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<SEC-DOCUMENT>0000908737-03-000241.txt : 20030521
<SEC-HEADER>0000908737-03-000241.hdr.sgml : 20030521
<ACCEPTANCE-DATETIME>20030521163339
ACCESSION NUMBER:		0000908737-03-000241
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		16
FILED AS OF DATE:		20030521

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			EVERGREEN MANAGED INCOME FUND
		CENTRAL INDEX KEY:			0001227073
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-104569
		FILM NUMBER:		03714778

	MAIL ADDRESS:	
		STREET 1:		200 BERKELEY STREET
		CITY:			BOSTON
		STATE:			MA
		ZIP:			02116

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	EVERGREEN INCOME OPPORTUNITY FUND
		DATE OF NAME CHANGE:	20030415

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	EVERGREEN INCOME FUND
		DATE OF NAME CHANGE:	20030411

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			EVERGREEN MANAGED INCOME FUND
		CENTRAL INDEX KEY:			0001227073
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-21331
		FILM NUMBER:		03714779

	MAIL ADDRESS:	
		STREET 1:		200 BERKELEY STREET
		CITY:			BOSTON
		STATE:			MA
		ZIP:			02116

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	EVERGREEN INCOME OPPORTUNITY FUND
		DATE OF NAME CHANGE:	20030415

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	EVERGREEN INCOME FUND
		DATE OF NAME CHANGE:	20030411
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>filing.txt
<TEXT>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 2003
                                                         =======

                               SECURITIES ACT FILE NO. 333-104569
                                                           ======
                              INVESTMENT COMPANY ACT FILE NO. 811-21331
                                                                  =====

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

                 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. 1           [X]
                                                    =           =
                       POST-EFFECTIVE AMENDMENT NO. __         [ ]

                                   AND/OR
                        REGISTRATION STATEMENT UNDER

                     THE INVESTMENT COMPANY ACT OF 1940        [ ]
                                                               ==
                              AMENDMENT NO. 1                  [X]
                                             =                  =

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



                          EVERGREEN MANAGED 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                LEONARD B. MACKEY, JR.

                SULLIVAN & WORCESTER LLP             CLIFFORD CHANCE US LLP
                                                     ======================
                  1666 K STREET, N.W.                    200 PARK AVENUE
                 WASHINGTON, D.C. 20006             NEW YORK, NEW YORK 10166


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





                  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

=====================================================================
<TABLE>
<S>                                     <C>                     <C>                             <C>                     <C>


     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)

          .............                  2,000,000 shares               $20.00                   $40,000,000               $3,236(2)
                                                                         ======                    ===========                 =====


</TABLE>

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


     (2)  $2,427 of this  amount  was  previously  paid in  connection  with the
registration of 2,000,000  shares of the total amount of shares to be registered
at a maximum  offering price per share of $15.00 as filed on April 16, 2003. The
remainder,  which  represents the difference in the fee for the  registration of
2,000,000  shares of the total  shares to be  registered  at a proposed  maximum
offering price of $20.00 per share, 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.






<PAGE>



     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 it is not soliciting an offer to buy
     these securities in any state where the offer or sale is not permitted.


                                 Subject to Completion
                           Preliminary Prospectus dated May 21, 2003

PROSPECTUS                                              [Evergreen Logo]


                                     Shares

                         Evergreen Managed Income Fund

                                  Common Shares

                                $20.00 per share

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


          Investment Objective.  Evergreen Managed Income Fund (the "Fund") is a
     newly organized, diversified, closed-end management investment company. The
     Fund's  investment  objective  is to seek a high  level of  current  income
     consistent  with  limiting its overall  exposure to domestic  interest rate
     risk.

          Portfolio Contents. The Fund allocates its assets among three separate
     investment strategies.  Under normal market conditions,  the Fund allocates
     approximately  50% of its  total  assets  to an  investment  strategy  that
     focuses  primarily  on  below  investment  grade  (high  yield)  U.S.  debt
     securities,  loans and  preferred  stocks;  approximately  25% of its total
     assets to an  investment  strategy  that focuses  primarily on foreign debt
     securities  including  obligations of foreign  governments or  governmental
     entities,  foreign  corporations or supranational  agencies  denominated in
     various  currencies;  and  approximately  25% of  its  total  assets  to an
     investment strategy that focuses primarily on securities that have interest
     rates  that  re-set  at  periodic   intervals   including   mortgage-backed
     securities, asset-backed securities and collateralized mortgage obligations
     ("CMOs")  issued or  guaranteed  by the U.S.  government,  its  agencies or
     instrumentalities.

          The Fund's  investment  adviser  reserves  the  discretion  based upon
     market  conditions to reallocate  these weightings in order for the Fund to
     seek to maintain a yield that  exceeds the  then-current  yield of ten-year
     Treasury  notes  and also for the  Fund as a whole  to seek to  maintain  a
     weighted  average  credit  quality of  investment  grade  (based on current
     market  conditions,  the  anticipated  average credit quality of the Fund's
     portfolio  on the date the Fund first  becomes  fully  invested  will be at
     least  BBB).  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 Ba or lower by Moody's Investors Service,  Inc.  ("Moody's") or BB or
     lower  by  Standard  &  Poor's  Ratings  Services  ("S&P")  or are  unrated
     securities  of comparable  quality as  determined by the Fund's  investment
     adviser.  Below  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.  The foreign debt securities portion of the Fund's portfolio is
     expected  to be  invested  in at least  three  countries  or  supranational
     agencies.  The weighted  average credit quality of this portion of the Fund
     will be  investment  grade.  Up to 30% of the  Fund's  total  assets may be
     allocated to the foreign debt securities  portion of the Fund's  portfolio.
     The adjustable rate securities  portion of the Fund's portfolio is expected
     to be typically  invested in  adjustable  rate  mortgage-backed  securities
     issued  or  guaranteed  by the  Government  National  Mortgage  Association
     ("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal
     Home Loan Mortgage  Corporation  ("FHLMC").  Securities issued by GNMA, but
     not those issued by FNMA or FHLMC,  are backed by the full faith and credit
     of the U.S. government. The weighted average credit quality of this portion
     of the Fund's portfolio is expected to be AAA/Aaa.


          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 36 of this
     prospectus.


                                                  --------------
<TABLE>
<CAPTION>
                                                                                 Per Share        Total
                                                                                   -----           ---

     <S>                                                                          <C>             <C>

     Public offering price...................................................     $20.00          $
                                                                                    =====
     Sales load..............................................................       $ .90         $
                                                                                      ===
     Estimated offering expenses(1)..........................................       $ .04         $
                                                                                      ===
     Proceeds to the Fund....................................................     $ 19.06         $
                                                                                    =====

</TABLE>

(1) The  aggregate  expenses of the offering are estimated to be $ . 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
$.04 per common share.


     The underwriters may also purchase up to an additional    common shares
     at the public offering price, less the sales load, within 45 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         , 2003.



                                      ----------


      Merrill Lynch & Co.                               Wachovia Securities
      A.G. Edwards & Sons, Inc.   Prudential Securities    UBS Warburg
                                  ---------------------
      Advest, Inc.        Janney Montgomery Scott LLC  McDonald Investments Inc.
      Quick & Reilly, Inc.                           Stifel, Nicolaus & Company
                                                          Incorporated
                                      ----------


                       The date of this prospectus is    , 2003.








<PAGE>





(continued from previous page)





     No Prior 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  intends  to apply for  listing on the  American  Stock
     Exchange under the symbol " ERC."
          Investment Adviser.  Evergreen Investment Management Company, LLC (the
     "Advisor") is the Fund's investment adviser. First International  Advisors,
     LLC, d/b/a Evergreen  International  Advisors (the  "Sub-Advisor"),  is the
     investment  sub-adviser  with  respect to the portion of the Fund's  assets
     that are invested in foreign debt securities. See "Management of the Fund."
         Leverage.  The Fund  initially  intends to issue  preferred  shares of
     beneficial  interest  representing  approximately  33  1/3%  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 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.
          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 , 2003 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 59 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.



<PAGE>

<TABLE>
<CAPTION>


                                                 TABLE OF CONTENTS

                                                                                                               Page
                                                                                                               ----

<S>                                                                                                            <C>

Prospectus Summary........................................................................................     5

Summary of Fund Expenses..................................................................................    22

The Fund..................................................................................................    23

Use of Proceeds...........................................................................................    23

Investment Objective and Principal Investment Strategies..................................................    24

Leverage..................................................................................................    33

Risk Factors..............................................................................................    36

Management of the Fund....................................................................................    43

Dividends and Distributions...............................................................................    45

Automatic Dividend Reinvestment Plan......................................................................   46
                                                                                                              =
Closed-End Fund Structure.................................................................................   48
                                                                                                              =
U.S. Federal Income Tax Matters...........................................................................   49
                                                                                                              =
Net Asset Value...........................................................................................   51
                                                                                                              =
Description of Shares.....................................................................................   52
                                                                                                              =
Certain Provisions of the Agreement and Declaration of Trust and By-laws..................................    53
Underwriting..............................................................................................   56
                                                                                                              =
Custodian, Transfer Agent, Dividend Disbursing Agent and Registrar........................................   58
                                                                                                              =
Validity of Common Shares.................................................................................   58
                                                                                                              =
Table of Contents for Statement of Additional Information.................................................   59


</TABLE>

          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 the Fund's business, financial condition and prospects
     may have changed since that date.


          Until , 2003 (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.




<PAGE>


                                     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."
<TABLE>
<CAPTION>



<S>                                      <C>

The Fund..............................   Evergreen Managed Income Fund (the "Fund") is a newly organized,
                                         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 Merrill Lynch,
                                         Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Wachovia
                                         Securities, Inc. ("Wachovia Securities"), A.G. Edwards & Sons, Inc. ("A.G. Edwards"),
                                         Prudential Securities Incorporated ("Prudential Securities") and UBS Warburg LLC
                                         ("UBS Warburg"). 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 45 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 $.04 per common share.


                                         See "Underwriting."
Investment Objective..................   The Fund's investment objective is to seek a high level of current

                                         income consistent with limiting its overall exposure to domestic
                                         interest rate risk. There can be no assurance that the Fund will achieve
                                         its investment objective.
Investment Policies...................   The Fund allocates its assets among three separate investment
                                         strategies. Under normal market conditions, the Fund allocates
                                         approximately 50% of its total assets to an investment strategy that
                                         focuses primarily on below investment grade (high yield) U.S. debt
                                         securities, loans and preferred stocks; approximately 25% of its total
                                         assets to an investment strategy that focuses primarily on foreign debt
                                         securities including obligations of foreign governments or governmental
                                         entities, foreign corporations or supranational agencies denominated in
                                         various currencies; and approximately 25% of its total assets to an
                                         investment strategy that focuses primarily on securities that have
                                         interest rates that re-set at periodic intervals including
                                         mortgage-backed securities, asset-backed securities and collateralized
                                         mortgage obligations ("CMOs") issued or guaranteed by the U.S.
                                         government, its agencies or instrumentalities.  The Advisor reserves
                                         the discretion based upon market conditions to reallocate these
                                         weightings in order for the Fund to seek to maintain a yield that
                                         exceeds the then-current yield of ten-year Treasury notes and also for
                                         the Fund as a whole to seek to maintain a weighted average credit
                                         quality of investment grade  (based on current market conditions, the anticipated
                                         average credit quality of the Fund's portfolio on the date the Fund first becomes
                                         fully invested will be at least BBB). Based upon current market conditions, the
                                         weighted average duration of the Fund's portfolio as a whole will be 3.5 years to
                                         4.5 years at the commencement of the Fund's operations.  Based upon current market
                                         conditions, it is expected that the Fund's portfolio as a whole will
                                         have an average maturity of 5 to 7 years.

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

                                         o U.S. High Yield Debt Securities.  Under normal market conditions, the
                                         Fund expects to invest approximately 50% of its total assets in an
                                         investment strategy that focuses on below investment grade (high yield)
                                         U.S. debt securities, loans and preferred stocks. Under normal market
                                         conditions, at least 80% of this portion of the Fund's portfolio will be
                                         invested in high yield U.S. debt securities, loans and preferred stocks.

                                         The high yield securities in which the Fund invests are rated Ba or
                                         lower by Moody's or BB or lower by S&P or are unrated but determined by
                                         the Advisor to be of comparable quality. 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. Below 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. This portion of the
                                         Fund's portfolio targets securities with a minimum rating of single B 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. The
                                         Advisor anticipates that no more than 10% of this portion of the Fund's
                                         assets will be comprised of securities that are rated CCC or lower. 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 33 1/3% 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 4.50 to 4.70 years, although there is
                                         no guarantee that this range will be obtained.

