner,         Trustee        2004     Member and Former President, North                 94              None
                                                    Carolina Securities Traders Association;
                                                    Member, Financial Analysts Society; Former
                                                    Chief Investment Officer, Executive Vice
                                                    President and Head of Capital Management
CFA**                                               Group, First Union National Bank; Former
DOB: 12/12/37                                       Consultant to the Boards of Trustees of
                                                    the Evergreen funds; Former Member, New
                                                    York Stock Exchange; Former Trustee,
                                                    Mentor Funds and Cash Resource Trust.
------------------------ -------------- ----------- -------------------------------------------- --------------- ------------------

*    Each Trustee serves until a successor is duly elected or qualified or until his death, resignation,
     retirement or removal from office.

**   Mr.  Wagoner  is an  "interested  person"  of the  funds  because  of his  ownership  of  shares  in  Wachovia
     Corporation, the parent to the Advisor.









Trustee Ownership of Evergreen Funds Shares

     Set forth below is the dollar range of the Trustees' investment in the Fund
and the  aggregate  dollar  range  of their  investment  in the  Evergreen  fund
complex, as of December 31, 2003. As of December 31, 2003, the Fund had not been
formed and therefore had not issued any shares.

------------------------------ -------------------- ------------------------
                                                    Aggregate Dollar Range
Trustees                         Dollar Range of     of Investment in Fund
                               Investment in Fund           Complex
------------------------------ -------------------- ------------------------
============================== ==================== ========================
Charles A. Austin, III*                $0           Over $100,000
============================== ==================== ========================
============================== ==================== ========================

Shirley L. Fulton                      $0           $0**


============================== ==================== ========================
============================== ==================== ========================
K. Dun Gifford                         $0           $10,001-$50,000
============================== ==================== ========================
============================== ==================== ========================
Dr. Leroy Keith, Jr.                   $0           $1-$10,000
============================== ==================== ========================
============================== ==================== ========================
Gerald M. McDonnell*                   $0           $10,001-$50,000
============================== ==================== ========================
============================== ==================== ========================
William Walt Pettit*                   $0           $10,001-$50,000
============================== ==================== ========================
============================== ==================== ========================
David M. Richardson                    $0           $50,001-$100,000
============================== ==================== ========================
============================== ==================== ========================
Dr. Russell A. Salton, III*            $0           $0
============================== ==================== ========================
============================== ==================== ========================
Michael S. Scofield*                   $0           Over $100,000
============================== ==================== ========================
============================== ==================== ========================
Richard J. Shima*                      $0           Over $100,000
============================== ==================== ========================
============================== ==================== ========================
Richard K. Wagoner                     $0           Over $100,000
============================== ==================== ========================

     * In  addition  to the  above  investment  amounts,  the  Trustee  has over
$100,000  indirectly invested in certain of the Evergreen funds through Deferred
Compensation  Plans,  with the  exception  of Mr.  Shima  who has  over  $50,000
indirectly invested.

** Ms. Fulton became a Trustee in 2004.


                                                          

Officers of the Fund

         Set forth below are the officers of the Fund.

-------------------------------- ------------------------ -------------------------------------------------------------

                                   Position with Fund               Principal Occupation for Last Five Years
         Name, Address
       and Date of Birth

-------------------------------- ------------------------ -------------------------------------------------------------
-------------------------------- ------------------------ -------------------------------------------------------------

                                 President                President and Chief Investment Officer, Evergreen
Dennis H. Ferro                                           Investment Management Company, LLC and Executive Vice
401 S. Tryon,                                             President, Wachovia Bank, N.A.
12th Floor
Charlotte, NC 28288
DOB: 6/20/45

-------------------------------- ------------------------ -------------------------------------------------------------
-------------------------------- ------------------------ -------------------------------------------------------------

Carol Kosel                      Treasurer                Senior Vice President, Evergreen Investment Services, Inc.
200 Berkeley Street                                       and Treasurer, Vestaur Securities, Inc.
Boston, MA 02116
DOB: 12/25/63
-------------------------------- ------------------------ -------------------------------------------------------------
-------------------------------- ------------------------ -------------------------------------------------------------

                                                          Senior Vice President and General Counsel, Evergreen
Michael H. Koonce                Secretary                Investment Services, Inc.; Senior Vice President and
200 Berkeley Street                                       Assistant General Counsel, Wachovia Corporation; former
Boston, MA 02116                                          Senior Vice President and General Counsel, Colonial
DOB: 4/20/60                                              Management Associates, Inc.; former Vice President and
                                                          Counsel, Colonial Management Associates, Inc.
-------------------------------- ------------------------ -------------------------------------------------------------


Trustees Compensation

     Listed below is the Trustee  compensation  estimated to be paid by the Fund
individually for the period beginning ____, 2004 and ending on December 31, 2004
and by the Fund and the ten trusts and one other  limited  liability  company in
the Evergreen  fund complex for the twelve months ended December 31, 2003. As of
December  31,  2003,  the Fund had not been  formed  and  therefore  did not pay
compensation to the Trustees.  The Trustees do not receive pension or retirement
benefits from the Fund.







                                                          

=========================================================================================
           Trustee               Aggregate Compensation     Total Compensation from the
                                        from Fund            Evergreen Fund Complex *
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

Charles A. Austin, III                      $                        $153,000
                                                                      =======

-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

Shirley L. Fulton                           $                          $0**
                                                                        ===

-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

K. Dun Gifford                              $                        $178,500
                                                                      =======

-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

Leroy Keith, Jr.                            $                        $153,000
                                                                      =======

-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

Gerald M. McDonnell                         $                        $153,000
                                                                      =======

-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

William Walt Pettit                         $                        $153,000
                                                                      =======

-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

David M. Richardson                         $                        $153,000
                                                                      =======

-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

Russell A. Salton, III                      $                        $163,500
                                                                      =======

-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

Michael S. Scofield                         $                        $193,500
                                                                      =======

-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

Richard J. Shima                            $                        $168,000
                                                                      =======

-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

Richard K. Wagoner                          $                        $153,000
                                                                      =======

=========================================================================================


     *Certain  Trustees  have  elected  to  defer  all or  part of  their  total
compensation  for the twelve months ended  December 31, 2003. The amounts listed
below will be payable in later years to the respective Trustees:


         Austin            $91,800
==================================
         Pettit            $153,000
===================================
         Shima             $58,800
==================================

** Ms. Fulton became a Trustee in 2004.


     Election of Trustees is non-cumulative.  Accordingly, holders of a majority
of the  outstanding  common  shares  may  elect all of the  trustees  who may be
elected by such holders.


Limitation of Trustees' Liability

     The Agreement and  Declaration of Trust provides that a Trustee will not be
liable for errors of judgment  or  mistakes  of fact or law,  but nothing in the
Agreement and  Declaration of Trust protects a Trustee  against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless  disregard of his duties involved in the conduct of
his office or the discharge of his functions.

     In addition,  the Fund's  Agreement and  Declaration of Trust provides that
the Fund will  indemnify  its  Trustees  and officers  against  liabilities  and
expenses in  connection  with the  performance  of their duties on behalf of the
Fund to the fullest extent permitted by law, including the advancing of expenses
incurred in connection  therewith.  Under  Delaware law, the Fund is entitled to
indemnify and hold harmless any Trustee or other person from and against any and
all claims and demands  whatsoever.  Indemnification  may be against  judgments,
penalties,  fines,  compromises  and  reasonable  accountants'  and counsel fees
actually incurred by the Trustee or officer in connection with the proceeding.

     In the view of the staff of the Commission, an indemnification provision is
consistent  with  the  1940  Act if it (1)  precludes  indemnification  for  any
liability,  whether or not there is an  adjudication  of  liability,  arising by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties  described  in Section  17(h) and (i) of the 1940 Act  ("disabling
conduct") and (2) sets forth  reasonable and fair means for determining  whether
indemnification  shall be made;  in the case of the Fund,  "reasonable  and fair
means" would include (1) a final decision on the merits by a court or other body
before  whom the  proceeding  was  brought  that the  person  to be  indemnified
("indemnitee")  was not  liable by  reason of  disabling  conduct  (including  a
dismissal   because  of   insufficiency   of  evidence)  and  (2)  a  reasonable
determination,  based upon a review of the facts,  that the  indemnitee  was not
liable by reason of disabling  conduct by (a) the vote of a majority of a quorum
of  Trustees  who are  neither  "interested  persons"  of the Fund as defined in
Section 2(a)(19) of the 1940 Act nor parties to the proceeding, or (b) a written
opinion of independent legal counsel.

     The  indemnification  rights  provided or  authorized  by the Agreement and
Declaration  of Trust or applicable law are not exclusive of any other rights to
which a person  seeking  indemnification  may be  entitled.  The Fund intends to
obtain  liability  insurance  at its expense for the benefit of its Trustees and
officers which includes  coverage for liability  arising from the performance of
their  duties  on  behalf  of the  Fund  which  is  not  inconsistent  with  the
indemnification  provisions  of the  Agreement  and  Declaration  of  Trust  and
applicable law.





                  THE ADVISOR, ADMINISTRATOR AND TRANSFER AGENT

Advisor


     Evergreen  Investment  Management  Company,  LLC (previously defined as the
"Advisor"),  a wholly owned subsidiary of Wachovia Bank, N.A., is the investment
adviser to the Fund.  Wachovia Bank, N.A.,  located at 201 South College Street,
Charlotte,  North Carolina 28288-0630,  is a subsidiary of Wachovia Corporation,
formerly First Union Corporation. As of December 31, 2003, the Advisor, with its
affiliates,  had more than $247 billion in assets under management.  The Advisor
has a 70-year  history of money  management  and is the 15th largest mutual fund
company in the United States, according to FRC Financial Research Corp (open-end
funds only). The Advisor employs over 350 investment  professionals and has more
than 5 million individual and institutional clients.


     The  Advisor  is a  Delaware  limited  liability  company.  The  Advisor is
registered  with the  Commission as an investment  adviser under the  Investment
Advisers Act of 1940,  as amended.  The business  address of the Advisor and its
officers and Trustees is 200 Berkeley Street, Boston,  Massachusetts 02116-5034.
Subject to the  authority of the Board of Trustees,  the Advisor is  responsible
for overall management of the Fund's business affairs.


     Day-to-day  management  of the  portion  of the  Fund's  portfolio  that is
described  as the  utility  and  telecommunications  portion  under  "Investment
Objectives and Principal Investment Strategies - Principal Investment Strategies
- Utility  Securities"  in the  Prospectus  is the  responsibility  of a team of
portfolio  management  professionals  from  the  Advisor's  Value  Equity  team.
Together the team managed more than $250 billion in assets under  management  as
of December 31, 2003. The team is led by Timothy  O'Brien,  who has more than 19
years of  investment  experience.  Mr.  O'Brien has been with the Advisor  since
April 2002 and  currently  serves as a managing  director  and senior  portfolio
manager.


     Day-to-day  management  of the  portion  of the  Fund's  portfolio  that is
described  as the U.S.  high yield debt  securities  portion  under  "Investment
Objective and Principal Investment Strategies - Principal Investment Strategies-
U.S. High Yield Debt  Securities" in the Prospectus is the  responsibility  of a
team of portfolio management  professionals from the Advisor's Select High Yield
Bond team, which includes  specialized industry analysts responsible for various
sectors.  Also,  the  open-end  Evergreen  Select  High  Yield Bond is among the
portfolios the team manages. The Select High Yield team is led by Richard Cryan,
who has more than 25 years of fixed income investment experience.  Mr. Cryan has
been a senior  portfolio  manager with the Advisor since 1992. Mr. Cryan is part
of the team that manages the closed-end  Evergreen  Income  Advantage Fund and a
portion of the  closed-end  Evergreen  Managed  Income  Fund.  Together the team
managed more than $4.5 billion in high yield securities as of December 31, 2003.


Investment Management Contract


     The Board of Trustees,  including a majority of the Disinterested Trustees,
has the  responsibility  under the 1940 Act to  approve  the  Fund's  management
contract for its initial term and annually  thereafter  at a meeting  called for
the purpose of voting on such matters.  The Fund's Board of Trustees,  including
the  Disinterested  Trustees,  approved the  management  contract for an initial
two-year  term on March 18, 2004.  In approving  the  management  contract,  the
Trustees  reviewed   materials  provided  by  the  Advisor  and  considered  the
following:  (1) the level of the management fees and estimated  expense ratio of
the Fund as compared to competitive  funds of a comparable  size; (2) the nature
and quality of the services  rendered by the Advisor to the Fund,  (3) the costs
of providing services to the Fund, and (4) the anticipated  profitability of the
Fund to the Advisor.  In particular,  the Trustees  considered the risk-adjusted
historical  performance  records of the  Advisor's  portfolio  management  teams
responsible  for  managing  high-yield  bond  portfolios  and for  managing  the
Advisor's  open-end  utilities  fund.  The Trustees also noted that the proposed
management fee was  competitive  with (and generally  lower than) those of other
comparable  leveraged  closed-end funds. Prior to the commencement of the Fund's
operations,  the management contract will also be considered for approval by the
Fund's sole shareholder.


     The  management  contract  will  continue  in effect for two years from its
effective  date and,  thereafter,  from year to year only if  approved  at least
annually  by the Board of  Trustees  or by a vote of a  majority  of the  Fund's
outstanding voting securities (as provided in the 1940 Act). In either case, the
terms of the management contract and continuance thereof must be approved by the
vote of a majority  of the  Disinterested  Trustees  cast in person at a meeting
called for the purpose of voting on such approval.  The management  contract may
be terminated,  without penalty,  on 60 days' written notice by the Fund's Board
of Trustees or by a vote of a majority of outstanding  voting  securities of the
Fund or by the Advisor by either  party to the other.  The  management  contract
will terminate  automatically  upon its  "assignment" as that term is defined in
the 1940 Act.


     Under the management contract, and subject to the supervision of the Fund's
Board of  Trustees,  the  Advisor  furnishes  to the Fund  investment  advisory,
management and  administrative  services,  office  facilities,  and equipment in
connection with its services for managing the investment and reinvestment of the
Fund's assets.  The Advisor pays for all of the expenses  incurred in connection
with the provision of its services.


     Pursuant  to the  management  contract,  the  Advisor  may  enter  into  an
agreement  to retain,  at its own  expense,  a firm or firms to provide the Fund
with all of the  services to be provided  by the  Advisor  under the  management
contract, provided such agreement is approved as required by law.


     The  management  contract  further  provides  that the Advisor shall not be
liable for any error of judgment  or mistake of law or for any loss  suffered by
the Fund in connection  with the  performance  of such  contract,  except a loss
resulting from the Advisor's willful  misfeasance,  bad faith, gross negligence,
or reckless disregard by it of its obligations and duties under such contract.


     The management  contract  provides that the Fund shall pay to the Advisor a
fee for its  services  which is equal to the annual  rate of 0.60% of the Fund's
average daily Total Assets. The advisory fee will be payable monthly.


Administrator


     Evergreen  Investment  Services,  Inc.  ("EIS"),  serves as  administrator,
subject to the  supervision  and control of the Fund's  Board of  Trustees.  EIS
provides  the  Fund  with  administrative   office  facilities,   equipment  and
personnel. For these services, the Fund will pay a monthly fee at an annual rate
of 0.05% of its Total Assets.


Transfer Agent


     EquiServe  Trust Company,  N.A.  ("EquiServe")  has entered into a transfer
agency and  service  agreement  with the Fund  pursuant  to which,  among  other
services,  EquiServe  provides certain transfer agency services to the Fund. The
transfer agency and service agreement may be terminated by the Fund or EquiServe
(without  penalty) at any time upon not less than 60 days' prior written  notice
to the other party to the agreement.


Code of Ethics


     The Fund and Advisor have each  adopted a code of ethics as required  under
the 1940 Act. Subject to certain conditions and restrictions, these codes permit
personnel  subject to the codes to invest in securities  for their own accounts,
including securities that may be purchased, held or sold by the Fund. Securities
transactions  by some  of  these  persons  may be  subject  to  prior  approval.
Securities  transactions of certain personnel are subject to quarterly reporting
and review  requirements.  The codes of the Fund and  Advisor are on public file
with, and available from, the Commission.


     The codes of ethics may be reviewed and copied at the  Commission's  Public
Reference Room ("PRR"), in Washington,  D.C. Information on the operation of the
PRR may be obtained by calling the  Commission at  1-202-942-8090.  The codes of
ethics are also  available on the EDGAR  database on the  Commission's  Internet
site at http://www.sec.gov.  Copies are also available (subject to a duplicating
fee) at the  following  E-mail  address:  publicinfo@sec.gov,  or by writing the
Commission's Public Reference Section, Washington, D.C. 20549-0102.