                                         o Foreign Debt Securities.  Under normal market conditions, the Fund
                                         expects to invest approximately 25% of its total assets in an investment
                                         strategy that focuses on foreign debt securities including obligations
                                         of foreign governments or governmental entities, foreign corporations
                                         or supranational agencies denominated in various currencies.  This
                                         portion of the Fund is expected to invest in at least three countries
                                         or supranational agencies.  This portion of the Fund will not invest in
                                         foreign debt securities issued by governments or governmental agencies
                                         of emerging market countries and will not invest in debt securities issued by
                                         corporations that are domiciled in emerging market countries.  The Advisor considers
                                         emerging market countries to be countries that issue long-term sovereign debt in their
                                         local currency that is rated as below investment grade.  Up to 10% of the debt securities
                                         in which this portion of the Fund invests may be below investment grade (i.e.,
                                         high yield). The weighted average credit quality of this portion of
                                         the Fund is expected to be investment grade.  This portion of the Fund
                                         may also enter into foreign currency exchange contracts to, for example,
                                         gain exposure to foreign markets in which this portion of the Fund's
                                         portfolio is underweighted.  The Fund typically uses currency hedging
                                         for risk control.  The Advisor anticipates that, assuming the issuance
                                         of preferred shares representing approximately 331/3% of the Fund's
                                         capital immediately after their issuance, the weighted average duration
                                         of the Fund's foreign debt securities will be 3.50 to 10 years, although
                                         there is no guarantee that this range will be obtained.  The Fund
                                         currently expects this portion of the Fund's portfolio to maintain a
                                         dollar-weighted average maturity of 5 to 14 years. Up to 30% of the
                                         Fund's total assets may be allocated to the foreign debt securities
                                         portion of the Fund's portfolio.

                                         o Adjustable Rate Securities.  Under normal market conditions, the Fund
                                         expects to invest approximately 25% of its total assets in an
                                         investment strategy that focuses on securities that have interest rates
                                         that re-set at periodic intervals including mortgage-backed securities,
                                         asset-backed securities and CMOs issued or guaranteed by the U.S.
                                         government, its agencies or instrumentalities.  The weighted average
                                         credit quality of this portion of the Fund's assets is expected to be
                                         AAA/Aaa.  This portion of the Fund typically will invest in adjustable
                                         rate mortgage-backed securities issued or guaranteed by the Government
                                         National Mortgage Association ("GNMA"), the Federal National Mortgage
                                         Association ("FNMA") or the Federal Home Loan Mortgage Corporation
                                         ("FHLMC").  Securities issued by GNMA, but not those issued by FNMA or
                                         FHLMC, are backed by the full faith and credit of the U.S. government.
                                         The Fund may also invest up to    20% of this portion of the Fund's
                                         assets in obligations of the U.S. government, its agencies or
                                         instrumentalities, such as the Federal Home Loan Banks, FNMA, GNMA,
                                         FHLMC or the Federal Farm Credit Banks, including obligations that pay
                                         fixed or adjustable interest rates. As part of this investment strategy,
                                         the Fund may engage in dollar roll transactions, which allow the Fund to
                                         sell a mortgage-backed security to a dealer and simultaneously contract
                                         to repurchase a security that is substantially similar in type, coupon
                                         and maturity, on a specified future date. The Fund currently expects
                                         this portion of the Fund's portfolio to maintain a weighted average life
                                         of 1 to 6 years and a weighted average duration of 0.5 to 1.5 years.

                                         Mortgage-Backed Securities.  The adjustable rate securities portion of
                                         the Fund may invest in mortgage pass-through certificates and
                                         multiple-class pass-through securities, and mortgage derivative
                                         securities such as real estate mortgage investment conduits ("REMIC")
                                         pass-through certificates, collateralized mortgage obligations ("CMOs")
                                         and stripped mortgage-backed securities ("SMBS"), interest only
                                         mortgage-backed securities and principal only mortgage-backed securities
                                         and other types of mortgage-backed securities that may be available in
                                         the future. A mortgage-backed security is an obligation of the issuer
                                         backed by a mortgage or pool of mortgages or a direct interest in an
                                         underlying pool of mortgages. Some mortgage-backed securities, such as
                                         CMOs, are adjustable rate and make payments of both principal and
                                         interest at a variety of intervals; others are fixed rate and make
                                         semiannual interest payments at a predetermined rate and repay principal
                                         at maturity (like a typical bond). Mortgage-backed securities are based
                                         on different types of mortgages including those on commercial real
                                         estate or residential properties. Mortgage-backed securities often have
                                         stated maturities of up to thirty years when they are issued, depending
                                         upon the length of the mortgages underlying the securities. In practice,
                                         however, unscheduled or early payments of principal and interest on the
                                         underlying mortgages may make the securities' effective maturity shorter
                                         than this, and the prevailing interest rates may be higher or lower than
                                         the current yield of the Fund's portfolio at the time the Fund receives
                                         the payments for reinvestment. Mortgage-backed securities may have less
                                         potential for capital appreciation than comparable fixed income
                                         securities, due to the likelihood of increased prepayments of mortgages
                                         as interest rates decline. If the Fund buys mortgage-backed securities
                                         at a premium, mortgage foreclosures and prepayments of principal by
                                         mortgagors (which may be made at any time without penalty) may result in
                                         some loss of the Fund's principal investment to the extent of the
                                         premium paid. The value of mortgage-backed securities may also change
                                         due to shifts in the market's perception of issuers. In addition,
                                         regulatory or tax changes may adversely affect the mortgage securities
                                         markets as a whole. Non-governmental mortgage-backed securities may
                                         offer higher yields than those issued by government entities but also
                                         may be subject to greater price changes than governmental issues.


                                         Asset-Backed Securities.  Asset-backed securities are securities that
                                         represent a participation in, or are secured by and payable from, a
                                         stream of payments generated by particular assets, most often a pool or
                                         pools of similar assets (e.g., trade receivables). The credit quality of
                                         these securities depends primarily upon the quality of the underlying
                                         assets and the level of credit support and/or enhancement provided.

                                         The underlying assets (e.g., loans) are subject to prepayments which
                                         shorten the securities' weighted average maturity and may lower their
                                         return. If the credit support or enhancement is exhausted, losses or
                                         delays in payment may result if the required payments of principal and
                                         interest are not made. The value of these securities also may change
                                         because of changes in the market's perception of the creditworthiness of
                                         the servicing agent for the pool, the originator of the pool, or the
                                         financial institution or Fund providing the credit support or
                                         enhancement.

                                         Dollar Roll Transactions.  In dollar roll transactions, the Fund sells a
                                         U.S. agency mortgage-backed security and simultaneously agrees to
                                         purchase at a future date another U.S. agency mortgage-backed security
                                         with the same interest rate and maturity date, but generally backed by a
                                         different pool of mortgages. The Fund loses the right to receive
                                         interest and principal payments on the security it sold. However, the
                                         Fund benefits from the interest earned on investing the proceeds of the
                                         sale and may receive a fee or lower purchase price. The benefits from
                                         these transactions depend upon the Advisor's ability to forecast
                                         mortgage prepayment patterns on different mortgage pools. The Fund may
                                         lose money if, during the period between the time it agrees to the
                                         forward purchase of the mortgage securities and the settlement date,
                                         these securities decline in value due to market conditions or
                                         prepayments on the underlying mortgages.

                                         The Fund's Advisor determines the appropriate weightings of each
                                         investment strategy and adjusts it periodically.  In making adjustments
                                         to the weightings of each strategy, the Advisor uses its analysis of the
                                         expected returns for each investment strategy and factors in the stock,
                                         bond and money markets, interest rate and corporate earnings growth
                                         trends, and economic conditions.

                                         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 investment techniques as described below (some of which
                                         may be a principal investment strategy for a portion of the Fund as
                                         described above).

                                         Convertible Securities.  The Fund's investments in fixed income
                                         securities may include bonds and preferred stocks that are convertible
                                         into the equity securities of the issuer. The Fund will not invest more
                                         than 10% of its total assets in convertible instruments. 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.

                                         Corporate Loans.  The Fund may invest a portion of its total assets in
                                         loan participations and other claims against a corporate borrower. 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.

                                         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.

                                         Real Estate Investment Trusts (REITs).  REITs are companies that invest
                                         primarily in real estate or real estate related loans. Interests in
                                         REITs are significantly affected by the market for real estate and are
                                         dependent upon management's skills and on cash flows.

                                         Derivatives.  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. 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 3% of the Fund's total assets will be committed
                                         to initial margin for derivatives for such purposes. 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.
                                         Due to current market conditions, investments that, in the judgment of
                                         the Advisor or the Sub-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.

Use of Leverage

By the Fund...........................   The Fund initially intends to issue preferred shares of beneficial
                                         interest representing approximately 33 1/3% 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, 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.

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

                                         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, which would adversely affect the Fund's net asset value and
                                         ability to make distributions. 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.

                                         High Yield Debt Securities.  Investment in high yield securities
                                         involves substantial risk of loss. Below 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 lead to a
                                         weakened capacity of a high yield issuer to make principal payments 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; and

                                         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 asked price is generally much larger than for higher
                                         quality 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.

                                         Interest rate risk.  If interest rates go up, the value of debt
                                         securities in the Fund's portfolio generally will decline. Because
                                         market interest rates are currently near their lowest levels in many
                                         years, there is a greater risk that the Fund's portfolio will decline in
                                         value.  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 this investment objective.

                                         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.
                                         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.

                                         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 and the
                                         Sub-Advisor's judgment about the attractiveness, relative value or
                                         potential appreciation of a particular sector, security or investment
                                         strategy may prove to be incorrect.

                                         Mortgage- and Asset-Backed Securities and Structured Securities. Like
                                         other debt securities, changes in interest rates generally affect the
                                         value of mortgage-backed securities and other asset-backed securities.
                                         Additionally, some mortgage-backed securities may be structured so that
                                         they may be particularly sensitive to interest rates.  Asset-backed and
                                         mortgage-backed securities are generally subject to higher prepayment
                                         risks than most other types of debt instruments.  Prepayment of
                                         mortgages may expose the Fund to a lower rate of return when it
                                         reinvests the principal.  Prepayment risks in mortgage-backed
                                         securities tend to increase during periods of declining interest rates
                                         because many borrowers refinance their mortgages to take advantage of
                                         the more favorable rates.


                                         The Fund may invest in mortgage derivatives and structured securities.
                                         Because these securities have imbedded leverage features, small changes
                                         in interest or prepayment rates may cause large and sudden price
                                         movements. Mortgage derivatives can also become illiquid and hard to
                                         value in declining markets.


                                         Foreign Securities.  Investments in non-U.S. issuers may involve unique
                                         risks compared to investing in securities of U.S. issuers. These risks
                                         are more pronounced to the extent that the Fund invests a significant
                                         portion of its non-U.S. investments in one region. These risks may
                                         include:

                                         o    Less information about non-U.S. issuers or markets may be
                                         available due to less rigorous disclosure or accounting standards or
                                         regulatory practices;
                                         o    Many non-U.S. markets are smaller, less liquid and more volatile.
                                         In a changing market, the Advisor or Sub-Advisor may not be able to sell
                                         the Fund's portfolio securities at times, in amounts and at prices it
                                         considers reasonable;
                                         o    Adverse effect of currency exchange rates or controls on the value
                                         of the Fund's investments ;
                                         o    The economies of non-U.S. countries may grow at slower rates than
                                         expected or may experience a downturn or recession;
                                         o    Economic, political and social developments may adversely affect
                                         the securities markets; and
                                         o    Withholding and other non-U.S. taxes may decrease the Fund's
                                         return.

                                         There may be less publicly available information about non-U.S. markets
                                         and issuers than is available with respect to U.S. securities and
                                         issuers. Non-U.S. companies generally are not subject to accounting,
                                         auditing and financial reporting standards, practices and requirements
                                         comparable to those applicable to U.S. companies. The trading markets
                                         for most non-U.S. securities are generally less liquid and subject to
                                         greater price volatility than the markets for comparable securities in
                                         the U.S. Even the markets for relatively widely -traded securities in
                                         certain non-U.S. markets may not be able to absorb, without price
                                         disruptions, a significant increase in trading volume or trades of a
                                         size customarily undertaken by institutional investors in the U.S.
                                         Additionally, market making and arbitrage activities are generally less
                                         extensive in such markets, which may contribute to increased volatility
                                         and reduced liquidity.

                                         Economies and social and political climate in individual countries may
                                         differ unfavorably from the U.S. Non-U.S. economies may have less
                                         favorable rates of growth of gross domestic product, rates of inflation,
                                         currency valuation, capital reinvestment, resource self-sufficiency and
                                         balance of payments positions. Many countries have experienced
                                         substantial, and in some cases extremely high, rates of inflation for
                                         many years. Unanticipated political or social developments may also
                                         affect the values of the Fund's investments and the availability to the
                                         Fund of additional investments in such countries.


                                         Foreign Currency Risks.  The value of the securities denominated or
                                         quoted in foreign currencies may be adversely affected by fluctuations
                                         in the relative currency exchange rates and by exchange control
                                         regulations. The Fund's investment performance may be negatively
                                         affected by a devaluation of a currency in which the Fund's investments
                                         are denominated or quoted. Further, the Fund's investment performance
                                         may be significantly affected, either positively or negatively, by
                                         currency exchange rates because the U.S. dollar value of securities
                                         denominated or quoted in another currency will increase or decrease in
                                         response to changes in the value of such currency in relation to the
                                         U.S. dollar.


                                         Sovereign Debt.  An investment in debt obligations of non-U.S.
                                         governments and their political subdivisions (sovereign debt), whether
                                         denominated in U.S. dollars or a foreign currency, involves special
                                         risks that are not present in corporate debt obligations. The non-U.S.
                                         issuer of the sovereign debt or the non-U.S. governmental authorities
                                         that control the repayment of the debt may be unable or unwilling to
                                         repay principal or interest when due, and the Fund may have limited
                                         recourse in the event of a default. During periods of economic
                                         uncertainty, the market prices of sovereign debt may be more volatile
                                         than prices of debt obligations of U.S. issuers. In the past, certain
                                         non-U.S. countries have encountered difficulties in servicing their debt
                                         obligations, withheld payments of principal and interest and declared
                                         moratoria on the payment of principal and interest on their sovereign
                                         debt.


                                         A sovereign debtor's willingness or ability to repay principal and pay
                                         interest in a timely manner may be affected by, among other factors, its
                                         cash flow situation, the extent of its foreign currency reserves, the
                                         availability of sufficient foreign exchange, the relative size of the
                                         debt service burden, the sovereign debtor's policy toward its principal
                                         international lenders and local political constraints. Sovereign debtors
                                         may also be dependent on expected disbursements from non-U.S.
                                         governments, multilateral agencies and other entities to reduce
                                         principal and interest arrearages on their debt. The failure of a
                                         sovereign debtor to implement economic reforms, achieve specified levels
                                         of economic performance or repay principal or interest when due may
                                         result in the cancellation of third-party commitments to lend funds to
                                         the sovereign debtor, which may further impair such debtor's ability or
                                         willingness to service its debts.


                                         Convertible Securities.  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.  The Fund may acquire interests in loans made by banks
                                         or other financial institutions to corporate issuers or participation
                                         interests in such loans. 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.

                                         Dollar Roll Transactions. If the broker-dealer to whom the Fund sells
                                         the security becomes insolvent, the Fund's right to purchase the
                                         security may be restricted; the value of the security may change
                                         adversely over the term of the dollar roll; the security that the Fund
                                         is required to purchase may be worth less than the security that the
                                         Fund originally held; and the return earned by the Fund with the
                                         proceeds of a dollar roll may not exceed transaction costs.

                                         Derivatives.  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.  The Fund initially intends to issue preferred shares
                                         of beneficial interest representing approximately 33 1/3% of the Fund's
                                         capital after their issuance. 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. 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 Risk.  The terrorist attacks in the U.S. on September
                                         11, 2001 had a disruptive effect on the securities markets. The war in
                                         Iraq also has resulted in recent market volatility and may have
                                         long-term effects on the U.S. and worldwide financial markets and may
                                         cause further economic uncertainties in the U.S. and worldwide.  The
                                         Fund does not know how long the securities markets will continue to be
                                         affected by these events and cannot predict the effects of the war or
                                         similar events in the future on the U.S. economy and securities
                                         markets.

                                         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.

                                         Tax Risk.  The Bush Administration has announced a proposal to eliminate
                                         the federal income tax on dividends of income previously taxed at the
                                         corporate level. In addition, several alternative proposals regarding
                                         the taxation of dividends and capital gains are being considered by
                                         Congress. The availability of tax-free dividends may reduce the value
                                         of, and thus the return on, certain securities which are part of the
                                         Fund's investment portfolio.  Moreover, these proposals may be given
                                         retroactive effect. This change could reduce the Fund's net asset value
                                         and distributions made by the Fund.

                                         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.

                                         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 or Sub-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.  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.

Investment Advisor

And Investment Sub-Advisor...........    Evergreen Investment Management Company, LLC (previously defined as the Advisor)
                                         and First International Advisors, LLC, d/b/a Evergreen International Advisors
                                         (the "Sub-Advisor"), subject to the supervision of the Advisor, with respect
                                         to the foreign debt securities portion of the Fund's portfolio, are responsible on a
                                         day-to-day basis for investment of the Fund's portfolio in accordance
                                         with its investment objective and policies. With respect to the U.S.
                                         high yield debt securities and adjustable rate securities portions of
                                         the Fund's portfolio, the Advisor makes all investment decisions for the
                                         Fund and places purchase and sale orders. 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 Customized Fixed Income teams, respectively. The Advisor has
                                         delegated these responsibilities to the Sub-Advisor with respect to the
                                         foreign debt securities portion of the Fund's portfolio.

                                         The Advisor has been managing mutual funds and private accounts since
                                         1932 and, as of March 31, 2003, managed over $229 billion in assets,
                                         including more than $93 billion in fixed income assets.
                                         As of March 31, 2003, the Sub-Advisor, which is the Advisor's
                                         London-based international bond team, managed approximately $8 billion
                                         in assets, which includes one of the Evergreen Funds, and has over 30
                                         years of experience investing in international fixed income
                                         securities.  The Advisor and the Sub-Advisor are wholly-owned
                                         subsidiaries of Wachovia Corporation.

                                         The Fund pays the Advisor an annual fee for its investment advisory
                                         services equal to 0.55% 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).
                                         The Advisor pays an annual fee to the Sub-Advisor for its investment
                                         sub-advisory services equal to 0.05% of the Fund's average daily Total
                                         Assets.



Listing...............................   Currently, there is no public market for the Fund's common shares. The
                                         Fund intends to apply for listing on the American Stock Exchange under
                                         "ticker" symbol       ERC.

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 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.

                                         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.

</TABLE>

<PAGE>



                                             SUMMARY OF FUND EXPENSES

          The  following  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 33
     1/3% 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.)

<TABLE>
<CAPTION>

Shareholder Transaction Expenses:


     <S>                                                                                <C>

     Sales Load (as a percentage of offering price).................................     4.50%

     Dividend Reinvestment Plan Fees................................................     None(1)

</TABLE>

<TABLE>
<CAPTION>

                                                                            Percentage of net assets
                                                                               attributable to common
                                                                           shares (assuming the issuance
                                                                            of Fund preferred shares)(2)

                                                                             ---------------------------
<S>                                                                                  <C>

Annual Expenses:

     Management Fee.................................................................  0.82%
                                                                                      ====
     Other Expenses.................................................................  0.40%(3)
                                                                                      ====

                                                                                        -----

     Total Annual Expenses..........................................................  1.22%(4)
                                                                                      ====

                                                                                        -----
</TABLE>


     --------------------------------------------------------------------------
     (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:


<TABLE>
<CAPTION>

                                                                              Percentage of net assets
                                                                               attributable to common
                                                                                shares (assuming no
                                                                               Fund preferred shares
                                                                             are issued or outstanding)
                                                                              ------------------------

    <S>                                                                                 <C>

     Annual Expenses:

         Management Fee.............................................................    0.55%
                                                                                        ====
         Other Expenses.............................................................    0.22%
                                                                                        ====

                                                                                        -----

         Total Annual Expenses...................................................... 0.77%(4)
                                                                                        ====

                                                                                        -----
</TABLE>


     (3) If the Fund offers preferred shares,  costs of the offering,  estimated
     to be approximately  1.13% 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 33 1/3% of the  Fund's  capital  (after  issuance),  those
     offering  costs are  estimated to be no more than  approximately  $0.11 per
     common  share  (0.56%  of the  offering  price  or  $1,690,000  based  on a
     $300,000,000  offering).  These  offering  costs are not included among the
     expenses shown in the table.

     (4) The Fund will bear  expenses  in  connection  with the  offering  in an
     amount up to $.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 $.04 per common share
     (.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.

          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  15,000,000  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  33 1/3% of the Fund's capital (after their
     issuance) of $5.63) in years one through ten, assuming (1) total net annual
     expenses of 1.22% of net assets attributable to common shares (assuming the
     issuance of preferred shares) and (2) a 5% annual return:*



<TABLE>
<CAPTION>



                                                      1 Year        3 Years        5 Years      10 Years
                                                      -------       -------        -------       -------

<S>                                                     <C>            <C>           <C>            <C>

     Total Expenses Incurred.....................       $65            $90           $117           $194
                                                         ==             ==            ===            ===


</TABLE>



     ---------------------------------------------------------------------------
     * 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,  diversified,  closed-end  management
     investment  company.  The Fund was organized as a statutory trust under the
     laws of the state of Delaware on April 10, 2003, 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  over-allotment
     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 $.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 or the  Sub-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 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  consistent with limiting its overall exposure to domestic  interest
     rate risk. 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 allocates approximately 50% of its
total  assets  to  an  investment  strategy  that  focuses  primarily  on  below
investment grade (high yield) U.S. debt securities,  loans and preferred stocks;
approximately  25% of its total assets to an  investment  strategy  that focuses
primarily  on  foreign  debt   securities   including   obligations  of  foreign
governments or governmental  entities,  foreign  corporations  or  supranational
agencies  denominated in various currencies;  and approximately 25% of its total
assets to an investment  strategy that focuses primarily on securities that have
interest  rates that re-set at  periodic  intervals,  including  mortgage-backed
securities,  asset-backed  securities and  collateralized  mortgage  obligations
("CMOs")  issued  or  guaranteed  by  the  U.S.  government,   its  agencies  or
instrumentalities.  This is a  non-fundamental  policy and may be changed by the
Board of Trustees of the Fund  provided that  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 these weightings in order for the Fund to seek to maintain a yield
that exceeds the then-current  yield of ten-year Treasury notes and also for the
Fund as a whole  to seek to  maintain  a  weighted  average  credit  quality  of
investment grade (based on current market  conditions,  the anticipated  average
credit quality of the Fund's  portfolio on the date the Fund first becomes fully
invested  will be at least  BBB).  Based upon  current  market  conditions,  the
weighted  average  duration of the Fund's portfolio as a whole is expected to be
3.5 years to 4.5 years at the commencement of the Fund's operations.  Based upon
current market  conditions,  it is expected that the Fund's portfolio as a whole
will have an average maturity of 5 to 7 years.

          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 three separate  investment
     strategies:


          o U.S. High Yield Debt Securities. Under normal market conditions, the
     Fund  invests  approximately  50%  of its  total  assets  in an  investment
     strategy  that focuses on below  investment  grade (high  yield) U.S.  debt
     securities,  loans and preferred stocks. Under normal market conditions, at
     least 80% of this portion of the Fund's  portfolio will be invested in high
     yield U.S. debt securities, loans and preferred stocks.

          The high yield  securities  in which the Fund  invests are rated Ba or
     lower by Moody's or BB or lower by S&P or are unrated but determined by the
     Advisor to be of comparable quality. 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.  Below 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,  zero coupon,  contingent,
     deferred,  payment in kind and auction rate  features.  This portion of the
     Fund's  portfolio  targets  securities with a minimum rating of single B 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. The Advisor
     anticipates that no more than 10% of this portion of the Fund's assets will
     be comprised of securities that are rated CCC or lower. 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  33  1/3%  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 4.50 to 4.70 years,  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.

          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.

     o Foreign Debt Securities. Under normal market conditions, the Fund invests
     approximately  25% of its  total  assets  in an  investment  strategy  that
     focuses  on  foreign  debt  securities  including  obligations  of  foreign
     governments or governmental entities, foreign corporations or supranational
     agencies  denominated in various currencies.  This portion of the Fund will
     invest in at least three countries or supranational  agencies. This portion
     of  the  Fund  will  not  invest  in  foreign  debt  securities  issued  by
     governments or governmental  agencies of emerging market countries and will
     not invest in debt securities  issued by corporations that are domiciled in
     emerging market countries.  The Advisor considers emerging market countries
     to be countries that issue long-term sovereign debt in their local currency
     that is rated as below  investment  grade. Up to 10% of the debt securities
     in which this  portion of the Fund  invests may be below  investment  grade
     (i.e.,  high  yield).  This portion of the Fund may also enter into foreign
     currency  exchange  contracts  to, for  example,  gain  exposure to foreign
     markets in which this portion of the Fund's portfolio is underweighted. The
     Fund typically uses currency  hedging for risk control.  The Fund makes its
     country  selection  and  currency  decisions  based on its own  fundamental
     research and advanced  analytical  systems.  The Advisor  anticipates that,
     assuming the issuance of preferred  shares  representing  approximately  33
     1/3% of the Fund's capital  immediately after their issuance,  the weighted
     average  duration of the Fund's foreign debt  securities will be 3.50 to 10
     years, although there is no guarantee that this range will be obtained. The
     Fund currently  expects this portion of the Fund's  portfolio to maintain a
     dollar-weighted  average maturity of 5 to 14 years. Up to 30% of the Fund's
     total assets may be allocated to the foreign debt securities portion of the
     Fund's portfolio.

          o Adjustable Rate Securities. Under normal market conditions, the Fund
     invests  approximately  25% of its total assets in an  investment  strategy
     that focuses on securities that have interest rates that re-set at periodic
     intervals,  including mortgage-backed  securities,  asset-backed securities
     and collateralized  mortgage obligations (CMOs) issued or guaranteed by the
     U.S.  government,  its agencies or  instrumentalities.  This portion of the
     Fund typically will invest in adjustable  rate  mortgage-backed  securities
     issued or guaranteed by GNMA, FNMA or FHLMC. Securities issued by GNMA, but
     not those issued by FNMA or FHLMC,  are backed by the full faith and credit
     of the U.S. government.  The Fund may also invest up to 20% of this portion
     of the Fund's assets in obligations of the U.S. government, its agencies or
     instrumentalities,  such as the Federal Home Loan Banks,  FNMA, GNMA, FHLMC
     or the Federal Farm Credit Banks,  including  obligations that pay fixed or
     adjustable  interest  rates.  The weighted  average  credit quality of this
     portion  of the  Fund's  portfolio  is  expected  to be  AAA/Aaa.  The Fund
     currently  expects  this  portion of the  Fund's  portfolio  to  maintain a
     weighted  average life of 1 to 6 years and a weighted  average  duration of
     0.5 to 1.5 years.