Potential Conflicts of Interest


     The Fund is managed by the Advisor, which also serves as investment adviser
to other Evergreen funds and other accounts with investment objectives identical
or  similar  to those of the Fund.  Securities  frequently  meet the  investment
objectives of the Fund, the other Evergreen  funds and such other  accounts.  In
such cases,  the decision to recommend a purchase to one fund or account  rather
than another is based on a number of factors.  The  determining  factors in most
cases are the amount of securities of the issuer then outstanding,  the value of
those  securities  and the  market for them.  Other  factors  considered  in the
investment  recommendations include other investments which each fund or account
presently has in a particular  industry and the availability of investment funds
in each fund or account.


     It is possible that at times identical securities will be held by more than
one fund and/or account.  However,  positions in the same issue may vary and the
length of time that any fund or account may choose to hold its investment in the
same issue may likewise  vary. To the extent that more than one of the Evergreen
funds or a private  account  managed by the  Advisor  seeks to acquire  the same
security at about the same time,  the Fund may not be able to acquire as large a
position in such security as it desires or it may have to pay a higher price for
the  security.  Similarly,  the  Fund  may not be able to  obtain  as  large  an
execution  of an order to sell or as high a price for any  particular  portfolio
security  if the Advisor  decides to sell on behalf of another  account the same
portfolio  security at the same time. On the other hand, if the same  securities
are  bought  or sold at the same  time by more  than one  fund or  account,  the
resulting  participation in volume  transactions could produce better executions
for the Fund.  In the event more than one  account  purchases  or sells the same
security  on a given  date,  the  purchases  and sales will  normally be made as
nearly as practicable  on a pro rata basis in proportion to the amounts  desired
to be purchased or sold by each account.  Although the other Evergreen funds may
have the same or similar  investment  objective and policies as the Fund,  their
portfolios may not  necessarily  consist of the same  investments as the Fund or
each other, and their performance results are likely to differ from those of the
Fund.





                             PORTFOLIO TRANSACTIONS


     All orders for the purchase or sale of portfolio  securities  are placed on
behalf of the Fund by the Advisor pursuant to authority  contained in the Fund's
management  contract.  Securities  purchased  and  sold on  behalf  of the  Fund
normally  will be traded in the  over-the-counter  market on a net basis  (i.e.,
without  commission)  through  dealers  acting for their own  account and not as
brokers  or  otherwise  through  transactions  directly  with the  issuer of the
instrument.  The cost of  securities  purchased  from  underwriters  includes an
underwriter's  commission or concession,  and the prices at which securities are
purchased  and sold from and to dealers  include a dealer's  markup or markdown.
The Advisor  normally  seeks to deal  directly  with the primary  market  makers
unless, in its opinion,  better prices are available elsewhere.  Some securities
are  purchased  and  sold on an  exchange  or in  over-the-counter  transactions
conducted on an agency basis involving a commission. The Advisor seeks to obtain
the  best  execution  on  portfolio  trades.  The  price of  securities  and any
commission rate paid are always factors, but frequently not the only factors, in
judging best execution.  In selecting brokers or dealers,  the Advisor considers
various relevant  factors,  including,  but not limited to, the size and type of
the transaction;  the nature and character of the markets for the security to be
purchased or sold; the execution efficiency, settlement capability and financial
condition  of  the  dealer;  the  dealer's  execution  services  rendered  on  a
continuing basis; and the reasonableness of any dealer spreads.

     The  Advisor  may  select  broker-dealers  that  provide  brokerage  and/or
research  services  to the  Fund  and/or  other  investment  companies  or other
accounts managed by the Advisor.  In addition,  consistent with Section 28(e) of
the  Securities  Exchange Act of 1934, as amended (the "Exchange  Act"),  if the
Advisor  determines  in good faith that the amount of  commissions  charged by a
broker-dealer  is  reasonable  in  relation  to the value of the  brokerage  and
research services provided by such broker,  the Fund may pay commissions to such
broker-dealer in an amount greater than the amount another firm may charge. Such
services may include advice concerning the value of securities; the advisability
of  investing  in,  purchasing  or  selling  securities;   the  availability  of
securities or the purchasers or sellers of securities; providing stock quotation
services,  credit rating service  information and comparative  fund  statistics;
furnishing  analyses,  electronic  information  services,  manuals  and  reports
concerning  issuers,  industries,   securities,  economic  factors  and  trends,
portfolio  strategy,  and  performance  of accounts  and  particular  investment
decisions;  and  effecting  securities  transactions  and  performing  functions
incidental  thereto (such as clearance and settlement).  The Advisor maintains a
listing of broker-dealers  who provide such services on regular basis.  However,
because many  transactions on behalf of the Fund and other investment  companies
or accounts  managed by the Advisor  are placed with  broker-dealers  (including
broker-dealers  on the  listing)  without  regard  to  the  furnishing  of  such
services,  it is not possible to estimate the  proportion  of such  transactions
directed to such dealers solely because such services were provided. The Advisor
believes that no exact dollar value can be calculated for such services.

     The research received from  broker-dealers  may be useful to the Advisor in
rendering investment management services to the Fund as well as other investment
companies  or other  accounts  managed  by the  Advisor,  although  not all such
research may be useful to the Fund.  Conversely,  such  information  provided by
brokers or dealers who have executed  transaction orders on behalf of such other
accounts  may  be  useful  to the  Advisor  in  carrying  out  their  respective
obligations  to the Fund.  The  receipt of such  research  has not  reduced  the
Advisor's  normal  independent  research  activities;  however,  it enables  the
Advisor to avoid the additional  expenses  which might  otherwise be incurred if
either of them were to attempt to develop comparable  information  through their
own staff.

     In circumstances where two or more  broker-dealers  offer comparable prices
and executions, preference may be given to a broker-dealer which has sold shares
of the Fund as well as  shares  of other  investment  companies  managed  by the
Advisor.  This  policy  does not imply a  commitment  to execute  all  portfolio
transactions  through  all  broker-dealers  that sell  shares  of the Fund.  The
Evergreen funds have entered into  third-party  brokerage  and/or expense offset
arrangements  to  reduce  the  funds'  total  operating  expenses.  Pursuant  to
third-party brokerage  arrangements,  certain of the funds that invest primarily
in U.S. equity securities may incur lower custody fees by directing brokerage to
third-party broker-dealers.  Pursuant to expense offset arrangements,  the funds
incur lower transfer agency expenses by maintaining their cash balances with the
custodian.

     The Board of Trustees will periodically review the Advisor's performance of
their   responsibilities   in   connection   with  the  placement  of  portfolio
transactions on behalf of the Fund.

                                  TENDER OFFERS

     The Fund is a closed-end  investment  company and as such its  shareholders
will not have the right to cause the Fund to redeem their shares.  Instead,  the
Fund's  common  shares  will trade in the open  market at a price that will be a
function of several factors,  including among others, dividend levels (which are
in turn  affected by  expenses),  net asset  value,  call  protection,  dividend
stability,  relative demand for and supply of such shares in the market, general
market and economic  conditions  and other factors.  Shares of closed-end  funds
frequently  trade at a  discount  to their net  asset  value.  Common  shares of
closed-end investment companies like the Fund have during some periods traded at
prices  higher  than their net asset  value (at a  "premium")  and during  other
periods  traded at prices  lower than their net asset  value (at a  "discount").
This is in part  because the market price  reflects  the  dividend  yield on the
common  shares.  When the yield on the net asset  value per share is higher than
yields generally available in the market for comparable  securities,  the market
price will tend to reflect  this by trading  higher than the net asset value per
share to adjust the yield to a comparable market rate.

     The  market  price per  common  share may be greater or less than net asset
value per  common  share.  Common  shares  of  closed-end  investment  companies
frequently  trade at a discount from net asset value, but in some cases trade at
a premium.  This  characteristic  of common shares of closed-end funds is a risk
separate  and  distinct  from the risk  that the  Fund's  net  asset  value  may
decrease.  The market price of the Fund's  common shares also may be affected by
trading volume of the common shares,  general market and economic conditions and
other factors beyond the control of the Fund.

     The Board of Trustees has determined that it would be in the best interests
of  shareholders  of the Fund to take action to attempt to reduce or eliminate a
market value  discount from net asset value.  To that end, the Board of Trustees
has determined that quarterly  tender offers may help reduce any market discount
that may develop.

     Accordingly,  the Board of Trustees has committed to make tender offers for
the Fund's  common  shares under  certain  circumstances  and subject to certain
conditions.  Beginning  six to eight  months  after the Fund's  commencement  of
operations (for a total of eight consecutive  calendar  quarters),  in the event
that the common shares trade at a discount to net asset value of greater than 5%
for fifteen of twenty days during a specific  measurement  period (initially the
twenty-first  through  fortieth  trading  days  of a  quarter)(the  "measurement
period"), the Fund, under normal circumstances,  will make offers to purchase up
to 5% of its  outstanding  common  shares  at their  net  asset  value  from all
beneficial  shareholders.  The Fund  will not  undertake  a tender  offer if the
Fund's common shares are not trading at a discount. The Fund will make its first
tender  offer within the first six to eight  months of the  commencement  of the
Fund's operations and for the following seven quarters after such initial tender
offer  evaluation if the discount exists during the  measurement  period for the
number of days  specified  above.  The Board of Trustees  reserves  the right to
modify the conditions  described in this  paragraph in light of  experience.  In
addition,  the Board of  Trustees  may  consider  from time to time open  market
repurchases of the Fund's outstanding common shares.

     Under  certain  circumstances  described  below,  the Board of Trustees may
determine  not to undertake a tender offer even if the  conditions  described in
the preceding  paragraph are met.  Moreover,  there can be no assurance that any
such tender  offers  would cause the common  shares to trade at a price equal to
their net asset value or reduce the spread  between the market price and the net
asset value per common share.  Although the Board of Trustees generally believes
that tender offers are in the best interests of shareholders, the acquisition of
common  shares  by the Fund  will  decrease  the  total  assets of the Fund and,
therefore, will have the effect of increasing the Fund's expense ratio.

     The Fund will purchase all outstanding common shares tendered in accordance
with the terms of the offer  unless the Board of Trustees  determined  to accept
none of them  (based upon the  circumstances  set forth  below).  If more common
shares are  tendered  for  repurchase  than the Fund has offered to  repurchase,
common  shares will be  repurchased  on a pro-rata  basis.  If authorized by the
Commission,  the Fund may make it a condition  of each tender  offer that no one
shareholder may receive more than 10% of the amount purchased by the Fund in the
tender offer.  There can be no assurance that the  Commission  will approve this
condition.  Thus,  shareholders  may be  unable  to  liquidate  all  or a  given
percentage of their common shares and some  shareholders  may tender more shares
than they wish to have  repurchased in order to ensure  repurchase of at least a
specific  number of common shares.  Shareholders  may withdraw  tendered  common
shares at any time prior to the tender offer deadline.

     Tender offers and the need to fund  repurchase  obligations  may affect the
ability of the Fund to be fully invested,  which may reduce  returns.  Moreover,
diminution in the size of the Fund through  repurchases  without  offsetting new
sales of common shares may result in untimely sales of portfolio  securities and
a higher expense ratio,  and may limit the ability of the Fund to participate in
new investment  opportunities.  Repurchases resulting in portfolio turnover will
result in additional  expenses  being borne by the Fund.  The Fund may borrow to
meet repurchase  obligations,  which entails certain risks and costs.  See "Risk
Factors- Tender Offers (Evergreen Enhanced Liquidity Plan)."

     Although the Board of Trustees has  committed to conduct  quarterly  tender
offers  beginning in the Fund's first six to eight months of  operations  if the
conditions  described  above are met,  it is the policy of the Board of Trustees
(which may be changed by the Board),  not to cause the Fund to  purchase  shares
pursuant to a tender offer if (1) such purchases  would impair the Fund's status
as a regulated investment company under the Federal tax laws; (2) the Fund would
not be able to liquidate  portfolio  securities  in a manner that is orderly and
consistent  with  the  Fund's  investment  objective  and  policies  in order to
purchase  tendered  common  shares;  (3) such  action  would  result in the Fund
failing to satisfy the American Stock Exchange's  minimum listing  requirements;
or (4) there is, in the judgment of the Board of Trustees,  any (a) legal action
or proceeding instituted or threatened challenging the tender offer or otherwise
materially adversely affecting the Fund, (b) declaration of a banking moratorium
by Federal or state  authorities  or any  suspension  of payment by banks in the
United States,  which is material to the Fund, (c) limitation imposed by Federal
or state  authorities  on the extension of credit by lending  institutions,  (d)
commencement  of war,  armed  hostilities  or other  international  or  national
calamity directly or indirectly involving the United States which is material to
the Fund,  or (e) other event or  condition  that would have a material  adverse
effect on the Fund or its shareholders if tendered common shares were purchased.
Thus, there can be no assurance that the Board of Trustees will proceed with any
tender  offer.  The Board of Trustees  may modify these  conditions  in light of
circumstances existing at the time.

     If the Fund's common shares are purchased  pursuant to a tender offer, such
purchases  could reduce  significantly  the asset  coverage of any  borrowing or
outstanding  senior  securities.  The Fund may not purchase common shares to the
extent such  purchases  would result in the asset  coverage with respect to such
borrowing  or  senior   securities   being  reduced  below  the  asset  coverage
requirement  set forth in the 1940 Act.  Accordingly,  in order to purchase  all
common  shares  tendered,  the Fund  may  have to repay  all or part of any then
outstanding  borrowing  or  redeem  all or part of any then  outstanding  senior
securities to maintain the required asset coverage.  In addition,  the amount of
common  shares  for which  the Fund  makes any  particular  tender  offer may be
limited for the reasons set forth above or in respect of other concerns  related
to liquidity of the Fund's portfolio.

     Any  tender  offer  will be made  and  shareholders  will  be  notified  in
accordance with the requirements of the Securities  Exchange Act of 1934 and the
1940 Act, either by publication or mailing or both. The offering  documents will
contain  information  prescribed  by such  laws and the  rules  thereunder.  The
repurchase  of tendered  shares by the Fund will be a taxable  event.  See "U.S.
Federal Income Tax Matters." The Fund will pay all costs and expenses associated
with the making of any tender offer.

     At any time when the Fund's preferred shares are outstanding,  the Fund may
not  purchase,  redeem or otherwise  acquire any of its common shares unless (1)
all accrued  preferred  shares  dividends  have been paid and (2) at the time of
such  purchase,  redemption  or  acquisition,  the net asset value of the Fund's
portfolio  (determined  after  deducting  the  acquisition  price of the  common
shares) is at least 200% of the liquidation  value of the outstanding  preferred
shares (expected to equal the original purchase price per share plus any accrued
and unpaid dividends thereon).  Any service fees incurred in connection with any
tender  offer made by the Fund will be borne by the Fund and will not reduce the
stated consideration to be paid to tendering shareholders.

     Subject to its investment restrictions,  the Fund may borrow to finance the
repurchase  of shares or to make a tender offer.  Interest on any  borrowings to
finance share repurchase transactions or the accumulation of cash by the Fund in
anticipation of share  repurchases or tenders will reduce the Fund's net income.
Any share  repurchase,  tender offer or borrowing  that might be approved by the
Fund's Board of Trustees  would have to comply with the  Exchange  Act, the 1940
Act and the rules and regulations thereunder.

                         U.S. FEDERAL INCOME TAX MATTERS

     The following is a summary  discussion of certain U.S.  federal  income tax
consequences  that may be relevant to a shareholder  of  acquiring,  holding and
disposing of common shares of the Fund.  This  discussion  only  addresses  U.S.
federal income tax  consequences to U.S.  shareholders  who hold their shares as
capital  assets  and  does  not  address  all of the  U.S.  federal  income  tax
consequences  that may be relevant to particular  shareholders in light of their
individual  circumstances.  This  discussion  also  does  not  address  the  tax
consequences  to  shareholders  who are  subject  to special  rules,  including,
without limitation,  financial  institutions,  insurance  companies,  dealers in
securities or foreign currencies, foreign holders, persons who hold their shares
as or in a hedge  against  currency  risk, a  constructive  sale,  or conversion
transaction,  holders  who  are  subject  to the  alternative  minimum  tax,  or
tax-exempt  or  tax-deferred  plans,  accounts,  or entities.  In addition,  the
discussion does not address any state,  local, or foreign tax consequences,  and
it does not address any federal tax consequences  other than U.S. federal income
tax  consequences.  The  discussion  reflects  applicable tax laws of the United
States as of the date of this  statement of  additional  information,  which tax
laws may be  changed  or  subject  to new  interpretations  by the courts or the
Internal Revenue Service (the "IRS") retroactively or prospectively.  No attempt
is made to  present  a  detailed  explanation  of all U.S.  federal  income  tax
concerns  affecting the Fund and its shareholders,  and the discussion set forth
herein does not constitute tax advice.  Investors are urged to consult their own
tax advisers to determine the specific tax  consequences to them of investing in
the Fund,  including  the  applicable  federal,  state,  local and  foreign  tax
consequences to them and the effect of possible changes in tax laws.