          As part of this  investment  strategy,  the Fund may  engage in dollar
     roll transactions,  which allow the Fund to sell a mortgage-backed security
     to a dealer and  simultaneously  contract to  repurchase a security that is
     substantially  similar in type, coupon and maturity,  on a specified future
     date.


          Mortgage-Backed  Securities. The adjustable rate securities portion of
     the  Fund  may   invest   in   mortgage   pass-through   certificates   and
     multiple-class  pass-through securities, and mortgage derivative securities
     such as real estate mortgage  investment  conduits  ("REMIC")  pass-through
     certificates,  collateralized  mortgage  obligations  ("CMOs") and stripped
     mortgage-backed   securities   ("SMBS"),   interest  only   mortgage-backed
     securities and principal only mortgage-backed securities and other types of
     mortgage-backed   securities  that  may  be  available  in  the  future.  A
     mortgage-backed  security  is an  obligation  of  the  issuer  backed  by a
     mortgage or pool of mortgages or a direct interest in an underlying pool of
     mortgages.  Some mortgage-backed  securities,  such as CMOs, are adjustable
     rate and make  payments  of both  principal  and  interest  at a variety of
     intervals; others are fixed rate and make semiannual interest payments at a
     predetermined  rate and repay  principal at maturity (like a typical bond).
     Mortgage-backed  securities  are  based on  different  types of  mortgages,
     including  those on  commercial  real  estate  or  residential  properties.
     Mortgage-backed  securities  often have stated  maturities  of up to thirty
     years when they are  issued,  depending  upon the  length of the  mortgages
     underlying  the  securities.  In practice,  however,  unscheduled  or early
     payments of principal and interest on the underlying mortgages may make the
     securities'  effective  maturity  shorter  than  this,  and the  prevailing
     interest  rates may be higher or lower than the current yield of the Fund's
     portfolio at the time the Fund  receives  the  payments  for  reinvestment.
     Mortgage-backed securities may have less potential for capital appreciation
     than comparable fixed income securities, due to the likelihood of increased
     prepayments  of  mortgages  as  interest  rates  decline.  If the Fund buys
     mortgage-backed   securities  at  a  premium,   mortgage  foreclosures  and
     prepayments  of  principal  by  mortgagors  (which  may be made at any time
     without penalty) may result in some loss of the Fund's principal investment
     to the extent of the premium paid. The value of mortgage-backed  securities
     may also change due to shifts in the  market's  perception  of issuers.  In
     addition,  regulatory  or tax changes  may  adversely  affect the  mortgage
     securities markets as a whole. Non-governmental  mortgage-backed securities
     may offer higher yields than those issued by  government  entities but also
     may be subject to greater price changes than governmental issues.


          Asset-Backed  Securities.  Asset-backed securities are securities that
     represent a participation  in, or are secured by and payable from, a stream
     of payments generated by particular  assets,  most often a pool or pools of
     similar  assets  (e.g.,  trade  receivables).  The credit  quality of these
     securities  depends primarily upon the quality of the underlying assets and
     the level of credit support and/or enhancement provided.

          The underlying  assets (e.g.,  loans) are subject to prepayments which
     shorten  the  securities'  weighted  average  maturity  and may lower their
     return. If the credit support or enhancement is exhausted, losses or delays
     in payment may result if the required  payments of  principal  and interest
     are not made.  The value of these  securities  also may  change  because of
     changes in the market's perception of the creditworthiness of the servicing
     agent  for  the  pool,  the  originator  of  the  pool,  or  the  financial
     institution or Fund providing the credit support or enhancement.


          Dollar Roll Transactions. In dollar roll transactions,  the Fund sells
     a  U.S.  agency  mortgage-backed  security  and  simultaneously  agrees  to
     purchase at a future date another U.S. agency mortgage-backed security with
     the same  interest  rate and  maturity  date,  but  generally  backed  by a
     different pool of mortgages.  The Fund loses the right to receive  interest
     and principal payments on the security it sold. However,  the Fund benefits
     from the  interest  earned on  investing  the  proceeds of the sale and may
     receive  a  fee  or  a  lower  purchase  price.  The  benefits  from  these
     transactions  depend  upon  the  Advisor's  ability  to  forecast  mortgage
     prepayment  patterns on different  mortgage pools.  The Fund may lose money
     if, during the period between the time it agrees to the forward purchase of
     the mortgage  securities and the settlement date, these securities  decline
     in  value  due to  market  conditions  or  prepayments  on  the  underlying
     mortgages.




          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.)

          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 10% of its total  assets in  convertible
     securities.  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.  Consistent  with its
     objective and other investment policies, the Fund may also invest a portion
     of its assets in equity  securities,  including  common stocks,  depositary
     receipts, warrants, rights and other equity interests.

          Corporate  Loans.  The Fund may invest a portion of its assets in loan
     participations  and other  claims  against a corporate  borrower.  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 (Ba or lower by Moody's or BB or lower 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.

          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.

          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.

          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.

          Asset-Backed  Securities.  Asset-backed securities are securities that
     represent a participation  in, or are secured by and payable from, a stream
     of payments generated by particular  assets,  most often a pool or pools of
     similar  assets  (e.g.,  trade  receivables).  The credit  quality of these
     securities  depends primarily upon the quality of the underlying assets and
     the level of credit support and/or enhancement provided.

          The underlying  assets (e.g.,  loans) are subject to prepayments which
     shorten  the  securities'  weighted  average  maturity  and may lower their
     return. If the credit support or enhancement is exhausted, losses or delays
     in payment may result if the required  payments of  principal  and interest
     are not made.  The value of these  securities  also may  change  because of
     changes in the market's perception of the creditworthiness of the servicing
     agent  for  the  pool,  the  originator  of  the  pool,  or  the  financial
     institution or Fund providing the credit support or enhancement.

          REITs.  REITs primarily invest in income producing real estate or real
     estate related loans or interests. REITs are generally classified as equity
     REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
     REITs  invest the majority of their  assets  directly in real  property and
     derive income primarily from the collection of rents. Equity REITs can also
     realize capital gains by selling properties that have appreciated in value.
     Mortgage REITs invest the majority of their assets in real estate mortgages
     and derive income from the collection of interest  payments.  REITs are not
     taxed on income  distributed to shareholders  provided they comply with the
     applicable requirements of the Code. The Fund will in some cases indirectly
     bear its  proportionate  share of any management and other expenses paid by
     REITs in which it invests in  addition  to the  expenses  paid by the Fund.
     Debt  securities  issued  by REITs  are,  for the most  part,  general  and
     unsecured obligations and are subject to risks associated with REITs.

          U.S. Government  Securities.  U.S. government  securities in which the
     Fund invests 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,  GNMA,  General  Services
     Administration,  Central Bank for Cooperatives,  Federal Farm Credit Banks,
     Federal  Home Loan Banks,  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.  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 (3) only the credit of the issuer.  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).

          Zero Coupon  Securities.  The securities in which the Fund invests may
     include zero coupon securities,  which are debt obligations that are issued
     or  purchased  at a  significant  discount  from face value.  The  discount
     approximates  the total  amount of interest  the  security  will accrue and
     compound over the period until maturity or the particular  interest payment
     date at a rate of interest  reflecting  the market rate of the  security at
     the time of issuance.  Zero coupon  securities  do not require the periodic
     payment of interest. These investments benefit the issuer by mitigating its
     need for cash to meet debt service,  but generally require a higher rate of
     return to attract investors who are willing to defer receipt of cash. These
     investments  may  experience   greater  volatility  in  market  value  than
     securities that make regular payments of interest.  The Fund accrues income
     on  these   investments   for  tax  and  accounting   purposes,   which  is
     distributable to shareholders and which, because no cash is received at the
     time of accrual,  may require the liquidation of other portfolio securities
     to satisfy the Fund's distribution obligations, in which case the Fund will
     forgo the purchase of additional  income producing assets with these funds.
     Zero coupon U.S. government  securities include STRIPS and CUBES, which are
     issued by the U.S.  Treasury as component parts of U.S.  Treasury bonds and
     represent scheduled interest and principal payments on the bonds.

          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.

          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.
     Notwithstanding  the foregoing,  as a result of an exemptive order received
     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.

          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.

          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 3% 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  33 1/3% 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 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 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 debt  instruments,  the
     Advisor  provides  professional  management  which  includes the  extensive
     credit  analysis  needed  to  invest  in high  yield  bonds,  foreign  debt
     securities,   adjustable  rate  securities,  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 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 and the Sub-Adviser  (with
     respect to the foreign  debt  securities  portion of the Fund's  portfolio)
     consider  both broad  economic and issuer  specific  factors in selecting a
     portfolio designed to 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 debt securities market.  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 each
     targeted  industry.  The Advisor also identifies any circumstances that may
     lead to improved business conditions, thus increasing the attractiveness of
     a particular industry or country. The Advisor selects individual securities
     based upon the terms of the  securities  (such as yields  compared  to U.S.
     Treasuries or comparable issues),  liquidity and rating,  sector and issuer
     diversification.  The Advisor also 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'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.


          Additionally, the portion of the Fund allocated to the adjustable rate
     securities  strategy employs a proprietary  investment process  emphasizing
     both macro (top-down) and micro (security specific)  analysis.  In addition
     to  determining  the  strategy's   appropriate  duration,   macro  analysis
     determines  index and reset mix,  fixed/float  mix and cap/floor  structure
     within the strategy's  investment  guidelines.  The Advisor's  selection of
     individual  mortgage  backed  securities  is  determined  by the  Advisor's
     assessment of the issuer and servicer, underwriting criteria, product type,
     geographical   diversification,   current  and  historical  spread  levels,
     prepayment analysis,  projected return on assets, margins, reset mechanisms
     and other criteria specific to agency pass-throughs. 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.

          To  uncover  opportunities  in  international  debt  securities,   the
     Sub-Advisor conducts extensive research of economic and business conditions
     across a wide array of sectors and regions.  In addition,  the  Sub-Advisor
     seeks to  reduce  risk  through  careful  management  of  foreign  currency
     exposure.

          In making portfolio decisions, the Advisor and the Sub-Advisor rely on
     the knowledge,  experience and judgment of their staff who have 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 or the Sub-Advisor's (with respect to the foreign debt securities
     portion of the Fund) judgment, it is advantageous to sell such securities.





                                    LEVERAGE

          To increase its assets  available for  investment,  the Fund initially
     intends  to issue  preferred  shares of  beneficial  interest  representing
     approximately  33  1/3%  of the  Fund's  capital  immediately  after  their
     issuance.   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). 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
     borrowing 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 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.  There is no assurance that a leveraging strategy will be
     successful during any period in which it is employed.

          Assuming  the  Fund  issues   preferred   shares  with  a  liquidation
     preference equal to approximately 33 1/3% of the Fund's total assets and an
     annual dividend rate of 3.33% 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  1.10%  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 33 1/3% 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.


<TABLE>
<CAPTION>

    <S>                                                     <C>          <C>        <C>      <C>     <C>

     Assumed portfolio return (net of expenses)..........      (10.00)%  (5.00)%    0.00%    5.00%   10.00%
     Corresponding common share return.........             (   16.34)%  ( 9.22)% ( 2.10)%   5.03%   12.15%
                                                                =====     ====      ====     ======  =====

</TABLE>

          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 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.

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

          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,  which would adversely  affect
     the Fund's net asset value and ability to make  distributions.  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.

          High  Yield  Debt  Securities.  Investment  in high  yield  securities
     involves  substantial  risk of loss. Below 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; and

     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 lead to a
     weakened  capacity of a high yield  issuer to make  principal  payments 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 2003 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 quality debt  securities  tend to
     reflect  individual  developments of the issuer to a greater extent than do
     higher quality  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 asked price is  generally  much larger
     than for higher  quality  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 quality 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 quality  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
     quality segments of the debt securities market,  resulting in greater yield
     and price volatility.

          If the Fund  invests  in high  yield  securities  that are  rated C or
     below,  the Fund  will  incur  significant  risk in  addition  to the risks
     associated with  investments in high yield  securities and corporate loans.
     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.

          Leverage.  The  Fund  initially  intends  to  issue  preferred  shares
     representing  approximately 33 1/3% 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.

          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 or the  Sub-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.


          Mortgage- and Asset-Backed Securities and Structured Securities.  Like
     other debt securities, changes in interest rates generally affect the value
     of   mortgage-backed   securities   and  other   asset-backed   securities.
     Additionally,  some  mortgage-backed  securities  may be structured so that
     they may be  particularly  sensitive to interest  rates.  Asset-backed  and
     mortgage-backed securities are generally subject to higher prepayment risks
     than most other types of debt  instruments.  Prepayment  of  mortgages  may
     expose the Fund to a lower rate of return when it reinvests the  principal.
     Prepayment  risks in  mortgage-backed  securities  tend to increase  during
     periods of declining interest rates because many borrowers  refinance their
     mortgages to take advantage of the more favorable rates.


          The Fund may invest in mortgage derivatives and structured securities.
     Because these securities have imbedded leverage features,  small changes in
     interest or  prepayment  rates may cause large and sudden price  movements.
     Mortgage  derivatives  can  also  become  illiquid  and  hard to  value  in
     declining markets.