     The  Fund  intends  to elect  be  treated  and to  qualify  each  year as a
"regulated  investment  company" under Subchapter M of the Internal Revenue Code
of 1986,  as amended  (the  "Code") and to comply with  applicable  distribution
requirements so that it generally will not pay U.S. federal income tax on income
and  capital  gains  distributed  to  shareholders.  In  order to  qualify  as a
regulated  investment  company  under  Subchapter  M of  the  Code,  which  this
discussion  assumes,  the Fund must, among other things, (i) derive at least 90%
of its gross  income for each taxable year from  dividends,  interest,  payments
with respect to securities  loans,  gains from the sale or other  disposition of
stock,  securities or foreign currencies,  or other income (including gains from
options,  futures and forward contracts) derived with respect to its business of
investing in such stock,  securities or  currencies  (the "90% income test") and
(ii)  diversify  its holdings so that, at the end of each quarter of its taxable
year,  (x) at least 50% of the value of its total assets is represented by cash,
United States government  securities,  securities of other regulated  investment
companies and other securities,  with such other securities  limited, in respect
of any one  issuer,  to an amount  that  does not  exceed 5% of the value of the
Fund's  total assets and that does not  represent  more than 10% of the issuer's
outstanding  voting  securities  and (y) not more  than 25% of the  value of its
total assets is invested in the securities  (other than United States government
securities or the securities of other regulated investment companies) of any one
issuer,  or of two or more  issuers  controlled  by the Fund and  engaged in the
same,  similar or related trades or  businesses.  For purposes of the 90% income
test,  the  character  of income  earned by certain  entities  in which the Fund
invests that are not treated as corporations (e.g.,  partnerships or trusts) for
U.S.  federal  income tax  purposes  will  generally  pass  through to the Fund.
Consequently,  the Fund may be required to limit its equity  investments in such
entities that earn fee income, rental income or other nonqualifying income.

     If the Fund  qualifies  as a regulated  investment  company  and,  for each
taxable year, it distributes to its shareholders an amount equal to or exceeding
the sum of (i) 90% of its  "investment  company  taxable income" as that term is
defined in the Code (which  includes,  among other  things,  dividends,  taxable
interest,  and the excess of any net short-term capital gains over net long-term
capital losses, as reduced by certain deductible expenses) without regard to the
deduction for dividends paid and (ii) 90% of the excess of its gross  tax-exempt
interest, if any, over certain disallowed deductions, the Fund will generally be
relieved  of U.S.  federal  income  tax on any  income  of the  Fund,  including
long-term  capital gains,  distributed  to  shareholders.  However,  if the Fund
retains any investment  company taxable income or "net capital gain" (the excess
of net long-term  capital gain over net short-term  capital loss),  it generally
will be subject to U.S.  federal  income tax at regular  corporate  rates on the
amounts  retained.  The Fund  intends to  distribute  at least  annually  all or
substantially  all of its  investment  company  taxable  income,  net tax-exempt
interest, and net capital gain. If for any taxable year the Fund did not qualify
as a regulated  investment company, it would be treated as a corporation subject
to U.S. federal income tax. In addition, in such cases, any distributions out of
current or accumulated  earnings and profits  (including net capital gain) would
be taxed as dividend  income and it may be  difficult  for the Fund to requalify
under Subchapter M.

     Under the Code,  the Fund will be  subject  to a  nondeductible  4% federal
excise tax on a portion of its  undistributed  ordinary income and capital gains
if it fails to meet  certain  distribution  requirements  with  respect  to each
calendar  year.  The Fund intends to make  distributions  in a timely manner and
accordingly  does not expect to be subject to the excise tax,  but, as described
below,  there  can  be no  assurance  that  the  Fund's  distributions  will  be
sufficient to entirely avoid this tax.

     Commencing within  approximately 90 days from the date of this statement of
additional  information,  the Fund  intends to declare a dividend  from all or a
portion of its net investment income monthly. The Fund intends to distribute any
net short- and long-term  capital gains at least  annually.  The Fund intends to
seek an exemptive  order from the  Commission  that would allow it to distribute
capital  gains  monthly  to  further  allow it to  maintain  a  stable  level of
distributions  to  shareholders.  Dividends from income and/or capital gains may
also be paid at such other times as may be necessary  for the Fund to avoid U.S.
federal income or excise tax.

     Unless a shareholder is ineligible to participate or elects otherwise, cash
distributions  will be automatically  reinvested in additional  common shares of
the Fund pursuant to the Automatic Dividend  Reinvestment Plan (the "Plan"). For
U.S.  federal  income tax  purposes,  such  distributions  generally are taxable
whether a shareholder takes them in cash or they are reinvested  pursuant to the
Plan in additional shares of the Fund. In general, assuming there are sufficient
earnings and profits,  dividends from  investment  company taxable income (other
than  dividends  attributable  to  qualified  dividend  income  of the  Fund  as
discussed below) are taxable as ordinary income,  and designated  dividends from
net capital  gain,  if any,  are  taxable as  long-term  capital  gains for U.S.
federal income tax purposes without regard to the length of time the shareholder
has held shares of the Fund.  Distributions  by the Fund in excess of the Fund's
current and  accumulated  earnings  and  profits  will be treated as a return of
capital to the extent of (and in reduction  of) the  shareholder's  tax basis in
its shares,  and any such amount in excess of that basis will be treated as gain
from the sale of the shares as  discussed  below.  The U.S.  federal  income tax
status of all distributions will be reported to shareholders annually.

     If the Fund  retains  any net  capital  gain,  the Fund may  designate  the
retained amount as undistributed  capital gains in a notice to shareholders who,
if subject to U.S.  federal income tax on long-term  capital gains,  (i) will be
required to include in income for U.S. federal income tax purposes, as long-term
capital gain, their proportionate shares of such undistributed amount, (ii) will
be entitled to credit their proportionate  shares of the tax paid by the Fund on
the undistributed  amount against their U.S. federal income tax liabilities,  if
any, and to claim refunds to the extent the credit exceeds such liabilities, and
(iii)  will be  entitled  to  increase  the tax  basis  of their  shares  by the
difference between their proportionate shares of such includible gains and their
proportionate shares of the tax deemed paid.

     Any dividend  declared by the Fund in October,  November or December with a
record  date in such a month  and paid  during  the  following  January  will be
treated for U.S. federal income tax purposes as paid by the Fund and received by
shareholders on December 31 of the calendar year in which it is declared.

     Recently  enacted  legislation  reduces  the  federal  income  tax rate for
individuals on certain  dividend income and net capital gain to a maximum of 15%
for taxable  years  beginning  on or before  December  31,  2008.  Capital  gain
dividends and a portion of ordinary income distributions (allocable to qualified
dividend income received by the Fund) received by individual shareholders of the
Fund may be subject to the reduced tax rate. Qualified dividend income generally
includes  dividends  from  domestic  corporations  and  dividends  from  foreign
corporations  that meet certain specified  criteria.  Certain holding period and
other  requirements must be satisfied in order for the reduced tax rate to apply
to dividends which would otherwise be qualified  dividend income.  The Fund will
annually inform  shareholders of the portion, if any, of ordinary dividends paid
by the Fund which qualify for the new reduced  federal income tax rate available
for such dividends.

     If  the  Fund  acquires  any  equity  interest  (under  proposed   Treasury
regulations,  generally  including  not only stock but also an option to acquire
stock such as is inherent in a convertible bond) in certain foreign corporations
that receive at least 75% of their  annual  gross  income from  passive  sources
(such as interest,  dividends, certain rents and royalties, or capital gains) or
that hold at least 50% of their  assets in  investments  producing  such passive
income ("passive foreign  investment  companies"),  the Fund could be subject to
U.S.   federal   income  tax  and   additional   interest   charges  on  "excess
distributions"  received from such companies or on gain from the  disposition of
stock in such  companies,  even if all income or gain  actually  received by the
Fund is timely  distributed to its shareholders.  The Fund generally will not be
able to pass through to its shareholders any credit or deduction for such a tax.
An election may generally be available that would  ameliorate  these adverse tax
consequences,  but any such election could require the Fund to recognize taxable
income or gain (subject to tax distribution requirements) without the concurrent
receipt  of cash.  These  investments  could  also  result in the  treatment  of
associated  capital gains as ordinary  income.  The Fund may limit and/or manage
its holdings in passive foreign investment  companies to limit its tax liability
or maximize its return from these investments.

     The Fund may invest to a significant extent in debt obligations that are in
the lowest  rating  categories or are unrated,  including  debt  obligations  of
issuers not currently paying interest or who are in default. Investments in debt
obligations that are at risk of or in default present special tax issues for the
Fund.  Tax rules are not  entirely  clear about  issues such as when and to what
extent  deductions  may be taken for bad debts or worthless  securities  and how
payments  received  on  obligations  in  default  should  be  allocated  between
principal  and income.  These and other issues will be addressed by the Fund, in
the event it  invests  in such  securities,  in order to seek to ensure  that it
distributes  sufficient income to preserve its status as a regulated  investment
company and does not become subject to U.S. federal income or excise tax.

     If the Fund utilizes leverage through  borrowing,  a failure by the Fund to
meet the asset  coverage  requirements  imposed by the 1940 Act or by any rating
organization that has rated such leverage or additional restrictions that may be
imposed  by  certain  lenders  on the  payment  of  dividends  or  distributions
potentially  could limit or suspend the Fund's ability to make  distributions on
its common shares.  Such a suspension or limitation  could prevent the Fund from
distributing  at  least  90% of its  investment  company  taxable  income  as is
required under the Code and therefore might  jeopardize the Fund's  reduction or
exemption from corporate taxation as a regulated investment company and/or might
subject  the Fund to the 4% excise  tax.  Upon any  failure  to meet such  asset
coverage requirements, the Fund may, in its sole discretion,  purchase or redeem
shares of preferred  stock in order to maintain or restore the  requisite  asset
coverage and avoid the adverse  consequences to the Fund and its shareholders of
failing to satisfy  the  distribution  requirement.  There can be no  assurance,
however,  that any such action would  achieve  these  objectives.  The Fund will
endeavor to avoid restrictions on its ability to distribute dividends.

     If the Fund invests in certain  pay-in-kind  securities,  certain preferred
shares,  deferred interest securities or, in general,  any other securities with
original issue  discount (or with market  discount if the Fund elects to include
market discount in income  currently),  the Fund generally must accrue income on
such  investments  for each taxable year,  which  generally will be prior to the
receipt of the corresponding cash payments.  However,  the Fund must distribute,
at least annually,  all or substantially  all of its net income,  including such
accrued income,  to shareholders  to qualify as a regulated  investment  company
under the Code and avoid U.S.  federal income and excise taxes.  Therefore,  the
Fund may have to  dispose  of its  portfolio  securities  under  disadvantageous
circumstances  to generate cash, or may have to leverage itself by borrowing the
cash, to satisfy distribution requirements.

     At the time of an investor's  purchase of the Fund's  shares,  a portion of
the purchase price may be attributable to realized or unrealized appreciation in
the Fund's portfolio or undistributed taxable income of the Fund.  Consequently,
subsequent  distributions  by the Fund with  respect to these  shares  from such
appreciation  or income may be taxable  to such  investor  even if the net asset
value of the  investor's  shares is, as a result of the  distributions,  reduced
below the  investor's  cost for such shares and the  distributions  economically
represent a return of a portion of the investment.

     Sales and other  dispositions  of the Fund's  shares  generally are taxable
events for  shareholders  that are subject to tax.  Shareholders  should consult
their own tax advisers  with  reference  to their  individual  circumstances  to
determine  whether any  particular  transaction in the Fund's shares is properly
treated as a sale for tax purposes, as the following discussion assumes, and the
tax  treatment  of any  gains or  losses  recognized  in such  transactions.  In
general,  if Fund shares are sold, the  shareholder  will recognize gain or loss
equal  to the  difference  between  the  amount  realized  on the  sale  and the
shareholder's  adjusted basis in the shares. Such gain or loss generally will be
treated as long-term gain or loss if the shares were held for more than one year
and otherwise  generally  will be treated as short-term  gain or loss.  Any loss
recognized by a shareholder upon the sale or other  disposition of shares with a
tax  holding  period  of six  months  or less  generally  will be  treated  as a
long-term  capital loss to the extent of any amounts treated as distributions of
long-term  capital gain with  respect to such  shares.  Losses on sales or other
dispositions of shares may be disallowed under "wash sale" rules in the event of
other  investments in the Fund (including those made pursuant to reinvestment of
dividends  and/or  capital  gain  distributions)  within  a  period  of 61  days
beginning 30 days before and ending 30 days after a sale or other disposition of
the original shares.

     The Fund's transactions in foreign currencies, foreign currency denominated
debt securities and certain foreign currency options and contracts may give rise
to  ordinary  income or loss  under  Section  988 of the Code to the  extent the
income or loss results from  fluctuations  in the value of the relevant  foreign
currency.

     Options written or purchased and futures contracts entered into by the Fund
on  certain  securities,  indices  and  foreign  currencies,  as well as certain
forward  foreign  currency  contracts,  may cause the Fund to recognize gains or
losses from marking-to-market even though such options may not have lapsed, been
closed out, or exercised, or such futures or forward contracts may not have been
performed or closed out. The tax rules  applicable to these contracts may affect
the  characterization of some capital gains and losses recognized by the Fund as
long-term or short-term.  As noted above,  certain options,  futures and forward
contracts relating to foreign currency may be subject to Section 988 of the Code
and accordingly may produce ordinary income or loss. Additionally,  the Fund may
be required to recognize gain if an option, futures contract,  forward contract,
short sale or other transaction that is not subject to the mark-to-market  rules
is treated as a "constructive sale" of an "appreciated  financial position" held
by the Fund under Section 1259 of the Code. Any net mark-to-market  gains and/or
gains from  constructive  sales may also have to be  distributed  to satisfy the
distribution  requirements referred to above even though the Fund may receive no
corresponding  cash amounts,  possibly  requiring the  disposition  of portfolio
securities or borrowing to obtain the necessary cash. Losses on certain options,
futures or forward contracts and/or offsetting positions  (portfolio  securities
or  other   positions  with  respect  to  which  the  Fund's  risk  of  loss  is
substantially  diminished by one or more options,  futures or forward contracts)
may also be deferred  under the tax straddle  rules of the Code,  which may also
affect the  characterization  of capital gains or losses from straddle positions
and  certain  successor  positions  as  long-term  or  short-term.  Certain  tax
elections may be available that would enable the Fund to ameliorate some adverse
effects of the tax rules described in this paragraph.  The tax rules  applicable
to options,  futures,  forward  contracts  and  straddles may affect the amount,
timing and  character of the Fund's  income and gains or losses and hence of its
distributions to shareholders.

     The Fund's  distributions to its corporate  shareholders  would potentially
qualify in their hands for the corporate dividends-received deduction subject to
certain holding period requirements and limitations on debt financings under the
Code,  but only to the  extent  the  Fund  earned  dividend  income  from  stock
investments in U.S.  domestic  corporations  and certain other  requirements are
satisfied.   The  Fund  is  permitted  to  acquire   stocks  of  U.S.   domestic
corporations,  and it is  therefore  possible  that  a  portion  of  the  Fund's
distributions,  from the dividends  attributable to such stocks, may qualify for
the dividends-received deduction.