          Foreign Securities. Investments in non-U.S. issuers may involve unique
     risks compared to investing in securities of U.S. issuers.  These risks are
     more  pronounced to the extent that the Fund invests a significant  portion
     of its non-U.S. investments in one region. These risks may include:

     o Less information  about non-U.S.  issuers or markets may be available due
     to less  rigorous  disclosure  or  accounting  standards  or  regulatory
     practices;

     o Many non-U.S.  markets are smaller,  less liquid and more volatile.  In a
     changing  market,  the Advisor or  Sub-Advisor  may not be able to sell the
     Trust's  portfolio  securities  at  times,  in  amounts  and at  prices  it
     considers reasonable;

     o Adverse effect of currency exchange rates or controls on the value of the
     Fund's investments

     o The  economies  of  non-U.S.  countries  may grow at  slower  rates  than
     expected or may experience a downturn = or recession;

     o Economic,  political and social  developments  may  adversely  affect the
     securities markets; and

    o  Withholding and other non-U.S. taxes may decrease the Fund's return.


          There  may be  less  publicly  available  information  about  non-U.S.
     markets and issuers than is available  with respect to U.S.  securities and
     issuers.  Non-U.S.  companies  generally  are not  subject  to  accounting,
     auditing and financial  reporting  standards,  practices  and  requirements
     comparable to those applicable to U.S.  companies.  The trading markets for
     most non-U.S.  securities  are generally less liquid and subject to greater
     price  volatility  than the markets for  comparable  securities in the U.S.
     Even the  markets  for  relatively  widely  traded  securities  in  certain
     non-U.S.  markets may not be able to absorb,  without price disruptions,  a
     significant  increase  in  trading  volume or trades of a size  customarily
     undertaken  by  institutional  investors in the U.S.  Additionally,  market
     making and  arbitrage  activities  are  generally  less  extensive  in such
     markets,   which  may  contribute  to  increased   volatility  and  reduced
     liquidity.

          Economies and social and political climate in individual countries may
     differ unfavorably from the U.S. Non-U.S. economies may have less favorable
     rates of growth of gross  domestic  product,  rates of inflation,  currency
     valuation,  capital reinvestment,  resource self-sufficiency and balance of
     payments  positions.  Many countries have experienced  substantial,  and in
     some cases extremely high, rates of inflation for many years. Unanticipated
     political or social  developments  may also affect the values of the Fund's
     investments and the  availability to the Fund of additional  investments in
     such countries.


          Foreign  Currency  Risks.  The value of the securities  denominated or
     quoted in foreign  currencies may be adversely  affected by fluctuations in
     the relative currency  exchange rates and by exchange control  regulations.
     The  Fund's  investment   performance  may  be  negatively  affected  by  a
     devaluation of a currency in which the Fund's  investments  are denominated
     or quoted.  Further, the Fund's investment performance may be significantly
     affected,  either  positively or  negatively,  by currency  exchange  rates
     because  the U.S.  dollar  value of  securities  denominated  or  quoted in
     another  currency  will  increase or decrease in response to changes in the
     value of such currency in relation to the U.S. dollar.

          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.

          Sovereign  Debt.  An  investment  in  debt   obligations  of  non-U.S.
     governments  and their political  subdivisions  (sovereign  debt),  whether
     denominated in U.S. dollars for a foreign currency,  involves special risks
     that are not present in corporate debt obligations.  The non-U.S. issuer of
     the sovereign debt or the non-U.S.  governmental  authorities  that control
     the repayment of the debt may be unable or unwilling to repay  principal or
     interest when due, and the Fund may have limited recourse in the event of a
     default.  During  periods of  economic  uncertainty,  the market  prices of
     sovereign debt may be more volatile than prices of debt obligations of U.S.
     issuers.   In  the  past,  certain  non-U.S.   countries  have  encountered
     difficulties  in servicing  their debt  obligations,  withheld  payments of
     principal  and interest and declared  moratoria on the payment of principal
     and interest on their sovereign debt.

          A sovereign debtor's willingness or ability to repay principal and pay
     interest in a timely  manner may be affected by, among other  factors,  its
     cash flow  situation,  the extent of its  foreign  currency  reserves,  the
     availability of sufficient foreign exchange,  the relative size of the debt
     service  burden,   the  sovereign  debtor's  policy  toward  its  principal
     international  lenders and local political  constraints.  Sovereign debtors
     may also be dependent on expected disbursements from non-U.S.  governments,
     multilateral  agencies and other entities to reduce  principal and interest
     arrearages  on their debt.  The failure of a sovereign  debtor to implement
     economic reforms, achieve specified levels of economic performance or repay
     principal  or  interest  when  due  may  result  in  the   cancellation  of
     third-party  commitments to lend funds to the sovereign  debtor,  which may
     further impair such debtor's ability or willingness to service its debts.


          Convertible  Securities.  The Fund may  invest  up to 10% 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. The Fund may acquire interests in loans made by banks
     or other  financial  institutions  to  corporate  issuers or  participation
     interests in such loans. 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.

          Dollar Roll Transactions.  If the broker-dealer to whom the Fund sells
     the security becomes  insolvent,  the Fund's right to purchase the security
     may be restricted;  the value of the security may change adversely over the
     term of the dollar roll; the security that the Fund is required to purchase
     may be worth less than the security that the Fund originally  held; and the
     return earned by the Fund with the proceeds of a dollar roll may not exceed
     transaction costs.


          REITs. Investing in REITs involves certain unique risks in addition to
     those  risks  associated  with  investing  in the real  estate  industry in
     general.  An equity  REIT may be  affected  by  changes in the value of the
     underlying properties owned by the REIT. A mortgage REIT may be affected by
     changes in interest  rates and the ability of the issuers of its  portfolio
     mortgages to repay their  obligations.  REITs are dependent upon the skills
     of their managers and are not  diversified.  REITs are generally  dependent
     upon maintaining  cash flows to repay borrowings and to make  distributions
     to  shareholders  and are  subject  to the risk of  default  by  lessees or
     borrowers. REITs with underlying assets that are concentrated in properties
     used by a particular  industry,  such as health  care,  are also subject to
     risks associated with such industry.

          REITs  (especially  mortgage  REITs) are also subject to interest rate
     risks.  When interest  rates decline,  the value of a REIT's  investment in
     fixed rate obligations can be expected to rise.  Conversely,  when interest
     rates rise, the value of a REIT's  investment in fixed rate obligations can
     be expected to decline.  If the REIT invests in  adjustable  rate  mortgage
     loans  the  interest  rates on which are  reset  periodically,  yields on a
     REIT's investments in such loans will gradually align themselves to reflect
     changes in market interest rates. This causes the value of such investments
     to fluctuate less  dramatically  in response to interest rate  fluctuations
     than would investments in fixed rate obligations.

          REITs may have limited  financial  resources and their  securities may
     trade less  frequently  and in a more  limited  volume than  securities  of
     larger companies.


          Market Price of Shares.  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.


          Derivatives.  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.


          Market Disruption Risk. The terrorist attacks in the U.S. on September
     11, 2001 had a disruptive effect on the securities markets. The war in Iraq
     also has  resulted  in  recent  market  volatility  and may have  long-term
     effects on the U.S. and worldwide  financial  markets and may cause further
     economic  uncertainties  in the U.S. and worldwide.  The Fund does not know
     how long the  securities  markets  will  continue  to be  affected by these
     events and cannot  predict the effects of the war or similar  events in the
     future on the U.S. economy and securities markets.


          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.


          Tax  Risk.  The  Bush  Administration  has  announced  a  proposal  to
     eliminate the federal income tax on dividends of income previously taxed at
     the corporate level. In addition,  several alternative  proposals regarding
     the  taxation  of  dividends  and  capital  gains are being  considered  by
     Congress.  The availability of tax-free  dividends may reduce the value of,
     and thus the return on,  securities which are part of the Fund's investment
     portfolio.  Moreover, these proposals may be given retroactive effect. This
     change  could reduce the Fund's net asset value and  distributions  made by
     the Fund.


          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.


          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 or the Sub-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.  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  "Certain  Provisions  of  the  Agreement  and
     Declaration of Trust."





                               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 107 U.S. registered  investment portfolios for which
     the Advisor serves as investment adviser.


Investment Advisor

     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 managed  over $229
billion in assets as of March 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.



Investment Sub-Advisor


          The Advisor has delegated  management  of the foreign debt  securities
     portion of the Fund's portfolio to First International Advisors, LLC, d/b/a
     Evergreen International Advisors (previously defined as the "Sub-Advisor"),
     subject to supervision by the Advisor.

          The  Sub-Advisor,  which is the Advisor's  London-based  international
     bond team, has over 30 years of experience investing in international fixed
     income  securities.  The  Sub-Advisor  is located at  Centurion  House,  24
     Monument  Street,  London,  England,  U.K.  EC3R 8AQ. The  Sub-Advisor,  an
     affiliate  of  the  Advisor,  is  a  wholly-owned  subsidiary  of  Wachovia
     Corporation.



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 0.55% of the Fund's  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 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,  the
     Sub-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 Advisor pays an annual fee to the  Sub-Advisor  for its investment
     sub-advisory  services  equal to 0.05% of the Fund's  average  daily  Total
     Assets.

          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 U.S. high yield debt securities  portion under "Investment
     Objective  and  Principal  Investment  Strategies  -  Principal  Investment
     Strategies- U.S. High Yield Debt Securities" above is the responsibility of
     a team of portfolio management  professionals from the Advisor's High Yield
     Bond team, which includes  specialized  industry  analysts  responsible for
     various  sectors.  The team is led by Prescott  Crocker,  CFA, who has more
     than 25 years of fixed income investment experience. Mr. Crocker has been a
     managing director and senior portfolio manager with the Advisor since 1997.
     Among the portfolios the team manages is the open-end  Evergreen High Yield
     Bond Fund and the closed-end  Evergreen Income Advantage Fund. Together the
     team  managed  almost $4 billion in high yield  securities  as of March 31,
     2003.

          Day-to-day  management of the portion of the Fund's  portfolio that is
     described as the adjustable rate portion under  "Investment  Objectives and
     Principal  Investment   Strategies  -  Principal  Investment  Strategies  -
     Adjustable  Rate  Securities"  above  is the  responsibility  of a team  of
     portfolio  management  professionals  from the Advisor's  Customized  Fixed
     Income  team.  Together  the team  managed  more than $15 billion in assets
     under management as of March 31, 2003. The team is led by Lisa Brown Premo,
     who has more than 19 years of investment  experience.  Ms.  Brown Premo has
     been  with the  Advisor  since  1986 and  currently  serves  as a  managing
     director  and senior  portfolio  manager.  She serves as Group  Manager for
     mortgage-backed securities and structured products.

          Day-to-day  management of the portion of the Fund's  portfolio that is
     described  as  the  foreign  debt  securities   portion  under  "Investment
     Objectives  and  Principal  Investment  Strategies  - Principal  Investment
     Strategies - Foreign Debt Securities" above is the responsibility of a team
     of portfolio management  professionals of the Sub-Advisor.  As of March 31,
     2003, the Sub-Advisor  managed  approximately  $8 billion in assets,  which
     includes one of the Evergreen Funds. The team is led by George McNeill, who
     has more than 40 years of investment  experience,  working  exclusively  in
     fixed income markets since 1977. Mr. McNeill joined the Sub-Advisor in 1990
     and currently serves as a managing director.





                                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  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 shares of 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,  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. To the extent the common shares do trade
     at a discount,  the Fund's Board of Trustees  may, but is not obligated to,
     from time to time cause the Fund to engage in  open-market  repurchases  or
     tender offers for shares after balancing the benefit to shareholders of the
     increase in the net asset  value per share  resulting  from such  purchases
     against the  decrease in the assets of the Fund and  potential  increase in
     the  expense  ratio of  expenses  to  assets  of the  Fund  and  consequent
     reduction in yield. The Board of Trustees  believes that in addition to the
     potential  beneficial effects described above, any such purchases or tender
     offers may result in the  temporary  narrowing of any discount but will not
     have any long-term effect on the level of any discount.




                                 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.

          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. 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 shares.

          Federal law requires that the Fund withhold (as "backup  withholding")
     at a rate of 30% for 2003 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 Form 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 Bush  Administration has announced a proposal to eliminate the tax
     on the  receipt of certain  dividends.  In  addition,  several  alternative
     proposals  regarding  the taxation of dividends and capital gains are being
     considered by Congress.  However, these proposals may be changed or may not
     be adopted by  Congress.  Accordingly,  it is not  possible to evaluate how
     this proposal might affect the tax discussion above.


          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 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.





                                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.  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.

          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 May 16, 2003, Evergreen Financing Company,  LLC, an affiliate of
     the Advisor,  provided the initial capital for the Fund by purchasing 5,000
     shares of 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, that is, 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 "Certain 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.




       CERTAIN 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.



<PAGE>






                                UNDERWRITING




          Subject to the terms and  conditions of a purchase  agreement  dated ,
     2003, each underwriter  named below has severally  agreed to purchase,  and
     the Fund has  agreed  to sell to such  underwriters,  the  number of common
     shares set forth opposite the name of such underwriter.