     The IRS has taken the position that if a regulated  investment  company has
two classes of shares, it must designate distributions made to each class in any
year  as  consisting  of no  more  than  such  class's  proportionate  share  of
particular  types of income,  including  dividends  qualifying for the corporate
dividends-received   deduction  (if  any)  and  net  capital  gains.  A  class's
proportionate  share of a particular  type of income is determined  according to
the  percentage  of total  dividends  paid by the regulated  investment  company
during the year to such class. Consequently, if both common shares and preferred
shares are outstanding,  the Fund intends to designate distributions made to the
classes  of  particular   types  of  income  in  accordance  with  the  classes'
proportionate  shares of such income.  Thus, the Fund will  designate  dividends
qualifying   for  the   corporate   dividends-received   deduction   (if   any),
distributions  of qualified  dividend  income eligible for reduced tax rates for
individual  shareholders  and net capital gains in a manner that  allocates such
income  between the holders of common shares and preferred  shares in proportion
to the total  dividends  paid to each class during or for the taxable  year,  or
otherwise as required by applicable law.

     Income  received by the Fund from sources within  foreign  countries may be
subject  to  withholding  and  other  taxes  imposed  by  such  countries.   Tax
conventions  and  treaties  may reduce or  eliminate  such  taxes.  Shareholders
generally  will not be entitled to claim a credit or  deduction  with respect to
foreign taxes.

     Federal law requires that the Fund withhold (as "backup  withholding")  tax
at a current rate of 28% on reportable payments, including dividends and capital
gain distributions  paid to certain  shareholders who have not complied with IRS
regulations. Corporations are generally exempt from backup withholding. In order
to avoid  this  withholding  requirement,  shareholders  must  certify  on their
account  applications,  or on separate IRS Forms W-9,  that the Social  Security
Number or other  Taxpayer  Identification  Number they provide is their  correct
number and that they are not currently  subject to backup  withholding,  or that
they are exempt from backup  withholding.  The Fund may nevertheless be required
to  withhold  if it  receives  notice  from the IRS that the number  provided is
incorrect  or  backup   withholding  is  applicable  as  a  result  of  previous
underreporting  of  income.  Similar  backup  withholding  rules  may apply to a
shareholder's broker with respect to the proceeds of sales or other dispositions
of  the  Fund's  shares  by  such  shareholder.  Backup  withholding  is  not an
additional tax. Any amounts  withheld from payments made to a shareholder may be
refunded  or  credited  against  such  shareholder's  U.S.  federal  income  tax
liability,  if any,  provided that the required  information  is provided to the
IRS.

     Under  recently   promulgated  Treasury   regulations,   if  a  shareholder
recognizes a loss with respect to shares of $2 million or more for an individual
shareholder,  or $10 million or more for a corporate shareholder,  in any single
taxable year (or a greater amount over a combination of years),  the shareholder
must  file  with  the  IRS a  disclosure  statement  on IRS  Form  8886.  Direct
shareholders  of  portfolio  securities  are in many  cases  excepted  from this
reporting  requirement  but under  current  guidance  shareholders  of regulated
investment companies are not excepted.  The fact that a loss is reportable under
these regulations does not affect the legal  determination of whether or not the
taxpayer's  treatment of the loss is proper.  Shareholders  should consult their
tax advisers to determine the  applicability  of these  regulations  in light of
their individual circumstances.

     Shareholders  should consult their tax advisers  regarding the specific tax
consequences,  including state and local tax consequences, of participating in a
tender offer of common  shares.  A tender of common shares  pursuant to a tender
offer will be treated as a taxable  sale or  exchange  of the common  shares if,
taking into account  common shares the tendering  shareholder  actually owns and
common shares the shareholder is treated as owning under constructive  ownership
rules, the tender (i) completely  terminates the  shareholder's  interest in the
Fund, (ii) is treated as a distribution that is "substantially disproportionate"
or (iii) is treated as a distribution  that is "not essentially  equivalent to a
dividend". A "substantially  disproportionate" distribution generally requires a
reduction of more than 20% in the  shareholder's  proportionate  interest in the
Fund after all shares are tendered.  A distribution "not essentially  equivalent
to  a  dividend"  requires  that  there  be  a  "meaningful  reduction"  in  the
shareholder's  interest,  which  should  be the  case if the  shareholder  has a
minimal interest in the Fund, exercises no control over Fund affairs and suffers
a reduction in his or her proportionate interest.

     The Fund  intends to take the position  that  tendering  shareholders  will
qualify for sale or exchange treatment.  If the transaction is treated as a sale
or exchange for tax purposes,  any gain or loss  recognized will be treated as a
capital gain or loss by  shareholders  who hold their common shares as a capital
asset and as a long-term  capital  gain or loss if such common  shares have been
held for more than 12 months.  If the  transaction  is not  treated as a sale or
exchange,  the amount received upon a sale of common shares may consist in whole
or in part of ordinary  dividend  income,  a return of capital or capital  gain,
depending on the Fund's earnings and profits and the  shareholder's tax basis in
the common  shares.  In  addition,  if any  amounts  received  are  treated as a
dividend   to   tendering   shareholders,   non-tendering   shareholders   whose
proportionate  interest in the Fund has been increased as a result of the tender
offer might be treated as receiving a constructive dividend.

     The  description of certain  federal tax  provisions  above relates only to
U.S. federal income tax  consequences  for  shareholders  who are U.S.  persons,
i.e., U.S. citizens or residents or U.S. corporations,  partnerships,  trusts or
estates,  and who are subject to U.S.  federal income tax.  Investors other than
U.S.  persons may be subject to different U.S. tax  treatment,  including a U.S.
withholding  tax on amounts  treated as  ordinary  dividends  from the Fund and,
unless an effective IRS Form W-8BEN or other authorized withholding  certificate
is on file,  to backup  withholding  on certain  other  payments  from the Fund.
Shareholders  should  consult their own tax advisers on these matters and on any
specific  questions  as  to  U.S.  federal,  foreign,  state,  local  and  other
applicable tax laws.

             PERFORMANCE-RELATED, COMPARATIVE AND OTHER INFORMATION

Performance-Related Information

     The Fund may quote certain performance-related  information and may compare
certain aspects of its portfolio and structure to other similar closed-end funds
as categorized by Lipper,  Inc. (Lipper),  Morningstar Inc. or other independent
services.  Comparison of the Fund to an  alternative  investment  should be made
with consideration of differences in features and expected performance. The Fund
may obtain data from sources or reporting services,  such as Bloomberg Financial
and Lipper, that the Fund believes to be generally accurate.

     From time to time,  the Fund and/or the Advisor may report to  shareholders
or to the public in  advertisements  concerning the Advisor's  performance as an
advisor to  Evergreen  mutual funds and clients  other than the Fund,  or on the
comparative  performance  or  standing of the Advisor in relation to other money
managers. The Advisor may also provide to current or prospective private account
clients, in connection with standardized  performance  information for the Fund,
performance  information for the Fund gross of fees and expenses for the purpose
of assisting such clients in evaluating similar performance information provided
by other  investment  managers or institutions.  Comparative  information may be
compiled or provided by independent  ratings services or by news  organizations.
Performance  information  for the Fund or for other  Evergreen  mutual  funds or
accounts  managed by the  Advisor  may also be  compared  to  various  unmanaged
indexes or to other  benchmarks,  some of which may not be available  for direct
investment.  Any  performance  information,  whether  related to the Fund or the
Advisor,  should be considered in light of the Fund's  investment  objective and
policies, the characteristics and quality of the Fund, and the market conditions
during  the  time  period  indicated,  and it  should  not be  considered  to be
representative  of what may be achieved  in the future.  The Advisor may provide
its opinion with respect to general economic  conditions  including such matters
as trends in default rates or economic cycles.

     Past  performance is not indicative of future  results.  At the time common
shareholders  sell  their  shares,  they may be worth  more or less  than  their
original investment.  At any time in the future,  yields and total return may be
higher or lower than past yields and total return, and there can be no assurance
that any historical results will continue.

The Advisor

     From time to time,  the Advisor or the Fund may use, in  advertisements  or
information  furnished  to  present  or  prospective  shareholders,  information
regarding the Advisor including,  without limitation,  information regarding the
Advisor's investment style, countries of operation,  organization,  professional
staff, clients (including other registered investment  companies),  assets under
management  and  performance  record.  These  materials may refer to opinions or
rankings of the Advisor's overall investment management performance contained in
third-party reports or publications.

     Advertisements  for the Fund may make  reference to certain  other open- or
closed-end investment companies managed by Evergreen.

     The Advisor may present an investment  allocation model  demonstrating  the
Fund's weightings in investment types, sectors or rating categories such as U.S.
high  yield,  emerging  markets  or  investment  grade  securities.   The  model
allocations are representative of the Fund's investment strategy,  the Advisor's
analysis of the market for high yield securities as of the date of the model and
certain  factors  that may  alter  the  allocation  percentages  include  global
economic  conditions,  individual  company  fundamentals  or  changes  in market
valuations.  Such models may also  indicate  an  expected  or targeted  weighted
average rating of the Fund's portfolio.

Comparative Information


     From time to time, the Fund's  advertisements  or information  furnished to
present or prospective  shareholders may refer to the returns and yields offered
by  various  types  of  investments,  as  well  as the  yield  spreads  on  such
investments.  For  instance,  such  advertisements  may  refer to the  spread in
corporate bond yield and government  bond yield,  or the yield of other types of
investments.  For purposes of  advertisements or related  materials,  yields and
returns may be measured by various  indices such as the S & P 500 Index or other
such indices.  Advertisements  and related materials may also note the Advisor's
belief  that  yields on  short-term,  intermediate-  and  long-term  bonds offer
attractive current yields and set forth yields on other  investments,  including
without limitation, 3-month T-Bills, 10-year Treasury bonds and 30-year Treasury
bonds.


     The Fund's  advertising  materials  may also  compare  the  performance  of
investment companies with differing  investment styles,  objectives or portfolio
securities.  Returns for investment companies that invest primarily in bonds may
be compared with the returns of investment  companies  that invest  primarily in
equities.   Such  material  may  also  assert  that,  in  an  uncertain   equity
environment,  bonds can provide an attractive alternative to equity investments.
The Fund's advertising materials may also include comparative graphics.

The Fund

     The Fund's  expected  listing of its common  shares on the  American  Stock
Exchange  is  expected  to  provide  liquidity,   convenience  and  daily  price
visibility through electronic services and in newspaper stock tables.

     The Fund, in its advertisements, may refer to pending legislation from time
to time and the possible  impact of such  legislation  on investors,  investment
strategy  and  related  matters.  The Fund may be a  suitable  investment  for a
shareholder  who is thinking  of adding bond  investments  to his  portfolio  to
balance the appreciated stocks that the shareholder is holding.

Performance Calculations

Average Annual Total Return

     Described  below are the total  return  calculations  the Fund may use from
time to time in advertisements.

     Total return quotations for a class of shares of the Fund are calculated by
finding the average  annual  compounded  rates of return over one,  five and ten
year  periods,  or the time  periods  for which  such  class of shares  has been
effective, whichever is relevant, on a hypothetical $1,000 investment that would
equate the initial amount invested in the class to the ending  redeemable value.
To the initial  investment all dividends and  distributions  are added,  and all
recurring  fees charged to all  shareholder  accounts are  deducted.  The ending
redeemable  value  assumes  a  complete  redemption  at the end of the  relevant
periods.  The  following is the formula used to calculate  average  annual total
return:



                                P(1+T)n = ERV

         P =  initial payment of $1,000.
         T =  average annual total return.
         n =  number of years.
         ERV = ending redeemable value of the initial $1,000.

Yield

     Described below are yield  calculations  the Fund may use. Yield quotations
are  expressed  in  annualized  terms and may be quoted on a  compounded  basis.
Yields based on these  calculations  do not  represent  the Fund's yield for any
future period.

30-Day Yield

     If the Fund invests  primarily  in bonds,  it may quote its 30-day yield in
advertisements  or in reports or other  communications  to  shareholders.  It is
calculated  by dividing the net  investment  income per share earned  during the
period by the  maximum  offering  price per share on the last day of the period,
according to the following formula:

                        Yield = 2[(a-b +1)6-1]
                                   ___
                                   cd

         Where:
         a = Dividends and interest earned during the period
         b = Expenses accrued for the period (net of reimbursements)
         c = The average daily number of shares outstanding during the period
                that were entitled to receive dividends
         d = The maximum offering price per share on the last day of the period

7-Day Current and Effective Yield

     If the Fund invests primarily in money market instruments, it may quote its
7-day current yield or effective yield in  advertisements or in reports or other
communications to shareholders.

     The current yield is calculated by  determining  the net change,  excluding
capital  changes  and income  other than  investment  income,  in the value of a
hypothetical,  pre-existing  account  having  a  balance  of  one  share  at the
beginning of the 7-day base period, subtracting a hypothetical charge reflecting
deductions from shareholder  accounts,  and dividing the difference by the value
of the  account at the  beginning  of the base  period to obtain the base period
return, and then multiplying the base period return by (365/7).

     The  effective  yield is  based  on a  compounding  of the  current  yield,
according to the following formula:

                       Effective Yield = [(base period return)]+ 1) 365/7]-1


Tax Equivalent Yield

     If  the  Fund  invests  primarily  in  municipal  bonds,  it may  quote  in
advertisements  or in  reports or other  communications  to  shareholders  a tax
equivalent yield,  which is what an investor would generally need to earn from a
fully  taxable  investment in order to realize,  after income  taxes,  a benefit
equal to the tax free  yield  provided  by the  Fund.  Tax  equivalent  yield is
calculated using the following formula:

              Tax Equivalent Yield = Yield
                                     _________________
                                     1-Income Tax Rate

     The  quotient is then added to that  portion,  if any, of the Fund's  yield
that is not tax exempt.  Depending on the Fund's objective,  the income tax rate
used in the formula above may be federal or a combination of federal and state.

Non-Standardized Performance

     In addition to the performance  information  described  above, the Fund may
provide total return  information for designated  periods,  such as for the most
recent six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.







                                     EXPERTS


     The  statement of assets and  liabilities  of the Fund as of March 15, 2004
appearing in this statement of additional  information  has been audited by KPMG
LLP,  independent  auditors,  as set  forth in their  report  thereon  appearing
elsewhere  herein,  and is included in reliance  upon such report given upon the
authority of such firm as experts in accounting and auditing.  KPMG LLP, located
at 99 High Street, Boston, Massachusetts 02110, provides accounting and auditing
services to the Fund.


                             ADDITIONAL INFORMATION

     A  Registration  Statement  on  Form  N-2,  including  amendments  thereto,
relating  to the  shares  offered  hereby,  has been  filed by the Fund with the
Commission,  Washington,  D.C. The  prospectus  and this statement of additional
information do not contain all of the information set forth in the  Registration
Statement, including any exhibits and schedules thereto. For further information
with respect to the Fund and the shares offered hereby, reference is made to the
Registration  Statement.   Statements  contained  in  the  prospectus  and  this
statement of additional  information as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such  contract or other  document  filed as an exhibit to
the Registration Statement,  each such statement being qualified in all respects
by such reference. A copy of the Registration Statement may be inspected without
charge at the Commission's  principal office in Washington,  D.C., and copies of
all or any part thereof may be obtained from the Commission  upon the payment of
certain fees prescribed by the Commission.








         FINANCIAL STATEMENT AND INDEPENDENT AUDITORS' REPORT



































                    EVERGREEN UTILITIES AND HIGH INCOME FUND

                       Statement of Assets and Liabilities

                                 March 15, 2004

                   (With Independent Auditors' Report Thereon)


































                          Independent Auditors' Report



The Board of Trustees and Shareholders
Evergreen Utilities and High Income Fund:

We have  audited  the  accompanying  statement  of  assets  and  liabilities  of
Evergreen  Utilities  and High Income Fund ("the  Fund"),  as of March 15, 2004.
This  statement of assets and  liabilities is the  responsibility  of the Fund's
management.  Our  responsibility  is to express  an  opinion  on this  financial
statement based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the statement of
assets and liabilities is free of material misstatement. An audit of a statement
of  assets  and  liabilities  includes  examining,  on a  test  basis,  evidence
supporting  the  amounts  and  disclosures  in  that  statement  of  assets  and
liabilities. An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our  opinion,  the  statement  of assets and  liabilities  referred  to above
presents fairly, in all material  respects,  the financial position of Evergreen
Utilities  and High  Income  Fund as of  March  15,  2004,  in  conformity  with
accounting principles generally accepted in the United States of America.

                                                                 KPMG LLP
                                                                 /s/ KPMG LLP

Boston, Massachusetts
         March 16, 2004









                    EVERGREEN UTILITIES AND HIGH INCOME FUND
                       Statement of Assets and Liabilities
                                 March 15, 2004



--------------------------------------------------------------------------------

ASSETS

         Cash                                                 $  100,000

         Deferred Offering
Costs                                                           500,000


                                                               -----------------


         Total Assets                                           600,000




LIABILITIES

         Payable for offering costs                            500,000




NET ASSETS                                                 $   100,000
==========

                                                               -----------------


Shares Outstanding                                               5,000

                                                               -----------------


Net asset value  ($100,000/5,000 shares outstanding)            $20.00







The accompanying notes are an integral part of the financial statement.











                    EVERGREEN UTILITIES AND HIGH INCOME FUND

                  Notes to Statement of Assets and Liabilities

                                 March 15, 2004

Note 1 - Organization
     Evergreen Utilities and High Income Fund (the "Fund"), a Delaware statutory
     trust, is registered  under the Investment  Company Act of 1940, as amended
     (the "1940 Act"), as a non-diversified,  closed-end  management  investment
     company.

     The Fund's  investment  objective is to seek a high level of current income
     and moderate capital growth,  with an emphasis on providing  tax-advantaged
     dividend income.

Note 2 - Significant Accounting Policies

     (a)  Valuation of Cash: Cash is valued at cost, which  approximates  market
          value.

     (b)  Organization  Expenses  and  Offering  Costs:   Organization  expenses
          relating  to  organizing  the Fund have  been  incurred  by  Evergreen
          Investment  Management  Company  LLC  ("EIMC").   Offering  costs  are
          estimated to be  approximately  $500,000.  EIMC has also agreed to pay
          offering costs  (excluding sales charges) that exceed $0.04 per share.
          Offering  costs up to $0.04 per share and sales  charges will be borne
          by the  Fund  and its  shareholders  and  will be  accounted  for as a
          reduction to paid in capital.  Based on an estimated expected offering
          of 12,500,000  shares,  all of the offering costs will be borne by the
          Fund.

     (c)  Federal  Taxes:  The  Fund  intends  to  qualify  for  treatment  as a
          regulated  investment company under the Internal Revenue Code of 1986,
          as amended,  and distribute all its taxable  income.  In addition,  by
          distributing  in  each  calendar  year   substantially   all  its  net
          investment  income,  capital gains and certain other amounts,  if any,
          the Fund will not be subject  to Federal  excise  tax.  Therefore,  no
          Federal income or excise tax provision will be required.

Note 3 - Investment  Adviser and Other  Affiliated  Transactions

     EIMC serves as investment  adviser to the Fund. As compensation  for EIMC's
     services,  the Fund will pay EIMC a  management  fee at an  annual  rate of
     0.60% of the Fund's average daily total assets.

     Evergreen Investment Services,  Inc. ("EIS") serves as administrator to the
     Fund. As administrator,  EIS provides the Fund certain  administrative  and
     accounting  services  and is paid an  annual  fee of  0.05%  of the  Fund's
     average daily total assets.

Note 4 - Service Providers
     The Fund has  retained  State Street Bank and Trust  Company as  custodian.
     EquiServe Trust Company, N.A. will serve as the transfer agent,  registrar,
     shareholder  servicing agent and dividend  disbursing  agent for the Fund's
     shares.

Note 5 - Fund Shares
     The Fund has authorized an unlimited  number of common shares,  without par
     value, of which 5,000 shares were issued and outstanding at March 15, 2004.
















                       APPENDIX A - DESCRIPTION OF RATINGS

                      CORPORATE AND MUNICIPAL BOND RATINGS

     The Fund relies on ratings provided by independent  rating services to help
determine the credit quality of bonds and other  obligations the Fund intends to
purchase or already  owns. A rating is an opinion of an issuer's  ability to pay
interest  and/or  principal  when  due.  Ratings  reflect  an  issuer's  overall
financial  strength  and  whether it can meet its  financial  commitments  under
various economic conditions.

     If a security  held by the Fund loses its rating or has its rating  reduced
after the Fund has  purchased  it, the Fund is not required to sell or otherwise
dispose of the security, but may consider doing so.

     The  principal  rating  services,  commonly  used by the Fund and investors
generally,  are Moody's,  Fitch and S&P.  Rating  systems are similar  among the
different  services.  As an example,  the chart below compares basic ratings for
long-term bonds. The "Credit Quality" terms in the chart are for quick reference
only. Following the chart are the specific definitions each service provides for
its ratings.

                      COMPARISON OF LONG-TERM BOND RATINGS

                                                       

     ================== ================ =============== =================================================

     MOODY'S            S&P              FITCH           Credit Quality
     ================== ================ =============== =================================================
     ------------------ ---------------- --------------- -------------------------------------------------

     Aaa                AAA              AAA             Excellent Quality (lowest risk)
     ------------------ ---------------- --------------- -------------------------------------------------
     ------------------ ---------------- --------------- -------------------------------------------------

     Aa                 AA               AA              Almost Excellent Quality (very low risk)
     ------------------ ---------------- --------------- -------------------------------------------------
     ------------------ ---------------- --------------- -------------------------------------------------

     A                  A                A               Good Quality (low risk)
     ------------------ ---------------- --------------- -------------------------------------------------
     ------------------ ---------------- --------------- -------------------------------------------------

     Baa                BBB              BBB             Satisfactory Quality (some risk)
     ------------------ ---------------- --------------- -------------------------------------------------
     ------------------ ---------------- --------------- -------------------------------------------------

     Ba                 BB               BB              Questionable Quality (definite risk)
     ------------------ ---------------- --------------- -------------------------------------------------
     ------------------ ---------------- --------------- -------------------------------------------------

     B                  B                B               Low Quality (high risk)
     ------------------ ---------------- --------------- -------------------------------------------------
     ------------------ ---------------- --------------- -------------------------------------------------

     Caa/Ca/C           CCC/CC/C         CCC/CC/C        In or Near Default
     ------------------ ---------------- --------------- -------------------------------------------------
     ------------------ ---------------- --------------- -------------------------------------------------

                        D                DDD/DD/D        In Default
     ================== ================ =============== =================================================









                                 CORPORATE BONDS

                                LONG-TERM RATINGS

Moody's Corporate Long-Term Bond Ratings

Aaa Bonds which are rated Aaa are judged to be of the best  quality.  They carry
the smallest  degree of investment  risk and are generally  referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change,  such changes as can be  visualized  are most  unlikely to impair the
fundamentally strong position of such issues.

Aa Bonds which are rated Aa are judged to be of high  quality by all  standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds.  They are rated lower than the best bonds  because  margins of protection
may not be as large as in Aaa securities or  fluctuation of protective  elements
may be of greater  amplitude or there may be other  elements  present which make
the long-term risk appear somewhat larger than the Aaa securities.

A Bonds which are rated A possess many favorable  investment  attributes and are
to be considered as upper-medium-grade  obligations.  Factors giving security to
principal  and interest  are  considered  adequate,  but elements may be present
which suggest a susceptibility to impairment some time in the future.

Baa Bonds which are rated Baa are considered as medium-grade obligations,  (i.e.
they are neither highly  protected nor poorly  secured).  Interest  payments and
principal  security  appear  adequate  for the present  but  certain  protective
elements may be lacking or may be  characteristically  unreliable over any great
length of time. Such bonds lack outstanding  investment  characteristics  and in
fact have speculative characteristics as well.

Ba Bonds  which are  rated Ba are  judged to have  speculative  elements;  their
future cannot be considered as  well-assured.  Often the  protection of interest
and principal  payments may be very moderate,  and thereby not well  safeguarded
during  both  good  and bad  times  over the  future.  Uncertainty  of  position
characterizes bonds in this class.

B Bonds  which are  rated B  generally  lack  characteristics  of the  desirable
investment.  Assurance of interest and principal  payments or of  maintenance of
other terms of the contract over any long period of time may be small.

Caa  Bonds  which  are rated Caa are of poor  standing.  Such  issues  may be in
default or there may be present  elements of danger with respect to principal or
interest.

Ca Bonds which are rated Ca represent  obligations  which are  speculative  in a
high degree. Such issues are often in default or have other marked shortcomings.

C Bonds  which are rated C are the lowest  rated  class of bonds,  and issues so
rated can be regarded as having  extremely  poor prospects of ever attaining any
real investment standing.

Note:  Moody's applies  numerical  modifiers,  1, 2 and 3 in each generic rating
classification  from Aa to Caa. The modifier 1 indicates  that the company ranks
in the higher end of its generic  rating  category;  the  modifier 2 indicates a
mid-range  raking and the  modifier 3 indicates  that the  company  ranks in the
lower end of its generic rating category.

S&P  Corporate Long-Term Bond Ratings

AAA An  obligation  rated  AAA has  the  highest  rating  assigned  by S&P.  The
obligor's  capacity  to meet  its  financial  commitment  on the  obligation  is
extremely strong.

AA An obligation  rated AA differs from the  highest-rated  obligations  only in
small  degree.  The obligor's  capacity to meet its financial  commitment on the
obligation is very strong.

A An obligation  rated A is somewhat more  susceptible to the adverse effects of
changes  in   circumstances   and  economic   conditions  than   obligations  in
higher-rated  categories.  However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB An obligation rated BBB exhibits adequate  protection  parameters.  However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened  capacity  of the  obligor to meet its  financial  commitment  on the
obligation.

BB, B, CCC, CC and C: As described below,  obligations rated BB, B, CCC, CC, and
C are regarded as having significant speculative  characteristics.  BB indicates
the least degree of speculation and C the highest.  While such  obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.

BB  An  obligation  rated  BB  is  less  vulnerable  to  nonpayment  than  other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business,  financial,  or economic  conditions,  which could lead to the
obligor's   inadequate  capacity  to  meet  its  financial   commitment  on  the
obligation.

B An obligation rated B is more vulnerable to nonpayment than obligations  rated
BB, but the obligor currently has the capacity to meet its financial  commitment
on the obligation.  Adverse  business,  financial,  or economic  conditions will
likely  impair  the  obligor's  capacity  or  willingness  to meet it  financial
commitment on the obligation.

CCC An  obligation  rated  CCC is  currently  vulnerable  to  nonpayment  and is
dependent upon favorable  business,  financial,  and economic conditions for the
obligor to meet its  financial  commitment  on the  obligation.  In the event of
adverse business,  financial, or economic conditions,  the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.

CC An obligation rated CC is currently highly vulnerable to nonpayment.

C The C rating may be used to cover a situation where a bankruptcy  petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.

D The D rating,  unlike other ratings,  is not prospective;  rather,  it is used
only  where a default  has  actually  occurred--and  not where a default is only
expected. S&P changes ratings to D either:

o    On the day an interest and/or principal  payment is due and is not paid. An
     exception  is made if  there  is a grace  period  and S&P  believes  that a
     payment will be made, in which case the rating can be maintained; or

o    Upon voluntary bankruptcy filing or similar action. An exception is made if
     S&P  expects  that debt  service  payments  will  continue  to be made on a
     specific issue. In the absence of a payment default or bankruptcy filing, a
     technical  default  (i.e.,   covenant  violation)  is  not  sufficient  for
     assigning a D rating.

Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus  sign to show  relative  standing  within  the  major  rating
categories.

Fitch Corporate Long-Term Bond Ratings

Investment Grade

AAA Highest credit quality.  AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment  of  financial  commitments.  This  capacity  is highly  unlikely  to be
adversely affected by foreseeable events.

AA Very high credit quality.  AA ratings denote a very low expectation of credit
risk.  They  indicate  very  strong  capacity  for timely  payment of  financial
commitments.  This  capacity  is not  significantly  vulnerable  to  foreseeable
events.

A High credit quality.  A ratings denote a lower expectation of credit risk. The
capacity for timely payment of financial  commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.

BBB Good credit  quality.  BBB ratings  indicate  that there is  currently a low
expectation  of credit  risk.  The  capacity  for timely  payment  of  financial
commitments is considered adequate,  but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity.  This is the lowest
investment-grade category.

Speculative Grade

BB Speculative.  BB ratings  indicate that there is a possibility of credit risk
developing,  particularly  as the result of adverse  economic  change over time;
however,  business or financial alternatives may be available to allow financial
commitments  to be met.  Securities  rated in this  category are not  investment
grade.

B Highly  speculative.  B  ratings  indicate  that  significant  credit  risk is
present,  but a limited  margin of safety  remains.  Financial  commitments  are
currently being met; however,  capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

CCC,  CC, C High  default  risk.  Default is a real  possibility.  Capacity  for
meeting  financial  commitment  is  solely  reliant  upon  sustained,  favorable
business or economic  developments.  A CC rating  indicates that default of some
kind appears probable. C ratings signal imminent default.

DDD,  DD, D Default.  Securities  are not meeting  current  obligations  and are
extremely  speculative.  DDD  designates  the highest  potential for recovery of
amounts  outstanding  on any  securities  involved.  For  U.S.  corporates,  for
example,  DD indicates expected recovery of 50%-90% of such outstandings,  and D
the lowest recovery potential, i.e. below 50%.

+ or - may be appended to a rating to denote relative status within major rating
categories.  Such  suffixes  are not  added  to the AAA  rating  category  or to
categories below CCC.


CORPORATE SHORT-TERM RATINGS

Moody's Corporate Short-Term Issuer Ratings

Prime-1  Issuers  rated  Prime-1 (or  supporting  institutions)  have a superior
ability for repayment of senior short-term debt  obligations.  Prime-1 repayment
ability will often be evidenced by many of the following characteristics.

-- Leading market positions in well-established industries.

-- High rates of return on funds employed.

--  Conservative  capitalization  structure  with moderate  reliance on debt and
ample asset protection.

-- Broad  margins in  earnings  coverage  of fixed  financial  changes  and high
internal cash generation.

--  Well-established  access to a range of financial markets and assured sources
of alternate liquidity.

Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for  repayment of senior  short-term  debt  obligations.  This will  normally be
evidenced  by many of the  characteristics  cited above but to a lesser  degree.
Earnings  trends  and  coverage  ratios,  while  sound,  may be more  subject to
variation. Capitalization characteristics,  while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Prime-3  Issuers rated Prime-3 (or supporting  institutions)  have an acceptable
ability for repayment of senior short-term  obligations.  The effect of industry
characteristics and market  compositions may be more pronounced.  Variability in
earnings and profitability may result in changes in the level of debt protection
measurements  and may  require  relatively  high  financial  leverage.  Adequate
alternate liquidity is maintained.

Not Prime  Issuers  rated Not Prime do not fall  within any of the Prime  rating
categories.

S&P Corporate Short-Term Obligation Ratings

A-1 A short-term  obligation  rated A-1 is rated in the highest category by S&P.
The  obligor's  capacity to meet its financial  commitment on the  obligation is
strong. Within this category certain obligations are designated with a plus sign
(+). This indicates that the obligor's capacity to meet its financial commitment
on these obligations is extremely strong.

A-2 A  short-term  obligation  rated A-2 is  somewhat  more  susceptible  to the
adverse  effects  of changes  in  circumstances  and  economic  conditions  than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial  commitment on the  obligation is  satisfactory.  A-3 A short-term
obligation rated A-3 exhibits adequate protection parameters.  However,  adverse
economic  conditions  or  changing  circumstances  are more  likely to lead to a
weakened  capacity  of the  obligor  to meet  its  financial  commitment  on the
obligation.

B A short-term obligation rated B is regarded as having significant  speculative
characteristics.  The obligor  currently  has the capacity to meet its financial
commitment on the  obligation;  however,  it faces major  ongoing  uncertainties
which could lead to the  obligor's  inadequate  capacity  to meet its  financial
commitment on the obligation.

C A short-term  obligation rated C is currently  vulnerable to nonpayment and is
dependent upon favorable  business,  financial,  and economic conditions for the
obligor to meet its financial commitment on the obligation.

D The D rating,  unlike other ratings,  is not prospective;  rather,  it is used
only  where a default  has  actually  occurred--and  not where a default is only
expected. S&P changes ratings to D either:

o    On the day an interest and/or principal  payment is due and is not paid. An
     exception  is made if  there  is a grace  period  and S&P  believes  that a
     payment will be made, in which case the rating can be maintained; or

o    Upon voluntary bankruptcy filing or similar action, An exception is made if
     S&P  expects  that debt  service  payments  will  continue  to be made on a
     specific issue. In the absence of a payment default or bankruptcy filing, a
     technical  default  (i.e.,   covenant  violation)  is  not  sufficient  for
     assigning a D rating.

Fitch Corporate Short-Term Obligation Ratings

F1 Highest credit quality.  Indicates the strongest  capacity for timely payment
of  financial  commitments;  may have an added "+" to denote  any  exceptionally
strong credit feature.

F2 Good credit quality. A satisfactory  capacity for timely payment of financial
commitments,  but the  margin  of  safety  is not as great as in the case of the
higher ratings.