<TABLE>
<CAPTION>


<S>              <C>                                                          <C>
                                                                                Number
                 Underwriter                                                   of Shares

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


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

                 Wachovia Securities, Inc............................
=====================================================================

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

                 Prudential Securities Incorporated..................
=====================================================================

                 UBS Warburg LLC.....................................
====================================================================

                 Advest, Inc.........................................
=====================================================================

                 Janney Montgomery Scott LLC.........................
=====================================================================

                 McDonald Investments Inc., a KeyCorp Company........

                 Quick & Reilly, Inc. ...............................
=====================================================================

                 Stifel, Nicolaus & Company,
                      Incorporated...................................
=====================================================================


                                                                        -       ----------
                        Total........................................   _
                                                                        =       ==========
</TABLE>

          The  purchase   agreement   provides  that  the   obligations  of  the
     underwriters  to purchase the shares  included in this offering are subject
     to the approval of certain  legal  matters by counsel and to certain  other
     conditions.  The  underwriters  are  obligated  to purchase  all the common
     shares sold under the purchase  agreement  if any of the common  shares are
     purchased. In the purchase agreement,  the Fund and the Advisor have agreed
     to  indemnify  the  underwriters  against  certain  liabilities,  including
     certain  liabilities  arising  under  the  Securities  Act of  1933,  or to
     contribute  payments  the  underwriters  may be required to make for any of
     those liabilities.


     Commissions and Discounts

          The underwriters  propose to initially offer some of the common shares
     directly to the public at the public  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 in excess of $ per share.
     The sales  load the Fund will pay of $.90 per share is equal to 4.5% of the
     initial  offering price.  The  underwriters  may allow, and the dealers may
     reallow, a discount not in excess of $ per share on sales to other dealers.
     After the initial public  offering,  the public offering price,  concession
     and discount may be changed.

          The following table shows the public  offering  price,  sales load and
     proceeds  before  expenses to the Fund. The  information  assumes either no
     exercise  or full  exercise  by the  underwriters  of their over  allotment
     option.



<TABLE>
<CAPTION>

<S>                                                       <C>           <C>                 <C>


                                                          Per Share     Without Option       With Option
                                                           --------       ------------        ----------


     Public offering price...........................      $20.00             $                 $
                                                             =====
     Sales load......................................        $.90             $                 $
                                                               ===
     Estimated offering expenses.....................        $.04             $                 $
                                                               ===
     Proceeds to the Fund............................      $19.06             $                 $
                                                             =====

</TABLE>

          The expenses of the offering are estimated at $ and are payable by the
     Fund. The Fund has agreed to pay the underwriters  $0.0067 per common share
     as a partial  reimbursement  of expenses  incurred in  connection  with the
     offering.  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 $.04 per common share.



     Overallotment Option

          The Fund has  granted  the  underwriters  an option to  purchase up to
     additional common shares at the public offering price, less the sales load,
     within  45 days  from  the date of this  prospectus  solely  to  cover  any
     over-allotments.  If the  underwriters  exercise this option,  each will be
     obligated,  subject to conditions  contained in the purchase agreement,  to
     purchase a number of additional shares  proportionate to that underwriter's
     initial amount reflected in the table above.

     Price Stabilization and Short Positions


          Until the  distribution  of the common shares is complete,  Commission
     rules may limit underwriters and selling group members from bidding for and
     purchasing  the Fund's common  shares.  However,  the  representatives  may
     engage in transactions that stabilize the price of the common shares,  such
     as bids or purchases to peg, fix or maintain that price.

          If the  underwriters  create a short  position in the common shares in
     connection  with the  offering,  i.e., if they sell more common shares than
     are listed on the cover of this prospectus,  the representatives may reduce
     that short  position by purchasing  common  shares in the open market.  The
     representatives  may also elect to reduce any short  position by exercising
     all or part of the over-allotment  option described above. The underwriters
     may also  impose a penalty  bid,  whereby  selling  concessions  allowed to
     syndicate  members or other  broker-dealers in respect of the common shares
     sold in this  offering for their  account may be reclaimed by the syndicate
     if such shares are  repurchased by the syndicate in stabilizing or covering
     transactions.  Purchases of the common  shares to stabilize the price or to
     reduce a short  position  may cause the  price of the  common  shares to be
     higher than it might be in the absence of such purchases.

          Neither the Fund nor any of the underwriters  makes any representation
     or  prediction  as to the  direction  or  magnitude  of any effect that the
     transactions  described  above may have on the price of common  shares.  In
     addition,   neither  the  Fund  nor  any  of  the  underwriters  makes  any
     representation that the  representatives  will engage in these transactions
     or that  these  transactions,  once  commenced,  will  not be  discontinued
     without notice.


     No Sales of Similar Securities


          The Fund has agreed not to offer or sell any additional  common shares
     for a period of 180 days after the date of the purchase  agreement  without
     the prior written consent of the  underwriters,  except for the sale of the
     common shares to the  underwriters  pursuant to the purchase  agreement and
     certain transactions relating to the Fund's dividend reinvestment plan.

          The Fund  anticipates  that the underwriters may from time to time act
     as brokers or dealers in executing the Fund's portfolio  transactions after
     they  have  ceased  to  be   underwriters.   The  underwriters  are  active
     underwriters  of, and dealers in,  securities and act as market makers in a
     number of such  securities  and,  therefore,  can be  expected to engage in
     portfolio transactions with the Fund.


     Other Relationships

          The  Advisor  has also  agreed to pay a fee to Merrill  Lynch  payable
     quarterly at the annual rate of .15% of the Fund's Total Assets  during the
     continuance  of the management  contract  between the Advisor and the Fund.
     The sum of this fee plus the amount of each fee  payable by the  Advisor to
     certain select underwriters (other than Merrill Lynch), as described in the
     following paragraph,  will not exceed 4.5% of the total price to the public
     of the common shares offered hereby; provided, that in determining when the
     maximum amount has been paid,  the value of each of the quarterly  payments
     shall be  discounted  at the annual rate of 10% to the closing date of this
     offering. Merrill Lynch has agreed to provide certain after-market services
     to the  Advisor  designed  to  maintain  the  visibility  of the Fund on an
     ongoing basis to provide relevant information, studies or reports regarding
     the Fund and the closed-end investment company industry.

          The  Advisor  has  also  agreed  to  pay  a  fee  to  certain   select
     underwriters  (other than  Merrill  Lynch)  that sell common  shares in the
     initial public offering payable quarterly at the annual rate of up to .15%
     of the Fund's Total Assets  corresponding to the common shares sold by such
     underwriter. The Advisor has also agreed, in certain circumstances,  to pay
     a fee to certain select underwriters  (other than Merrill Lynch) that sell
     common  shares in the initial  public  offering  payable  quarterly at the
     annual rate of the greater of .15% of the Fund's Total Assets corresponding
     to the common shares sold by such  underwriter or .05% of the Fund's Total
     Assets. The sum of the amounts of each of these fees plus the amount of the
     fee payable to Merrill Lynch, as described in the preceding paragraph, will
     not  exceed  4.5% of the  aggregate  initial  offering  price of the common
     shares  offered  hereby;  provided,  that in  determining  when the maximum
     amount has been paid the value of each of the quarterly  payments  shall be
     discounted at the annual rate of 10% to the closing date of this  offering.
     Such underwriters have agreed to provide certain  after-market  services to
     the Advisor  designed to maintain the  visibility of the Fund on an ongoing
     basis and to provide relevant information, studies or reports regarding the
     Fund and the closed-end investment company industry.

          The address of Merrill Lynch is 4 World  Financial  Center,  New York,
     New York  10080.  The  address of  Wachovia  Securities  is 401 South Tryon
     Street, Charlotte, North Carolina 28202. The address of A.G. Edwards is One
     North  Jefferson,  St. Louis,  Missouri 63103. The address of Prudential is
     New York Plaza,  15th Floor, New York, New York 10292-2015.  The address of
     UBS Warburg is 299 Park Avenue, 34th Floor, New York, New York 10171.





          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 Clifford
     Chance US LLP, New York,  New York.  Sullivan & Worcester  LLP and Clifford
     Chance US LLP may rely as to certain matters of Delaware law on the opinion
     of Richards, Layton & Finger, P.A., Wilmington, Delaware.





<PAGE>

<TABLE>
<CAPTION>



                             TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION

                                                                                                               Page
                                                                                                               ----

<S>                                                                                                            <C>

Fund History..............................................................................................     3
                                                                                                               =
Use of Proceeds...........................................................................................     3
                                                                                                               =
Investment Objective and Policies.........................................................................     3
                                                                                                               =
Investment Restrictions...................................................................................    23
                                                                                                              ==
Management of the Fund....................................................................................    26
                                                                                                              ==
The Advisor, Sub-Advisor, Administrator and Transfer Agent................................................    35
                                                                                                              ==
Portfolio Transactions....................................................................................    40
                                                                                                              ==
Repurchase of Common Shares...............................................................................    41
                                                                                                              ==
U.S. Federal Income Tax Matters...........................................................................    43
                                                                                                              ==
Performance-Related, Comparative and Other Information Experts............................................    50
                                                                                                              ==
Experts...................................................................................................    65
                                                                                                              ==
Additional Information....................................................................................    65
                                                                                                              ==
Financial Statements and Independent Auditors' Report.....................................................    66
                                                                                                              ==
Appendix A--Description of Ratings........................................................................   A-1
                                                                                                             ===


</TABLE>




<PAGE>





                                        Shares


                             Evergreen Managed Income Fund


                                     Common Shares


                                   $20.00 per share

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

                                      PROSPECTUS




                                  Merrill Lynch & Co.
                                 Wachovia Securities
                               A.G. Edwards & Sons, Inc.
                                 Prudential Securities
                                      UBS Warburg
                                     Advest, Inc.
                              Janney Montgomery Scott LLC
                                McDonald Investments Inc.
                                 Quick & Reilly, Inc.
                              Stifel, Nicolaus & Company


                                        , 2003
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
<PAGE>




                             EVERGREEN MANAGED 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   Managed  Income  Fund  (the  "Fund")  is  a  newly   organized,
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 , 2003. 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

<TABLE>
<CAPTION>

<S>     <C>                                                                             <C>


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

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

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

         Investment Restrictions................................................ ......23

         Management of the Fund..................................................    ..26

         The Advisor, Administrator and Transfer Agent.................... ............35

         Portfolio Transactions     ..................................... .............40

         Repurchase of Common Shares...................................................41

         U.S. Federal Income Tax Matters................................... ...........43

         Performance-Related, Comparative and Other Information........................50
                                                                                        ==

         Experts.......................................................................65

         Additional Information........................................................65

         Financial Statements and Independent Auditors' Report........................66
                                                                                      ==


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

</TABLE>


         This Statement of Additional Information is dated              , 2003.



<PAGE>



                                         FUND HISTORY

     The  Fund  is  a  diversified,  closed-end  management  investment  company
organized as a statutory  trust under the laws of Delaware on April 10, 2003 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).
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


     The Fund allocates its assets among three separate  investment  strategies.
Under normal market  conditions,  the Fund  allocates  approximately  50% of its
total  assets  to  an  investment  strategy  that  focuses  primarily  on  below
investment grade (high yield) U.S. debt securities,  loans and preferred stocks;
approximately  25% of its total assets to an  investment  strategy  that focuses
primarily  on  foreign  debt   securities   including   obligations  of  foreign
governments or governmental  entities,  foreign  corporations  or  supranational
agencies  denominated in various currencies;  and approximately 25% of its total
assets to an investment  strategy that focuses primarily on securities that have
interest  rates that  re-set at  periodic  intervals  including  mortgage-backed
securities,  asset-backed  securities and  collateralized  mortgage  obligations
("CMOs")  issued  or  guaranteed  by  the  U.S.  government,   its  agencies  or
instrumentalities.  The Fund's investment  adviser reserves the discretion based
upon market  conditions to reallocate  these weightings in order for the Fund to
seek to  maintain  a yield  that  exceeds  the  then-current  yield of  ten-year
Treasury  notes and also for the Fund as a whole to seek to  maintain a weighted
average credit quality of investment grade.


     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. EDRs and GDRs
are  not  necessarily  denominated  in  the  same  currency  as  the  underlying
securities which they represent.

     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").  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.  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.


     MORTGAGE-BACKED  SECURITIES.  The Fund may invest in mortgage  pass-through
certificates and multiple-class pass-through securities, and mortgage derivative
securities  such  as  real  estate  mortgage   investment   conduits  ("REMIC"),
pass-through  certificates,  collateralized  mortgage  obligations  ("CMOs") and
stripped  mortgage-backed  securities  ("SMBS"),  interest only  mortgage-backed
securities  and principal  only  mortgage-backed  securities  and other types of
mortgage-backed   securities   that  may  be   available   in  the   future.   A
mortgage-backed  security is an obligation of the issuer backed by a mortgage or
pool of mortgages or a direct interest in an underlying pool of mortgages.  Some
mortgage-backed  securities, such as CMOs, are adjustable rate and make payments
of both  principal and interest at a variety of intervals;  others are fixed and
make semiannual interest payments at a predetermined rate and repay principal at
maturity  (like a typical  bond).  The Fund  primarily will invest in adjustable
rate  mortgage-backed   securities,   although  it  may  invest  in  fixed  rate
mortgage-backed  securities.  Mortgage-backed  securities are based on different
types of mortgages  including  those on  commercial  real estate or  residential
properties.  Mortgage-backed  securities  often have stated  maturities of up to
thirty years when they are issued,  depending  upon the length of the  mortgages
underlying the securities. In practice,  however,  unscheduled or early payments
of principal and interest on the underlying  mortgages may make the  securities'
effective  maturity shorter than this, and the prevailing  interest rates may be
higher or lower than the current  yield of the Fund's  portfolio at the time the
Fund receives the payments for reinvestment. Mortgage-backed securities may have
less potential for capital appreciation than comparable fixed income securities,
due to the  likelihood of increased  prepayments  of mortgages as interest rates
decline.  If the Fund buys  mortgage-backed  securities  at a premium,  mortgage
foreclosures  and  prepayments of principal by mortgagors  (which may be made at
any time  without  penalty)  may  result  in some loss of the  Fund's  principal
investment to the extent of the premium paid.