F3 Fair credit quality. The capacity for timely payment of financial commitments
is adequate;  however,  near-term adverse changes could result in a reduction to
non-investment grade.

B Speculative.  Minimal  capacity for timely  payment of financial  commitments,
plus  vulnerability  to  near-term  adverse  changes in  financial  and economic
conditions.

C High  default  risk.  Default  is a real  possibility.  Capacity  for  meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.

D Default. Denotes actual or imminent payment default.


                                 MUNICIPAL BONDS

                                LONG-TERM RATINGS

Moody's Municipal Long-Term Bond Ratings

Aaa  Bonds  rated  Aaa are  judged  to be of the best  quality.  They  carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally  stable margin
and  principal is secure.  While the various  protective  elements are likely to
change,  such  changes  as can be  visualized  are most  unlikely  to impair the
fundamentally strong position of such issues.

Aa Bonds rated Aa are judged to be of high  quality by all  standards.  Together
with the Aaa group they comprise  what are generally  known as high grade bonds.
They are rated lower than the best bonds because  margins of protection  may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater  amplitude  or  there  may be  other  elements  present  which  make the
long-term risk appear somewhat larger than the Aaa securities.

A Bonds  rated A possess  many  favorable  investment  attributes  and are to be
considered  as  upper-medium  grade  obligations.  Factors  giving  security  to
principal  and interest  are  considered  adequate,  but elements may be present
which suggest a susceptibility to impairment some time in the future.

Baa Bonds rated Baa are considered as medium-grade  obligations,  i.e., they are
neither highly  protected nor poorly  secured.  Interest  payments and principal
security appear adequate for the present but certain protective  elements may be
lacking or may be  characteristically  unreliable over any great length of time.
Such  bonds  lack  outstanding  investment  characteristics  and  in  fact  have
speculative characteristics as well.

Ba Bonds rated Ba are judged to have speculative  elements;  their future cannot
be considered as  well-assured.  Often the  protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future.  Uncertainty of position  characterizes  bonds in
this class.

B Bonds rated B generally  lack  characteristics  of the  desirable  investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa Bonds rated Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest.

Ca Bonds rated Ca represent  obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.

C Bonds rated C are the lowest rated class of bonds,  and issues so rated can be
regarded  as  having  extremely  poor  prospects  of  ever  attaining  any  real
investment standing.

Note:  Moody's  applies  numerical  modifiers 1, 2 and 3 in each generic  rating
classification  from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its  generic  rating  category;  the  modifier 2  indicates  a
mid-range  raking and the  modifier 3 indicates  that the  company  ranks in the
lower end of its generic rating category.

S&P Municipal Long-Term Bond Ratings

AAA An  obligation  rated  AAA has  the  highest  rating  assigned  by S&P.  The
obligor's  capacity  to meet  its  financial  commitment  on the  obligation  is
extremely strong.

AA An obligation  rated AA differs from the  highest-rated  obligations  only in
small  degree.  The obligor's  capacity to meet its financial  commitment on the
obligation is very strong.

A An obligation  rated A is somewhat more  susceptible to the adverse effects of
changes  in   circumstances   and  economic   conditions  than   obligations  in
higher-rated  categories.  However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB An obligation rated BBB exhibits adequate  protection  parameters.  However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened  capacity  of the  obligor to meet its  financial  commitment  on the
obligation.

BB, B, CCC, CC and C: As described below,  obligations rated BB, B, CCC, CC, and
C are regarded as having significant speculative  characteristics.  BB indicates
the least degree of speculation and C the highest.  While such  obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.

BB  An  obligation  rated  BB  is  less  vulnerable  to  nonpayment  than  other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business,  financial,  or economic  conditions,  which could lead to the
obligor's   inadequate  capacity  to  meet  its  financial   commitment  on  the
obligation.

B An obligation rated B is more vulnerable to nonpayment than obligations  rated
BB, but the obligor currently has the capacity to meet its financial  commitment
on the obligation.  Adverse  business,  financial,  or economic  conditions will
likely  impair  the  obligor's  capacity  or  willingness  to meet it  financial
commitment on the obligation.

CCC An  obligation  rated  CCC is  currently  vulnerable  to  nonpayment  and is
dependent upon favorable  business,  financial,  and economic conditions for the
obligor to meet its  financial  commitment  on the  obligation.  In the event of
adverse business,  financial, or economic conditions,  the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.

CC  An obligation rated CC is currently highly vulnerable to nonpayment.

C The C rating may be used to cover a situation where a bankruptcy  petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.

D An obligation  rated D is in payment  default.  The D rating  category is used
when  payments  on an  obligation  are not  made  on the  date  due  even if the
applicable grace period has not expired,  unless S&P believes that such payments
will be made during such grace  period.  The D rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus  sign to show  relative  standing  within  the  major  rating
categories.

Fitch Municipal Long-Term Bond Ratings

Investment Grade

AAA Highest credit quality.  AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment  of  financial  commitments.  This  capacity  is highly  unlikely  to be
adversely affected by foreseeable events.

AA Very high credit quality.  AA ratings denote a very low expectation of credit
risk.  They  indicate  very  strong  capacity  for timely  payment of  financial
commitments.  This  capacity  is not  significantly  vulnerable  to  foreseeable
events.

A High credit quality.  A ratings denote a lower expectation of credit risk. The
capacity for timely payment of financial  commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.

BBB Good credit  quality.  BBB ratings  indicate  that there is  currently a low
expectation  of credit  risk.  The  capacity  for timely  payment  of  financial
commitments is considered adequate,  but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity.  This is the lowest
investment-grade category.

Speculative Grade

BB Speculative.  BB ratings  indicate that there is a possibility of credit risk
developing,  particularly  as the result of adverse  economic  change over time;
however,  business or financial alternatives may be available to allow financial
commitments  to be met.  Securities  rated in this  category are not  investment
grade.

B Highly  speculative.  B  ratings  indicate  that  significant  credit  risk is
present,  but a limited  margin of safety  remains.  Financial  commitments  are
currently being met; however,  capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

CCC,  CC, C High  default  risk.  Default is a real  possibility.  Capacity  for
meeting  financial  commitments  is solely  reliant  upon  sustained,  favorable
business or economic  developments.  A CC rating  indicates that default of some
kind appears probable. C ratings signal imminent default.

DDD, DD, D Default.  The ratings of  obligations  in this  category are based on
their prospects for achieving  partial or full recovery in a  reorganization  or
liquidation  of  the  obligor.   While  expected   recovery  values  are  highly
speculative  and cannot be estimated with any precision,  the following serve as
general  guidelines.  'DDD' obligations have the highest potential for recovery,
around 90% - 100% of outstanding  amounts and accrued  interest.  "DD' indicates
potential  recoveries  in the  range  of 50% - 90% and 'D' the  lowest  recovery
potential, i.e., below 50%.

Entities  rated  in  this  category  have  defaulted  on  some  or all of  their
obligations.  Entities  rated 'DDD' have the highest  prospect for resumption of
performance  or  continued  operation  with or  without a formal  reorganization
process.  Entities  rated  'DD'  and  'D'  are  generally  undergoing  a  formal
reorganization or liquidation process;  those rated 'DD' are likely to satisfy a
higher portion of their outstanding obligations, while entities rated 'D' have a
poor prospect of repaying all obligations.

+ or - may be appended to a rating to denote relative status within major rating
categories.  Such  suffixes  are not  added  to the AAA  rating  category  or to
categories  below CCC or to short-term  ratings (as discussed  below) other than
F1.

SHORT-TERM MUNICIPAL RATINGS

Moody's Municipal Short-Term Issuer Ratings

Prime-1  Issuers  rated  Prime-1 (or  supporting  institutions)  have a superior
ability for repayment of senior short-term debt  obligations.  Prime-1 repayment
ability will often be evidence by many of the following characteristics.

-- Leading market positions in well-established industries.

-- High rates of return on funds employed.

--  Conservative  capitalization  structure  with moderate  reliance on debt and
ample asset protection.

-- Broad  margins in  earnings  coverage  of fixed  financial  changes  and high
internal cash generation.

--  Well-established  access to a range of financial markets and assured sources
of alternate liquidity.

Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for  repayment of senior  short-term  debt  obligations.  This will  normally be
evidenced  by many of the  characteristics  cited above but to a lesser  degree.
Earnings  trends  and  coverage  ratios,  while  sound,  may be more  subject to
variation. Capitalization characteristics,  while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Prime-3  Issuers rated Prime-3 (or supporting  institutions)  have an acceptable
ability for repayment of senior short-term  obligations.  The effect of industry
characteristics and market  compositions may be more pronounced.  Variability in
earnings and profitability may result in changes in the level of debt protection
measurements  and may  require  relatively  high  financial  leverage.  Adequate
alternate liquidity is maintained.

Not Prime  Issuers  rated Not Prime do not fall  within any of the Prime  rating
categories.

Moody's Municipal Short-Term Loan Ratings

MIG 1 This  designation  denotes best  quality.  There is strong  protection  by
established cash flows, superior liquidity support, or demonstrated  broad-based
access to the market for refinancing.

MIG 2 This  designation  denotes high quality.  Margins of protection  are ample
although not so large as in the preceding group.

MIG 3 This  designation  denotes  favorable  quality.  Liquidity  and  cash-flow
protection may be narrow and market access for  refinancing is likely to be less
well established.

SG This  designation  denotes  speculative  quality.  Debt  instruments  in this
category may lack margins of protection.

S&P Commercial Paper Ratings

A-1 This  designation  indicates  that the  degree  of safety  regarding  timely
payment is strong.  Those issues  determined to possess  extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2 Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree
of safety is not as high as for issues designated A-1.

A-3 Issues  carrying  this  designation  have an  adequate  capacity  for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.

B Issues  rated B are  regarded as having only  speculative  capacity for timely
payment.

C This  rating is  assigned  to  short-term  debt  obligations  with a  doubtful
capacity for payment.

D Debt  rated D is in  payment  default.  The D  rating  category  is used  when
interest  payments or principal  payments are not made on the date due,  even if
the applicable  grace period has not expired,  unless S&P believes such payments
will be made during such grace period.

S&P Municipal Short-Term Obligation Ratings

SP-1 Strong  capacity to pay  principal  and  interest.  An issue  determined to
possess  a very  strong  capacity  to pay  debt  service  is  given  a plus  (+)
designation.

SP-2   Satisfactory   capacity  to  pay  principal   and  interest,   with  some
vulnerability  to adverse  financial  and economic  changes over the term of the
notes.

SP-3 Speculative capacity to pay principal and interest.

Fitch Municipal Short-Term Obligation Ratings

F1 Highest credit quality.  Indicates the strongest  capacity for timely payment
of  financial  commitments;  may have an added "+" to denote  any  exceptionally
strong credit feature.

F2 Good credit quality. A satisfactory  capacity for timely payment of financial
commitments,  but the  margin  of  safety  is not as great as in the case of the
higher ratings.

F3 Fair credit quality. The capacity for timely payment of financial commitments
is adequate;  however,  near-term adverse changes could result in a reduction to
non-investment grade.

B Speculative.  Minimal  capacity for timely  payment of financial  commitments,
plus  vulnerability  to  near-term  adverse  changes in  financial  and economic
conditions.

C High  default  risk.  Default  is a real  possibility.  Capacity  for  meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.

D  Default. Denotes actual or imminent payment default.















                 APPENDIX B--PROXY VOTING POLICY AND PROCEDURES



                  Evergreen Investment Management Company, LLC

                       Proxy Voting Policy and Procedures

                       ISS Proxy Voting Guidelines Summary

June 16, 2003

Statement of Principles


Evergreen  Investment  Management  Company,  LLC  (EIMCO)  recognizes  it  has a
fiduciary  duty to vote  proxies on behalf of clients  who have  delegated  such
responsibility  to  EIMCO,  and that in all cases  proxies  should be voted in a
manner reasonably believed to be in the clients' best interest.

Corporate Governance Committee


EIMCO has established a corporate  governance  committee  (Committee) which is a
sub-committee  of  EIMCO's   Investment  Policy  Committee.   The  Committee  is
responsible  for approving  EIMCO's proxy voting  policies and  procedures,  for
overseeing the proxy voting process, and for reviewing proxy voting on a regular
basis.  The Committee will meet quarterly to review reports of all proxies voted
for the prior period and to conduct other business as required.

Conflicts of Interest


EIMCO  recognizes  that under  certain  circumstances  it may have a conflict of
interest in voting  proxies on behalf of its  clients.  Such  circumstances  may
include,  but are not limited to,  situations  where EIMCO or one or more of its
affiliates has a client or customer relationship with the issuer of the security
that is the subject of the proxy vote.

In most cases,  structural and informational  barriers within EIMCO and Wachovia
Corporation  will prevent EIMCO from becoming aware of the  relationship  giving
rise to the potential conflict of interest.  In such  circumstances,  EIMCO will
vote the proxy  according to its standard  guidelines and  procedures  described
above.

If  persons  involved  in proxy  voting on behalf  of EIMCO  becomes  aware of a
potential  conflict of interest,  the Committee shall consult with EIMCO's Legal
Department and consider whether to implement special  procedures with respect to
the voting of that proxy, including whether an independent third party should be
retained to vote the proxy.

Share Blocking


EIMCO does not vote global proxies, with share blocking restrictions,  requiring
shares to be prohibited from sale.


Proxy Voting Guideline Summary



I.       The Board of Directors

Voting on Director Nominees in Uncontested Elections


Votes on director nominees should be made on a case-by-case basis, examining the
following factors: composition of the board and key board committees, attendance
at board  meetings,  corporate  governance  provisions  and  takeover  activity,
long-term company performance relative to a market index,  directors' investment
in the  company,  whether  the  chairman is also  serving as CEO,  and whether a
retired CEO sits on the board. However, there are some actions by directors that
should result in votes being withheld. These instances include directors who:

     o Attend less than 75 percent of the board and committee meetings without a
     valid excuse

o    Implement or renew a dead-hand or modified dead-hand poison pill

o    Ignore a shareholder  proposal that is approved by a majority of the shares
     outstanding

o    Ignore a  shareholder  proposal that is approved by a majority of the votes
     cast for two consecutive years

o    Have  failed  to  act  on  takeover   offers  where  the  majority  of  the
     shareholders have tendered their shares

o    Are inside  directors  and sit on the audit,  compensation,  or  nominating
     committees

o    Are inside directors and the full board serves as the audit,  compensation,
     or  nominating  committee  or the  company  does  not  have  one  of  these
     committees

In addition,  directors who enacted egregious  corporate  governance policies or
failed to replace  management as appropriate would be subject to recommendations
to withhold votes.

Separating Chairman and CEO


Vote on a  case-by-case  basis  on  shareholder  proposals  requiring  that  the
positions of chairman and CEO be held separately.


Proposals Seeking a Majority of Independent Directors


Shareholder  proposals asking that a majority of directors be independent should
be evaluated on a case-by-case basis. Vote for shareholder proposals asking that
board audit, compensation,  and/or nominating committees be composed exclusively
of independent directors.

Stock Ownership Requirements


Vote against  shareholder  proposals requiring directors to own a minimum amount
of company  stock in order to  qualify as a director  or to remain on the board.
Term of Office


Vote against shareholder proposals to limit the tenure of outside directors.

Age Limits


Vote  against  shareholder  proposals to impose a mandatory  retirement  age for
outside directors.

Director and Officer Indemnification and Liability Protection


Proposals  on director  and officer  indemnification  and  liability  protection
should be evaluated on a case-by-case basis, using Delaware law as the standard.
Vote against proposals to eliminate entirely  directors' and officers' liability
for   monetary   damages  for   violating   the  duty  of  care.   Vote  against
indemnification  proposals that would expand coverage beyond just legal expenses
to acts,  such as  negligence,  that are more  serious  violations  of fiduciary
obligation than mere carelessness.  Vote for only those proposals providing such
expanded  coverage in cases when a  director's  or officer's  legal  defense was
unsuccessful if: (1) the director was found to have acted in good faith and in a
manner that he reasonably believed was in the best interests of the company, and
(2) only if the director's legal expenses would be covered.

Charitable Contributions


Vote against proposals regarding charitable contributions.

II.      Proxy Contests

Voting for Director Nominees in Contested Elections


Votes in a contested  election of directors  must be evaluated on a case-by-case
basis, considering the following factors: long-term financial performance of the
target company relative to its industry;  management's track record;  background
to the  proxy  contest;  qualifications  of  director  nominees  (both  slates);
evaluation of what each side is offering  shareholders as well as the likelihood
that  the  proposed  objectives  and  goals  can be  met;  and  stock  ownership
positions.

Reimburse Proxy Solicitation Expenses


Voting  to  reimburse  proxy  solicitation  expenses  should  be  analyzed  on a
case-by-case  basis.  In  cases  where  Evergreen  recommends  in  favor  of the
dissidents,   we  also  recommend  voting  for  reimbursing  proxy  solicitation
expenses.

III.     Auditors

Ratifying Auditors


Vote for  proposals  to ratify  auditors,  unless:  an auditor  has a  financial
interest in or association  with the company,  and is therefore not independent;
or there is reason to believe  that the  independent  auditor  has  rendered  an
opinion which is neither  accurate nor  indicative  of the  company's  financial
position.




IV.      Proxy Contest Defenses

Board Structure: Staggered vs. Annual Elections


Vote against proposals to classify the board.

Vote for  proposals  to repeal  classified  boards  and to elect  all  directors
annually.



Shareholder Ability to Remove Directors


Vote  against  proposals  that provide  that  directors  may be removed only for
cause.

Vote for proposals to restore  shareholder  ability to remove  directors with or
without cause.

Vote against  proposals  that provide that only  continuing  directors may elect
replacements to fill board vacancies.

Vote for proposals  that permit  shareholders  to elect  directors to fill board
vacancies.

Cumulative Voting


Vote against proposals to eliminate cumulative voting.

Vote proposals to restore or permit  cumulative  voting on a case-by-case  basis
relative to the company's other governance provisions.

Shareholder Ability to Call Special Meetings


Vote  against  proposals  to restrict or  prohibit  shareholder  ability to call
special meetings.

Vote for proposals that remove  restrictions on the right of shareholders to act
independently of management.

Shareholder Ability to Act by Written Consent

Vote  against  proposals  to restrict or  prohibit  shareholder  ability to take
action by written consent.

Vote for  proposals  to allow  or make  easier  shareholder  action  by  written
consent.

Shareholder Ability to Alter the Size of the Board


Vote for proposals that seek to fix the size of the board.

Vote against proposals that give management the ability to alter the size of the
board without shareholder approval.

V.       Tender Offer Defenses

Poison Pills


Vote for shareholder  proposals that ask a company to submit its poison pill for
shareholder ratification.

Review on a  case-by-case  basis  shareholder  proposals  to redeem a  company's
poison pill.

Review on a case-by-case basis management proposals to ratify a poison pill.

Fair Price Provisions


Vote  proposals  to  adopt  fair  price  provisions  on  a  case-by-case  basis,
evaluating   factors  such  as  the  vote   required  to  approve  the  proposed
acquisition,  the vote  required  to repeal  the fair price  provision,  and the
mechanism for determining the fair price.

Generally, vote against fair price provisions with shareholder vote requirements
greater than a majority of disinterested shares.

Greenmail


Vote for  proposals  to adopt  antigreenmail  charter  of  bylaw  amendments  or
otherwise restrict a company's ability to make greenmail payments.

Review on a  case-by-case  basis  antigreenmail  proposals when they are bundled
with other charter or bylaw amendments.

Pale Greenmail


Review on a case-by-case basis  restructuring  plans that involve the payment of
pale greenmail.

Unequal Voting Rights


Vote against dual-class exchange offers.

Vote against dual-class recapitalizations.

Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws


Vote against management proposals to require a supermajority shareholder vote to
approve charter and bylaw amendments.

Vote  for  shareholder   proposals  to  lower  supermajority   shareholder  vote
requirements for charter and bylaw amendments.

Supermajority Shareholder Vote Requirement to Approve Mergers


Vote against management proposals to require a supermajority shareholder vote to
approve mergers and other significant business combinations.

Vote  for  shareholder   proposals  to  lower  supermajority   shareholder  vote
requirements for mergers and other significant business combinations.

White Squire Placements


Vote for  shareholder  proposals  to require  approval of blank check  preferred
stock Issues for other than general corporate purposes.

VI.      Miscellaneous Governance Provisions

Confidential Voting


Vote for  shareholder  proposals  that request  companies to adopt  confidential
voting, use independent  tabulators,  and use independent inspectors of election
as long as the proposals  include clauses for proxy contests as follows:  In the
case of a contested election, management should be permitted to request that the
dissident group honor its confidential  voting policy.  If the dissidents agree,
the policy remains in place.  If the dissidents do not agree,  the  confidential
voting policy is waived.

Vote for management proposals to adopt confidential voting.

Equal Access


Vote for shareholder proposals that would allow significant company shareholders
equal  access to  management's  proxy  material in order to evaluate and propose
voting recommendations on proxy proposals and director nominees, and in order to
nominate their own candidates to the board.

Bundled Proposals


Review on a case-by-case basis bundled or "conditioned" proxy proposals.  In the
case of items that are  conditioned  upon each other,  examine the  benefits and
costs  of the  packaged  items.  In  instances  when  the  joint  effect  of the
conditioned  items is not in  shareholders'  best  interests,  vote  against the
proposals. If the combined effect is positive, support such proposals.

Shareholder Advisory Committees


Review on a  case-by-case  basis  proposals to establish a shareholder  advisory
committee.

VII.     Capital Structure

Common Stock Authorization


Review proposals to increase the number of shares of common stock authorized for
issue on a case-by-case basis.

Vote against  proposals to increase the number of authorized shares of the class
of stock that has  superior  voting  rights in  companies  that have  dual-class
capitalization structures.

Stock Distributions: Splits and Dividends


Vote for management proposals to increase common share authorization for a stock
split,  provided that the increase in  authorized  shares would not result in an
excessive number of shares available for issuance given a company's industry and
performance in terms of shareholder returns.

Reverse Stock Splits


Vote for management proposals to implement a reverse stock split when the number
of shares will be proportionately reduced to avoid delisting.

Review on a  case-by-case  basis on proposals to implement a reverse stock split
that do not proportionately reduce the number of shares authorized for Issue.

Preferred Stock


Vote  against  proposals  authorizing  the  creation of new classes of preferred
stock with unspecified  voting,  conversion,  dividend  distribution,  and other
rights ("blank check" preferred stock).

Vote for  proposals  to create  blank  check  preferred  stock in cases when the
company expressly states that the stock will not be used as a takeover defense.

Vote for  proposals  to  authorize  preferred  stock in cases  where the company
specifies the voting, dividend,  conversion,  and other rights of such stock and
the terms of the preferred stock appear reasonable.

Vote  case-by-case  on proposals to increase the number of blank check preferred
shares after analyzing the number of preferred  shares available for Issue given
a company's industry and performance in terms of shareholder returns.

Shareholder Proposals Regarding Blank Check Preferred Stock


Vote for shareholder  proposals to have blank check preferred stock  placements,
other than those  shares  issued  for the  purpose of raising  capital or making
acquisitions  in the  normal  course  of  business,  submitted  for  shareholder
ratification.

Adjustments to Par Value of Common Stock


Vote for management proposals to reduce the par value of common stock.

Preemptive Rights


Review on a  case-by-case  basis  shareholder  proposals  that  seek  preemptive
rights.  In evaluating  proposals on preemptive  rights,  consider the size of a
company and the characteristics of its shareholder base.

Debt Restructurings


Review on a case-by-case  basis  proposals to increase  common and/or  preferred
shares and to Issue shares as part of a debt  restructuring  plan.  Consider the
following  Issues:  Dilution--How  much  will  ownership  interest  of  existing
shareholders  be reduced,  and how extreme will dilution to any future  earnings
be? Change in Control--Will the transaction result in a change in control of the
company?   Bankruptcy--Generally,   approve   proposals  that   facilitate  debt
restructurings unless there are clear signs of self-dealing or other abuses.

Share Repurchase Programs


Vote for management proposals to institute open-market share repurchase plans in
which all shareholders may participate on equal terms.

Tracking Stock


Votes on the creation of tracking stock are determined on a case-by-case  basis,
weighing the strategic value of the transaction against such factors as:

o        adverse governance changes

o        excessive increases in authorized capital stock

o        unfair method of distribution

o        diminution of voting rights
o        adverse conversion features

o        negative impact on stock option plans

o        other alternatives such as spinoff


VIII.    Executive and Director Compensation

Votes with respect to compensation  plans should be determined on a case-by-case
basis.

Our new methodology for reviewing  compensation  plans primarily  focuses on the
transfer of  shareholder  wealth  (the dollar cost of pay plans to  shareholders
instead  of  simply  focusing  on voting  power  dilution).  Using the  expanded
compensation  data  disclosed  under the SEC's new rules,  Evergreen  will value
every award type.  Evergreen  will include in its  analyses an estimated  dollar
cost for the proposed  plan and all  continuing  plans.  This cost,  dilution to
shareholders'  equity,  will also be expressed  as a  percentage  figure for the
transfer of shareholder  wealth,  and will be considered  along with dilution to
voting power.  Once  Evergreen  determines  the  estimated  cost of the plan, we
compare it to a company-specific dilution cap.

Our model  determines a  company-specific  allowable pool of shareholder  wealth
that may be  transferred  from  the  company  to  executives,  adjusted  for (1)
long-term corporate performance (on an absolute basis and relative to a standard
industry peer group and an appropriate market index), (2) cash compensation, and
(3)  categorization  of the  company  as  emerging,  growth,  or  mature.  These
adjustments  are pegged to market  capitalization.  Evergreen  will  continue to
examine  other  features of proposed pay plans such as  administration,  payment
terms, plan duration,  and whether the  administering  committee is permitted to
reprice underwater stock options without shareholder approval.

Management Proposals Seeking Approval to Reprice Options


Vote  on  management   proposals  seeking  approval  to  reprice  options  on  a
case-by-case basis.

Director Compensation


Votes on stock-based plans for directors are made on a case-by-case basis.

Employee Stock Purchase Plans


Votes on employee stock purchase plans should be made on a case-by-case basis.

OBRA-Related Compensation Proposals:

Amendments that Place a Cap on Annual Grants or Amend Administrative Features


Vote  for  plans  that  simply  amend   shareholder-approved  plans  to  include
administrative  features or place a cap on the annual grants any one participant
may receive to comply with the provisions of Section 162(m) of OBRA.

Amendments to Added Performance-Based Goals


Vote for amendments to add performance goals to existing  compensation  plans to
comply with the provisions of Section 162(m) of OBRA.



Amendments to Increase Shares and Retain Tax Deductions Under OBRA


Votes on amendments to existing plans to increase shares reserved and to qualify
the plan for  favorable  tax treatment  under the  provisions of Section  162(m)
should be evaluated on a case-by-case basis.

Approval of Cash or Cash-and-Stock Bonus Plans


Vote for cash or  cash-and-stock  bonus  plans to exempt the  compensation  from
taxes under the provisions of Section 162(m) of OBRA.

Shareholder Proposals to Limit Executive and Director Pay


Generally,  vote for shareholder  proposals that seek  additional  disclosure of
executive and director pay information.

Review on a  case-by-case  basis all other  shareholder  proposals  that seek to
limit executive and director pay.

Golden and Tin Parachutes


Vote for shareholder  proposals to have golden and tin parachutes  submitted for
shareholder ratification.

Review on a  case-by-case  basis all proposals to ratify or cancel golden or tin
parachutes.

Employee Stock Ownership Plans (ESOPs)


Vote for proposals  that request  shareholder  approval in order to implement an
ESOP or to increase  authorized shares for existing ESOPs,  except in cases when
the  number of shares  allocated  to the ESOP is  "excessive"  (i.e.,  generally
greater than five percent of outstanding shares).

401(k) Employee Benefit Plans


Vote for proposals to implement a 401(k) savings plan for employees.

IX.      State of Incorporation

Voting on State Takeover Statutes


Review on a  case-by-case  basis  proposals  to opt in or out of state  takeover
statutes (including control share acquisition  statutes,  control share cash-out
statutes, freezeout provisions, fair price provisions,  stakeholder laws, poison
pill endorsements,  severance pay and labor contract  provisions,  antigreenmail
provisions, and disgorgement provisions).

Voting on Reincorporation Proposals


Proposals to change a company's state of  incorporation  should be examined on a
case-by-case basis.




X.       Mergers and Corporate Restructurings

Mergers and Acquisitions


Votes on mergers and acquisitions  should be considered on a case-by-case basis,
taking into account at least the following:  anticipated financial and operating
benefits;  offer price (cost vs. premium);  prospects of the combined companies;
how the deal was  negotiated;  and  changes in  corporate  governance  and their
impact on shareholder rights.

Corporate Restructuring


Votes on corporate  restructuring  proposals,  including  minority  squeezeouts,
leveraged buyouts, spinoffs,  liquidations, and asset sales should be considered
on a case-by-case basis.

Spinoffs


Votes on spinoffs should be considered on a case-by-case  basis depending on the
tax and regulatory advantages,  planned use of sale proceeds,  market focus, and
managerial incentives.

Asset Sales


Votes on asset sales should be made on a  case-by-case  basis after  considering
the impact on the balance sheet/working  capital,  value received for the asset,
and potential elimination of diseconomies.

Liquidations


Votes on  liquidations  should be made on a case-by-case  basis after  reviewing
management's  efforts to pursue other  alternatives,  appraisal value of assets,
and the compensation plan for executives managing the liquidation.

Appraisal Rights


Vote  for  proposals  to  restore,  or  provide  shareholders  with,  rights  of
appraisal.

Changing Corporate Name


Vote for changing the corporate name.

XI.      Mutual Fund Proxies

Election of Directors


Vote  the  election  of  directors  on a  case-by-case  basis,  considering  the
following factors:  board structure;  director  independence and qualifications;
and compensation of directors within the fund and the family of funds attendance
at board and committee meetings.

Votes should be withheld from directors who:

o    attend less than 75 percent of the board and committee  meetings  without a
     valid excuse for the absences. Valid reasons include illness or absence due
     to  company  business.   Participation  via  telephone  is  acceptable.  In
     addition,  if the director  missed only one meeting or one day's  meetings,
     votes should not be withheld  even if such absence  dropped the  director's
     attendance below 75 percent.

o    ignore a  shareholder  proposal  that is  approved  by a majority of shares
     outstanding

o    ignore a  shareholder  proposal that is approved by a majority of the votes
     cast for two consecutive years

o    are interested directors and sit on the audit or nominating committee

o    are  interested  directors  and the  full  board  serves  as the  audit  or
     nominating committee or the company does not have one of these committees.

Converting Closed-end Fund to Open-end Fund


Vote  conversion  proposals on a case-by-case  basis,  considering the following
factors:  past  performance  as a  closed-end  fund;  market  in which  the fund
invests;  measures  taken  by the  board  to  address  the  discount;  and  past
shareholder activism, board activity, and votes on related proposals.

Proxy Contests


Vote proxy contests on a case-by-case basis,  considering the following factors:
past performance;  market in which fund invests; and measures taken by the board
to address the Issues past shareholder  activism,  board activity,  and votes on
related proposals.

Investment Advisory Agreements


Vote the investment advisory agreements on a case-by-case basis, considering the
following factors:  proposed and current fee schedules; fund category/investment
objective;  performance  benchmarks;  share price  performance  as compared with
peers; and the magnitude of any fee increase.

Approving New Classes or Series of Shares


Vote for the establishment of new classes or series of shares.

Preferred Stock Proposals


Vote the  authorization  for or increase in preferred  shares on a  case-by-case
basis,  considering the following factors: stated specific financing purpose and
other reasons management gives possible dilution for common shares.

1940 Act Policies


Vote these proposals on a case-by-case basis, considering the following factors:
potential  competitiveness;   regulatory  developments;  current  and  potential
returns; and current and potential risk.


Changing a Fundamental Restriction to a Nonfundamental Restriction


Vote these proposals on a case-by-case basis, considering the following factors:
fund's target  investments;  reasons given by fund for change; and the projected
impact of change on portfolio.

Change Fundamental Investment Objective to Nonfundamental


Vote against proposals to change a fund's  fundamental  investment  objective to
nonfundamental.

Name Rule Proposals


Vote these proposals on a case-by-case basis, considering the following factors:
political/economic  changes in target market; bundling with quorum requirements;
bundling with asset allocation  changes;  and consolidation in the fund's target
market.



Disposition of Assets/Termination/Liquidation


Vote this proposal on a case-by-case  basis,  considering the following factors:
strategies  employed to salvage the company;  company's  past  performance;  and
terms of the liquidation.