     The value of  mortgage-backed  securities  may also change due to shifts in
the market's perception of issuers.  In addition,  regulatory or tax changes may
adversely affect the mortgage  securities  markets as a whole.  Non-governmental
mortgage-backed  securities  may  offer  higher  yields  than  those  issued  by
government  entities,  but also may be  subject to greater  price  changes  than
governmental issues.

     Guaranteed   Mortgage   Pass-Through   Securities.    Guaranteed   mortgage
pass-through   securities   represent   participation   interests  in  pools  of
residential  mortgage  loans and are  issued  by U.S.  governmental  or  private
lenders  and  guaranteed  by the  U.S.  government  or one  of its  agencies  or
instrumentalities,  including  but not  limited to GNMA,  FNMA and  FHLMC.  GNMA
certificates are guaranteed by the full faith and credit of the U.S.  government
for  timely  payment  of  principal  and  interest  on  the  certificates.  FNMA
certificates  are guaranteed by FNMA, a federally  chartered and privately owned
corporation,  for full and  timely  payment of  principal  and  interest  on the
certificates.   FHLMC   certificates   are  guaranteed  by  FHLMC,  a  corporate
instrumentality of the U.S.  government,  for timely payment of interest and the
ultimate collection of all principal of the related mortgage loans.

     Commercial banks, savings and loan institutions, private mortgage insurance
companies,  mortgage  bankers and other  secondary  market  issuers  also create
pass-through pools of conventional residential mortgage loans. Such issuers may,
in addition,  be the  originators  and/or  servicers of the underlying  mortgage
loans as well as the  guarantors  of the  mortgage-related  securities.  Because
there are no direct or indirect  government or agency  guarantees of payments in
pools created by such  non-governmental  issuers,  they generally offer a higher
rate of interest than government and government-related pools. Timely payment of
interest  and  principal  of  these  pools  may be  supported  by  insurance  or
guarantees,  including  individual  loan,  title,  pool and hazard insurance and
letters of credit.  The  insurance  and  guarantees  are issued by  governmental
entities,  private insurers and the mortgage poolers.  There can be no assurance
that the private  insurers or guarantors  can meet their  obligations  under the
insurance policies or guarantee arrangements.

     Mortgage-related   securities   without  insurance  or  guarantees  may  be
purchased if the Advisor  determines that the securities meet the Fund's quality
standards.  Mortgage-related  securities issued by certain private organizations
may not be readily marketable.

     Multiple-Class   Pass-Through   Securities   and   CMOS.   CMOs  and  REMIC
pass-through or participation  certificates may be issued by, among others, U.S.
government agencies and instrumentalities as well as private issuers. REMICs are
CMO vehicles that qualify for special tax treatment  under the Internal  Revenue
Code of 1986,  as  amended  (the  "Code")  and invest in  mortgages  principally
secured by interests in real  property  and other  investments  permitted by the
Code.  CMOs and REMIC  certificates  are  issued  in  multiple  classes  and the
principal  of and interest on the  mortgage  assets may be  allocated  among the
several classes of CMOs or REMIC certificates in various ways. Each class of CMO
or REMIC certificate,  often referred to as a "tranche," is issued at a specific
adjustable  or fixed  interest  rate and must be fully retired no later than its
final distribution date.  Generally,  interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis.

     Typically,  CMOs are collateralized by GNMA, FNMA or FHLMC certificates but
also may be  collateralized  by other  mortgage  assets  such as whole  loans or
private mortgage pass-through securities.  Debt service on CMOs is provided from
payments of principal  and interest on  collateral  of mortgaged  assets and any
reinvestment income thereon.

     Stripped    Mortgage-Backed    Securities.    SMBS    are    multiple-class
mortgage-backed  securities that are created when a U.S.  government agency or a
financial  institution  separates  the interest and  principal  components  of a
mortgage-backed  security  and sells  them as  individual  securities.  The Fund
invests  in SMBS that are  usually  structured  with two  classes  that  receive
different  proportions  of interest  and  principal  distributions  on a pool of
mortgage  assets.  A typical  SMBS will  have one  class  receiving  some of the
interest and most of the  principal,  while the other class will receive most of
the interest and the  remaining  principal.  The holder of the  "principal-only"
security  ("PO")  receives  the  principal   payments  made  by  the  underlying
mortgage-backed  security,  while  the  holder of the  "interest-only"  security
("IO") receives interest payments from the same underlying security.  The prices
of stripped  mortgage-backed  securities may be particularly affected by changes
in interest  rates. As interest rates fall,  prepayment  rates tend to increase,
which tends to reduce prices of IOs and increase  prices of POs. Rising interest
rates can have the opposite effect.  Although the market for these securities is
increasingly   liquid,   the  Advisor  may  determine   that  certain   stripped
mortgage-backed  securities  issued  by the U.S.  government,  its  agencies  or
instrumentalities are not readily marketable. If so, these securities,  together
with privately-issued  stripped mortgage-backed  securities,  will be considered
illiquid.  The yields and market risk of interest only and principal  only SMBS,
respectively, may be more volatile than those of other fixed income securities.

     The Fund also may invest in planned  amortization  class ("PAC") and target
amortization  class ("TAC") CMO bonds which involve less exposure to prepayment,
extension  and  interest  rate  risks  than  other  mortgage-backed  securities,
provided that  prepayment  rates remain  within  expected  prepayment  ranges or
"collars."  To  the  extent  that  the  prepayment  rates  remain  within  these
prepayment  ranges,  the residual or support tranches of PAC and TAC CMOs assume
the extra  prepayment,  extension  and interest rate risks  associated  with the
underlying mortgage assets.

     Risk  Factors  Associated  With  Mortgage-Backed  Securities.  Investing in
mortgage-backed  securities  involves certain risks,  including the failure of a
counterparty  to meet its  commitments,  adverse  interest  rate changes and the
effects of  prepayments  on mortgage cash flows.  In addition,  investing in the
lowest  tranche of CMOs and REMIC  certificates  involves risks similar to those
associated  with  investing in equity  securities.  However,  due to adverse tax
consequences  under  current  tax  laws,  the Fund does not  intend  to  acquire
"residual"  interests  in  REMICs.   Further,   the  yield   characteristics  of
mortgage-backed  securities  differ  from  those  of  traditional  fixed  income
securities.  The major differences  typically include more frequent interest and
principal payments (usually monthly), the adjustability of interest rates of the
underlying instrument,  and the possibility that prepayments of principal may be
made substantially earlier than their final distribution dates.

     Prepayment  rates are influenced by changes in current interest rates and a
variety  of  economic,  geographic,  social  and  other  factors  and  cannot be
predicted with  certainty.  Both  adjustable  rate mortgage loans and fixed rate
mortgage  loans may be subject to a greater rate of principal  prepayments  in a
declining   interest  rate  environment  and  to  a  lesser  rate  of  principal
prepayments in an increasing  interest rate environment.  Under certain interest
rate and  prepayment  rate  scenarios,  the Fund may fail to  recoup  fully  its
investment in mortgage-backed  securities notwithstanding any direct or indirect
governmental,  agency  or  other  guarantee.  When the  Fund  reinvests  amounts
representing payments and unscheduled  prepayments of principal, it may obtain a
rate of  interest  that is  lower  than  the rate on  existing  adjustable  rate
mortgage  pass-through  securities.   Thus,   mortgage-backed   securities,  and
adjustable  rate mortgage  pass-through  securities in  particular,  may be less
effective than other types of U.S. government  securities as a means of "locking
in" interest rates.


     DOLLAR ROLLS.  The Fund may enter into dollar rolls in which the Fund sells
securities for delivery in the current month and  simultaneously  contracts with
the same  counterparty to purchase similar (same type,  coupon and maturity) but
not identical securities on a specified future date. During the roll period, the
Fund loses the right to receive  principal and interest  paid on the  securities
sold.  However,  the Fund would benefit to the extent of any difference  between
the price received for the  securities  sold and the lower forward price for the
future  purchase  (often  referred  to as the  "drop")  or fee  income  plus the
interest earned on the cash proceeds of the securities sold until the settlement
date of the forward  purchase.  Unless such benefits exceed the income,  capital
appreciation  and gain or loss due to mortgage  prepayments that would have been
realized  on the  securities  sold as part of the dollar  roll,  the use of this
technique  will diminish the  investment  performance  of the Fund compared with
what such performance  would have been without the use of dollar rolls. All cash
proceeds will be invested in instruments  that are  permissible  investments for
the Fund.  The Fund will hold and  maintain in a  segregated  account  until the
settlement  date cash or liquid  securities  in an amount  equal to its  forward
purchase price.


     For financial  reporting and tax purposes,  the Fund treats dollar rolls as
two  separate  transactions;  one  involving  the  purchase of a security  and a
separate  transaction  involving a sale.  The Fund does not currently  intend to
enter into dollar rolls that are accounted for as borrowing.


     Dollar  rolls  involve  certain  risks  including  the  following:  if  the
broker-dealer to whom the Fund sells the security becomes insolvent,  the Fund's
right to purchase the mortgage-related securities subject to the dollar roll may
be restricted and the  instrument  which the Fund is required to purchase may be
worth less than an instrument which the Fund originally held.  Successful use of
dollar rolls will depend upon the Advisor's  ability to manage its interest rate
and mortgage prepayments exposure. For these reasons, there is no assurance that
dollar rolls can be successfully employed.


     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.

     REAL ESTATE INVESTMENT TRUSTS ("REITS") AND ASSOCIATED RISK FACTORS.  REITs
are companies  which invest  primarily in income  producing  real estate or real
estate  related  loans or interests.  REITs are  generally  classified as equity
REITs,  mortgage  REITs or a combination  of equity and mortgage  REITs.  Equity
REITs invest the majority of their assets  directly in real  property and derive
income  primarily  from the  collection of rents.  Equity REITs can also realize
capital gains by selling  properties  that have  appreciated in value.  Mortgage
REITs invest the majority of their  assets in real estate  mortgages  and derive
income from the collection of interest  payments.  REITs are not taxed on income
distributed   to   shareholders   provided  they  comply  with  the   applicable
requirements  of the  Code.  The Fund  will in some  cases  indirectly  bear its
proportionate  share of any management and other expenses paid by REITs in which
it invests in addition to the expenses paid by the Fund. Debt securities  issued
by REITs are,  for the most part,  general  and  unsecured  obligations  and are
subject to risks associated with REITs.

     Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. An equity REIT
may be affected by changes in the value of the  underlying  properties  owned by
the REIT. A mortgage  REIT may be affected by changes in interest  rates and the
ability of the issuers of its  portfolio  mortgages to repay their  obligations.
REITs are dependent upon the skills of their  managers and are not  diversified.
REITs are generally  dependent upon  maintaining  cash flows to repay borrowings
and to make distributions to shareholders and are subject to the risk of default
by lessees or  borrowers.  REITs whose  underlying  assets are  concentrated  in
properties used by a particular industry,  such as health care, are also subject
to risks associated with such industry.

     REITs (especially  mortgage REITs) are also subject to interest rate risks.
When  interest  rates  decline,  the value of a REIT's  investment in fixed rate
obligations can be expected to rise.  Conversely,  when interest rates rise, the
value of a REIT's  investment  in fixed  rate  obligations  can be  expected  to
decline.  If the REIT invests in  adjustable  rate  mortgage  loans the interest
rates on which are reset  periodically,  yields on a REIT's  investments in such
loans will  gradually  align  themselves to reflect  changes in market  interest
rates.  This causes the value of such investments to fluctuate less dramatically
in response to interest rate  fluctuations  than would investments in fixed rate
obligations.

     REITs may have limited  financial  resources and may trade less  frequently
and in a more limited volume than larger company securities.

     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,  as a
result of an exemptive order received 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.


         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 Sub-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 Sub-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  Sub-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 Sub-Advisor  wants to eliminate  substantially  all of
the risk of owning a particular currency,  and/or if the Sub-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 Sub-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 Sub-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 required to satisfy 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 and Sub-Advisor's Investment Process

     The Fund combines investments in high yield debt securities,  international
debt  securities  and  adjustable  rate  securities.  Each of these fixed income
sectors  has its  own  distinct  attributes  that  the  Advisor  believes  could
contribute to the potential  for the Fund to achieve its  investment  objective.
For example,  because  foreign  debt  securities  have the  potential to provide
higher  yield than U.S.  Treasuries  but do not always move in tandem with them,
international  diversification  may increase the yield potential and help manage
overall portfolio risk. Because adjustable rate  mortgage-backed  securities are
subject  to  periodic  yield  adjustments,  they  have the  potential  to absorb
interest  rate  changes  without  the wide price  swings of other  fixed  income
investments.  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.