Changes to the Charter Document


Vote changes to the charter  document on a case-by-case  basis,  considering the
following factors:  degree of change implied by the proposal;  efficiencies that
could result; state of incorporation; and regulatory standards and implications.

Changing the Domicile of a Fund


Vote  reincorporations  on  a  case-by-case  basis,  considering  the  following
factors: state regulations of both states; required fundamental policies of both
states; and the increased flexibility available.

Change in Fund's Subclassification


Vote these proposals on a case-by-case basis, considering the following factors:
potential competitiveness; current and potential returns; risk of concentration;
and consolidation in the target industry.

Authorizing  the Board to Hire and  Terminate  Subadvisors  Without  Shareholder
Approval


Vote against these proposals.

Distribution Agreements


Vote these proposals on a case-by-case basis, considering the following factors:
fees  charged to  comparably  sized  funds  with  similar  objectives;  proposed
distributor's  reputation and past performance;  and  competitiveness of fund in
industry.

Master-Feeder Structure


Vote for the establishment of a master-feeder structure.

Changes to the Charter Document


Vote changes to the charter  document on a case-by-case  basis,  considering the
following factors:  degree of change implied by the proposal;  efficiencies that
could result; state of incorporation; and regulatory standards and implications.

Mergers



Vote  merger  proposals  on a  case-by-case  basis,  considering  the  following
factors:  resulting fee structure;  performance of both funds; and continuity of
management personnel.

Shareholder Proposals


Establish Director Ownership Requirement


Vote against the establishment of a director ownership requirement.


Reimburse Shareholder for Expenses Incurred


Voting  to  reimburse  proxy  solicitation  expenses  should  be  analyzed  on a
case-by-case  basis.  In  cases  where  Evergreen  recommends  in  favor  of the
dissidents,   we  also  recommend  voting  for  reimbursing  proxy  solicitation
expenses.

Terminate the Investment Advisor


Vote to terminate the investment  advisor on a case-by-case  basis,  considering
the  following  factors:  performance  of the  fund's  NAV  and the  history  of
shareholder relations.


XII.     Social and Environmental Issues

Energy and Environment


In most  cases,  Evergreen  refrains  from  providing a vote  recommendation  on
proposals that request companies to file the CERES Principles.

Generally,  vote  for  disclosure  reports  that  seek  additional  information,
particularly   when  it  appears   companies  have  not   adequately   addressed
shareholders' environmental concerns.

South Africa


In most  cases,  Evergreen  refrains  from  providing a vote  recommendation  on
proposals pertaining to South Africa.

Generally,  vote for disclosure reports that seek additional information such as
the  amount of  business  that  could be lost by  conducting  business  in South
Africa.

Northern Ireland


In most  cases,  Evergreen  refrains  from  providing a vote  recommendation  on
proposals pertaining to the MacBride Principles.

Generally,  vote for disclosure  reports that seek additional  information about
progress being made toward eliminating employment  discrimination,  particularly
when it appears companies have not adequately addressed shareholder concerns.

Military Business


In most  cases,  Evergreen  refrains  from  providing a vote  recommendation  on
defense Issue proposals.

Generally,  vote for  disclosure  reports that seek  additional  information  on
military related operations, particularly when the company has been unresponsive
to shareholder requests.

Maquiladora Standards and International Operations Policies


In most  cases,  Evergreen  refrains  from  providing a vote  recommendation  on
proposals  relating to the  Maquiladora  Standards and  international  operating
policies.

Generally,  vote for disclosure  reports on these Issues,  particularly  when it
appears companies have not adequately addressed shareholder concerns.

World Debt Crisis


In most  cases,  Evergreen  refrains  from  providing a vote  recommendation  on
proposals dealing with third world debt.

Generally,  vote for disclosure  reports on these Issues,  particularly  when it
appears companies have not adequately addressed shareholder concerns.

Equal Employment Opportunity and Discrimination


In most  cases,  Evergreen  refrains  from  providing a vote  recommendation  on
proposals regarding equal employment opportunities and discrimination.

Generally,  vote for disclosure  reports that seek additional  information about
affirmative  action efforts,  particularly  when it appears  companies have been
unresponsive to shareholder requests.

Animal Rights


In most  cases,  Evergreen  refrains  from  providing a vote  recommendation  on
proposals that deal with animal rights.

Product Integrity and Marketing


In most  cases,  Evergreen  refrains  from  providing a vote  recommendation  on
proposals  that ask  companies to end their  production  of legal,  but socially
questionable, products.

Generally,   vote  for  disclosure  reports  that  seek  additional  information
regarding product  integrity and marketing Issues,  particularly when it appears
companies have been unresponsive to shareholder requests.

Human Resources issues


In most  cases,  Evergreen  refrains  from  providing a vote  recommendation  on
proposals regarding human resources Issues.

Generally,   vote  for  disclosure  reports  that  seek  additional  information
regarding human resources  Issues,  particularly  when it appears companies have
been unresponsive to shareholder requests.








                           PART C -- OTHER INFORMATION


ITEM 24.   FINANCIAL STATEMENTS AND EXHIBITS


     (1)  FINANCIAL  STATEMENTS - The following  financial  statements have been
          incorporated by reference into the Registration Statement as described
          on page 51 of the Statement of Additional Information:

          (i)  Statement of Assets and  Liabilities  as of March 15,  2004;  and


          (ii) Notes to Financial Statements March 15, 2004.




     Statements,  schedules and historical  information  other than these listed
above have been omitted since they are either not applicable, or not required or
the required information is shown in the financial statements or notes thereto.

(2)      EXHIBITS

     All references are to the Registrant's  Registration  Statement on Form N-2
as filed with the  Commission  on February 9, 2004,  Files Nos.  333-112631  and
811-21507 (the "Registration Statement").

                             

---------------------------- ------------------------------------------------------------------------

Exhibit No.                  Description of Exhibits
---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------

(a)(1)                       Amended and Restated Certificate of Trust of Evergreen Utilities and
                             High Income Fund dated February 9, 2004 is incorporated by reference
                             to the Registration Statement.
---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------

(a)(2)                       Amended and Restated Agreement and Declaration of Trust of Evergreen
                             Utilities and High Income Fund is incorporated by reference to the
                             Registration Statement.
---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------

(b)                          Amended and Restated By-Laws are incorporated by reference to the
                             Registration Statement.
---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------

(c)                          Not applicable.
---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(d)                          Form of Share Certificate is filed herein.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(e)                          Terms and Conditions of Automatic Dividend Reinvestment Plan are
                             incorporated by reference to Pre-Effective Amendment No. 1 to the
                             Registrant's Registration Statement ("Pre-Effective Amendment No. 1").

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------

(f)                          Not applicable.
---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(g)                          Form of Investment Advisory and Management Agreement between
                             Registrant and Evergreen Investment Management Company, LLC is
                             incorporated by reference to Pre-Effective Amendment No. 1.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(h)(1)                       Form of Underwriting Agreement is filed herein.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(h)(2)                       Form of Master Selected Dealer Agreement is filed herein.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(i)                          Deferred Compensation Plan is filed herein.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(j)                          Form of Custodian Agreement by and between Registrant and State Street
                             Bank and Trust Company is incorporated by reference to Pre-Effective
                             Amendment No. 1.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(k)(1)                       Form of Administrative Services Agreement between Registrant and
                             Evergreen Investment Services, Inc. is incorporated by reference to
                             Pre-Effective Amendment No. 1.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(k)(2)                       Form of Transfer Agency and Service Agreement is incorporated by
                             reference to Pre-Effective Amendment No. 1.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(l)(1)                     Opinion and consent of Sullivan & Worcester LLP.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(l)(2)                       Opinion and consent of Richards, Layton & Finger, P.A.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------

(m)                          Not applicable.
---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(n)                          Consent of KPMG LLP is filed herein.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------

(o)                          Not applicable.
---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(p)                          Initial Stock Purchase Agreement is filed herein.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------

(q)                          Not applicable.
---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(r)(1)                       Code of Ethics for Evergreen Utilities and High Income Fund is
                             incorporated by reference to Pre-Effective Amendment No. 1.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(r)(2)                       Code of Ethics for Evergreen Management Company, LLC is incorporated
                             by reference to Pre-Effective Amendment No. 1.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(s)                          Powers of Attorney are incorporated by reference to Pre-Effective
                             Amendment No. 1.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


---------------------------- ---------------------------------------------------


ITEM 25.   MARKETING ARRANGEMENTS




         See Exhibit (h) of Item 24(2) of this Registration Statement.


ITEM 26.   OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The  following  table sets forth the expenses to be incurred in  connection
with the issuance and distribution of securities  described in this Registration
Statement:

Registration fees                                                $31,675
National Association of Securities Dealers, Inc. fee             $30,500
American Stock Exchange listing fee                              $65,000
Printing (other than stock certificates)                         $50,000
Accounting fees and expenses                                     $10,000
Legal fees and expenses                                          $115,000
Underwriter expense reimbursement                                $62,500
Engraving and Printing Certificates                              $4,900
Miscellaneous                                                    $5,000
Marketing                                                        $125,425
Total                                                            $500,000

ITEM 27.   PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

                  None.



ITEM 28.   NUMBER OF HOLDERS OF SECURITIES (as of April 15, 2004)






TITLE OF CLASS                                         NUMBER OF RECORD HOLDERS
--------------                                          -------------
Common Shares                                                       1


ITEM 29.  INDEMNIFICATION

     Prior to its commencement of operations, Registrant will have obtained from
a major  insurance  carrier a trustees and officers  liability  policy  covering
certain types of errors and omissions.

     Provisions  for  the  indemnification  of  the  Registrant's  Trustees  and
officers are also contained in the Registrant's  Amended and Restated  Agreement
and Declaration of Trust.

     The Investment Advisory and Management Agreement between the Registrant and
Evergreen  Investment  Management  Company,  LLC  contains  provisions  for  the
indemnification of the Registrant's Advisor.


     The Underwriting Agreement contains provisions requiring indemnification of
the Registrant's underwriters by the Registrant.


     The  Administrative  Services  Agreement  between  Registrant and Evergreen
Investment  Services,  Inc.  contains  provisions  for  the  indemnification  of
Evergreen Investment Services, Inc., the Registrant's Administrator.

     The Transfer Agency and Service  Agreement with the  Registrant's  transfer
agent contains  provisions for the  indemnification  of EquiServe Trust Company,
N.A., the Registrant's transfer agent.

ITEM 30.   BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR

     The Directors and principal executive officers of Wachovia Bank, N.A. are:


















         G. Kennedy Thompson     Chairman, Wachovia Corporation and
                                 Wachovia Bank, N.A., Chief Executive
                                 Officer, President and Director, Wachovia
                                 Corporation and Wachovia Bank, N.A.

         Mark C. Treanor         Executive Vice President, Secretary &
                                 General Counsel, Wachovia Corporation;
                                 Secretary and Executive Vice President,
                                 Wachovia Bank, N.A.

         Robert T. Atwood        Executive Vice President and Chief Financial
                                 Officer, Wachovia Corporation; Chief
                                 Financial Officer and Executive Vice
                                 President, Wachovia Bank, N.A.


     All of the above  persons are located at the  following  address:  Wachovia
Bank, N.A., One Wachovia Center, Charlotte, NC 28288.

     The information  required by this item with respect to Evergreen Investment
Management  Company,  LLC is incorporated by reference to the Form ADV (File No.
801-8327) of Evergreen Investment Management Company, LLC.

ITEM 31.  LOCATION OF ACCOUNTS AND RECORDS

     All accounts and records  required to be maintained by Section 31(a) of the
Investment  Company Act of 1940 and the Rules 31a-1  through  31a-3  promulgated
thereunder are maintained at one of the following locations:

     Evergreen  Investment Services,  Inc. and Evergreen  Investment  Management
Company, LLC, all located at 200 Berkeley Street, Boston, Massachusetts 02116.

     Wachovia Bank, N.A., One Wachovia Center, 301 S. College Street, Charlotte,
North Carolina 28288.

     State  Street  Bank and Trust  Company,  2 Heritage  Drive,  North  Quincy,
Massachusetts 02171.

     EquiServe Trust Company,  N.A., 150 Royall Street,  Canton,  Massachusetts,
02021.

ITEM 32.   MANAGEMENT SERVICES

         Not applicable.

ITEM 33.   UNDERTAKINGS

(1) The  Registrant  undertakes  to suspend the  offering of its shares until it
amends  its  Prospectus  if:  (1)  subsequent  to the  effective  date  of  this
Registration  Statement,  the net asset value per share  declines  more than 10%
from its net asset value per share as of the effective date of the  Registration
Statement;  or (2) the net asset value  increases to an amount  greater than its
net proceeds as stated in the Prospectus.

(2) Not Applicable.

(3) Not Applicable.

(4) Not Applicable.

(5) Registrant hereby undertakes:

     (a) that for purposes of determining any liability under the Securities Act
of 1933, the  information  omitted from the form of prospectus  filed as part of
this  Registration  Statement in reliance upon Rule 430A and contained in a form
of  prospectus  filed  by the  Registrant  pursuant  to Rule  497(h)  under  the
Securities Act shall be deemed to be part of this  Registration  Statement as of
the time it was declared effective.

     (b) that for the purpose of determining  any liability under the Securities
Act of 1933,  each  post-effective  amendment that contains a form of prospectus
shall be deemed to be a new  registration  statement  relating to the securities
offered  therein,  and the  offering  of such  securities  at that time shall be
deemed to be the initial bona fide offering thereof.

     (6) The  Registrant  hereby  undertakes  to send by first  class mail or by
other means designed to ensure equally prompt delivery, within two business days
of  receipt  of  a  written  or  oral  request,   any  Statement  of  Additional
Information.







                                    SIGNATURES



     Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment  Company Act of 1940, as amended,  the Registrant has duly caused
this Pre-Effective Amendment No. 2 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Boston,
the Commonwealth of Massachusetts on the 19th day of April, 2004.


                                    EVERGREEN UTILITIES AND HIGH INCOME FUND


                                    By:  /s/ Dennis H. Ferro
                                         Dennis H. Ferro
                                         President


     Pursuant to the  requirements  of the  Securities  Act of 1933, as amended,
this Pre-Effective Amendment No. 2 to the Registration Statement has been signed
below by the following  persons in the  capacities  indicated on the 19th day of
April, 2004.


         /s/ Carol A. Kosel
         -----------------------------
         Carol A. Kosel
         Treasurer
          (Principal Financial and Accounting Officer)

                                                                  

         /s/ Charles A. Austin, III         /s/ K. Dun Gifford        /s/ William Walt Pettit
         ------------------------------     ------------------------  ----------------------------------
         Charles A. Austin III*             K. Dun Gifford*          William Walt Pettit*
         Trustee                            Trustee                  Trustee

         /s/ Gerald M. McDonnell                     /s/ Russell A. Salton, III MD
         -------------------------------             -----------------------------------
         Gerald M. McDonnell*                        Russell A. Salton, III MD*
         Trustee                                                            Trustee

         /s/ Michael S. Scofield    /s/ David M. Richardson       /s/ Richard K. Wagoner
         -------------------------  ---------------------------  -------------------------------
         Michael S. Scofield*       David M. Richardson*          Richard K. Wagoner*
         Chairman of the Board      Trustee                       Trustee
         and Trustee


          /s/ Leroy Keith, Jr.              /s/ Richard J. Shima


         ------------------------------     ------------------------------  ------------------------------

         Leroy Keith, Jr.*                  Richard J. Shima*              Shirley L. Fulton*
         Trustee                            Trustee                        Trustee






         *By: /s/ Catherine F. Kennedy
                  ------------------------------
                  Catherine F. Kennedy
                  Attorney-in-Fact

     *Catherine  F. Kennedy,  by signing her name hereto,  does hereby sign this
document on behalf of each of the above-named  individuals pursuant to powers of
attorney duly executed by such persons.








                             

                                  EXHIBIT INDEX

---------------------------- ------------------------------------------------------------------------

Exhibit No.                  Description of Exhibits
---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------



---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(d)                         Form of Share Certificate.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(h)(1)                      Form of Underwriting Agreement.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------



---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(h)(2)                      Form of Master Selected Dealer Agreement .

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(i)                        Deferred Compensation Plan.


---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(l)(1)                     Opinion and consent of Sullivan & Worcester LLP.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(l)(2)                       Opinion and consent of Richards, Layton & Finger, P.A.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(n)                          Consent of KPMG LLP.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------


(p)                          Initial Stock Purchase Agreement.

---------------------------- ------------------------------------------------------------------------
---------------------------- ------------------------------------------------------------------------