     Adjustable  Rate  Securities.  The adjustable  rate team pursues a balanced
approach  targeting yield and price stability in all interest rate environments.
Using  proprietary  research,  the group seeks to manage risks  associated  with
adjustable  rate  mortgage-backed  securities.  Economic  issues that can affect
these  securities,  including  inflation,  employment  and GDP growth,  are also
analyzed.

     International  Debt Securities.  To uncover  opportunities in international
debt,  the  international  team  conducts  extensive  research of  economic  and
business conditions across a wide array of sectors and regions. In addition, the
team  seeks to reduce  risk  through  careful  management  of  foreign  currency
exposure.




                                       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.       Diversification

     The  Fund  may not  make  any  investment  that is  inconsistent  with  its
classification as a diversified investment company under the 1940 Act.

         Further Explanation of Diversification Policy:

     To remain  classified  as a diversified  investment  company under the 1940
Act, the Fund must conform with the following:  With respect to 75% of its total
assets,  a  diversified  investment  company  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  of any  one  issuer,  or  invest  in  more  than  10% of the
outstanding  voting  securities  of any one  issuer,  determined  at the time of
purchase.  These limitations do not apply to investments in securities issued or
guaranteed  by  the  United   States  (U.S.)   government  or  its  agencies  or
instrumentalities.

2.       Concentration

     The Fund may not  concentrate  its investments in the securities of issuers
primarily  engaged in any particular  industry  (other than  securities that are
issued   or   guaranteed   by  the   U.S.   government   or  its   agencies   or
instrumentalities).

         Further Explanation of Concentration Policy:

     The Fund may not invest more than 25% of its total assets,  taken at market
value, in the securities of issuers primarily engaged in any particular industry
(other  than  securities  issued or  guaranteed  by the U.S.  government  or its
agencies or instrumentalities).


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.

          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.

          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 K. Dun  Gifford
     (Chairperson),  Charles A.  Austin  III,  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:

<TABLE>
<CAPTION>

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

<S>                          <C>            <C>        <C>                                            <C>              <C>

Charles A. Austin III        Trustee        2003       Investment Counselor, Anchor Capital           107              None
======================       =======        ====       =====================================          ===              ====
                                                       Advisors, Inc. (investment advice);
                                                       ====================================
                                                       Former Director, Executive Vice
                                                       ================================
                                                       President and Treasurer, State Street
                                                       ======================================
                                                       Research & Management Company
                                                       ==============================
                                                       (investment advice); Director, The
                                                       ===================================
                                                       Andover Companies (insurance); Trustee,
                                                       ========================================
                                                       Arthritis Foundation of New England;
                                                       =====================================
DOB: 10/23/34                                          Director, The Francis Ouimet Society;
=============                                          ======================================
                                                       Former Investment Counselor, Appleton
                                                       =====================================
                                                       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.
                                                       ====================

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

K. Dun Gifford               Trustee        2003       Chairman and President, Oldways                107              None
===============              =======        ====       ================================               ===              ====
                                                       Preservation and Exchange Trust
                                                       ================================
                                                       (education); Trustee, Treasurer and
                                                       ====================================
                                                       Chairman of the Finance Committee,
                                                       ===================================
                                                       Cambridge College; Former Managing
                                                       ===================================
                                                       Partner, Roscommon Capital Corp.;
                                                       ==================================
                                                       Former Chairman of the Board, Director,
                                                       ========================================
DOB: 10/23/38                                          and Executive Vice President, The
=============                                          ==================================
                                                       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        2003       (manufacturing); Former Director of            107        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        2003       Company; Former Director, Mentor Income        107              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        2003       Director, Mentor Income Fund, Inc.;            107              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, 411 Technologies,
                                                       =====================================
                                                       LLP (communications); Director, J&M
                                                       ====================================
                                                       Cumming Paper Co. (paper
                                                       =========================
David M. Richardson                                    merchandising); Columnist, Commerce and
DOB: 9/19/41                 Trustee        2003       Industry Association of New Jersey;            107              None
============                 =======        ====       ====================================           ===              ====
                                                       Former Vice Chairman, DHR
                                                       =========================
                                                       International, Inc. (executive
                                                       ==============================
                                                       recruitment); Former Senior Vice
                                                       ================================
                                                       President, Boyden International Inc.
                                                       ====================================
                                                       (executive recruitment); Former
                                                       ===============================
                                                       Director, Mentor Income Fund, Inc.;
                                                       ===================================
                                                       Former Trustee, Mentor Funds and Cash
                                                       =====================================
                                                       Resource Trust.
                                                       ===============

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

                                                       Medical Director, Healthcare Resource
                                                       Associates, Inc.; Former Medical
                                                       Director, U.S. Health Care/Aetna Health
Russell A. Salton, III MD                              Services; Former Consultant, Managed
DOB: 6/2/47                  Trustee        2003       Health Care; Former President, Primary         107              None
===========                  =======        ====       =======================================        ===              ====
                                                       Physician Care; Former Director, Mentor
                                                       =======================================
                                                       Income Fund, Inc.; Former Trustee,
                                                       ==================================
                                                       Mentor Funds and Cash Resource Trust.
                                                       =====================================

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


<PAGE>



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

                                                       Attorney, Law Offices of Michael S.
Michael S. Scofield                                    Scofield; Former Director, Mentor
DOB: 2/20/43                 Trustee        2003       Income Fund, Inc.; Former Trustee,             107              None
============                 =======        ====       ===================================            ===              ====
                                                       Mentor Funds and Cash Resource Trust.
                                                       =====================================

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

Richard J. Shima             Trustee        2003       Independent Consultant; Director, Trust        107              None
================             =======        ====       ========================================       ===              ====
                                                       Company of CT; Trustee, Saint Joseph
                                                       =====================================
                                                       College (CT); Director of Hartford
                                                       ===================================
                                                       Hospital, Old State House Association;
                                                       =======================================
                                                       Trustee, Greater Hartford YMCA; Former
                                                       =======================================
                                                       Chairman, Environmental Warranty, Inc.
                                                       =======================================
                                                       (insurance agency); Former Executive
                                                       =====================================
                                                       Consultant, Drake Beam Morin, Inc.
                                                       ===================================
                                                       (executive outplacement); Former
                                                       =================================
DOB: 8/11/39                                           Director of Enhance Financial Services,
============                                           ========================================
                                                       Inc.; Former Director of CTG Resources,
                                                       =======================================
                                                       Inc. (natural gas); Former Director
                                                       ===================================
                                                       Middlesex Mutual Assurance Company;
                                                       ===================================
                                                       Former Chairman, Board of Trustees,
                                                       ===================================
                                                       Hartford Graduate Center; Former
                                                       ================================
                                                       Director, Mentor Income Fund, Inc.;
                                                       ===================================
                                                       Former Trustee, Mentor Funds and Cash
                                                       =====================================
                                                       Resource Trust.
                                                       ===============

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

Interested Trustee:

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









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

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

Richard K. Wagoner,         Trustee        2003     Current Member and Former President, North        107              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.

- ------------------------ -------------- ----------- -------------------------------------------- --------------- ------------------
</TABLE>

* 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 (formerly First Union 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, 2002.  As of December 31, 2002,  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
=======================                ==           =============

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

K. Dun Gifford*                        $0           $0**
===============                        ==           ====

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

Leroy Keith, Jr.                       $0           $0
================                       ==           ==

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

Gerald M. McDonnell*                   $0           $10,001-$50,000
====================                   ==           ===============

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

William Walt Pettit*                   $0           $10,001-$50,000
====================                   ==           ===============

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

David M. Richardson                    $0           $10,001-$50,000
===================                    ==           ===============

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

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.

** In January  2003,  Mr.  Gifford made an  investment  of
$10,001-$50,000 in the Evergreen Funds complex.




<PAGE>

<TABLE>
<CAPTION>


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

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



<S>                              <C>                      <C>

                                 President                President and Chief Executive Officer, Evergreen Investment
William M. Ennis                                          Company and Chief Operating Officer, Capital Management
301 S. Tryon, 12th Floor                                  Group, Wachovia Bank, N.A.
Charlotte, NC 28288
DOB: 6/26/60


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


Carol Kosel                      Treasurer                Senior Vice President, Evergreen Investment Services, Inc.
200 Berkeley Street                                       and Treasurer, Vestaur Securities, Inc.; former Senior
Boston, MA 02116                                          Manager, KPMG LLP.
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
                                                          Management Associates, Inc.; former Vice President and
DOB: 4/20/60                                              Counsel, Colonial Management Associates, Inc.

- -------------------------------- ------------------------ -------------------------------------------------------------
</TABLE>


Trustees Compensation


          Listed below is the Trustee  compensation  estimated to be paid by the
     Fund  individually  for the period  beginning , 2003 and ending on December
     31,  2003  and by the  Fund  and the  nine  trusts  and one  other  limited
     liability company in the Evergreen fund complex for the twelve months ended
     December  31, 2002.  As of December 31, 2002,  the Fund had not been formed
     and therefore did not pay compensation to the Trustees for that period. The
     Trustees do not receive pension or retirement benefits from the Fund.



===============================================================================
<TABLE>
<CAPTION>


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

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

<S>                                         <C>                      <C>


Charles A. Austin, III                      $                        $125,000
======================                      =                        ========

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

K. Dun Gifford                              $                        $143,500
==============                              =                        ========

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

Leroy Keith, Jr.                            $                        $125,000
================                            =                        ========

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

Gerald M. McDonnell                         $                        $134,727
===================                         =                        ========

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

William Walt Pettit                         $                        $125,000
===================                         =                        ========

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

David M. Richardson                         $                        $125,000
===================                         =                        ========

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

Russell A. Salton, III                      $                        $144,000
======================                      =                        ========

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

Michael S. Scofield                         $                        $160,000
===================                         =                        ========

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

Richard J. Shima                            $                        $125,000
================                            =                        ========

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

Richard K. Wagoner                          $                        $125,000
==================                          =                        ========

=========================================================================================
</TABLE>

* Certain Trustees have elected to defer all or part of their total compensation
for the twelve months ended  December 31, 2002. The amounts listed below will be
payable in later years to the respective Trustees:


Austin                $93,750
======                =======
Pettit               $125,000
======               ========
Scofield             $125,000
========             ========



          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 March 31,
     2003,  the Advisor had more than $229 billion in assets  under  management,
     including more than $93 billion in fixed income  assets.  Among these fixed
     income assets under management were almost $4 billion in high yield assets,
     more than $15 billion in adjustable rate assets and more than $8 billion in
     international  bond  assets.  The  Advisor  has a 70-year  history of money
     management  and is the 12th  largest  mutual  fund  company  in the  United
     States. The Advisor employs over 350 investment  professionals and has more
     than 4 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 U.S. high yield debt securities  portion in the prospectus
     under "Investment Objective and Principal Investment Strategies - Principal
     Investment  Strategies-  U.S.  High  Yield  Debt  Securities"  above is the
     responsibility  of a team of portfolio  management  professionals  from the
     Advisor's  High  Yield  Bond  team,  which  includes  specialized  industry
     analysts  responsible  for  various  sectors.  The team is led by  Prescott
     Crocker,  CFA,  who has  more  than 25 years  of  fixed  income  investment
     experience.  Mr. Crocker has been a managing  director and senior portfolio
     manager with the Advisor since 1997.  Among the portfolios the team manages
     is the open-end Evergreen High Yield Bond Fund and the closed-end Evergreen
     Income Advantage Fund.  Together the team managed almost $4 billion in high
     yield  securities  as of March 31,  2003.  To help  manage  risk,  the team
     focuses on  higher-quality  high yield  corporate debt securities and seeks
     companies with improving operating profiles and strong balance sheets.

          Day-to-day  management of the portion of the Fund's  portfolio that is
     described  as  the  adjustable   rate  portion  in  the  prospectus   under
     "Investment  Objectives  and  Principal  Investment  Strategies - Principal
     Investment   Strategies  -  Adjustable  Rate   Securities"   above  is  the
     responsibility  of a team of portfolio  management  professionals  from the
     Advisor's   Customized   Fixed  Income  team.  The  team  is  led  by  Lisa
     Brown Premo,  who has  more  than 19 years of  investment  experience.  Ms.
     Brown Premo has been with the Advisor since 1986 and currently  serves as a
     managing director and senior portfolio manager. She serves as Group Manager
     for mortgage-backed  securities and structured products.  Together the team
     managed almost $15 billion in assets under management as of March 31, 2003.
     The  team  focuses  on  high-quality  securities  that  may  enhance  price
     stability by quickly absorbing changes in interest rates.

          Day-to-day  management of the portion of the Fund's  portfolio that is
     described as the foreign debt  securities  portion in the prospectus  under
     "Investment  Objectives  and  Principal  Investment  Strategies - Principal
     Investment   Strategies   -   Foreign   Debt   Securities"   above  is  the
     responsibility  of a team  of  portfolio  management  professionals  of the
     Sub-Advisor.  The Sub-Advisor  managed  approximately $8 billion in assets,
     which includes one of the Evergreen  Funds,  as of March 31, 2003. The team
     is led by  George  McNeill,  who has  more  than  40  years  of  investment
     experience,  working  exclusively  in fixed income  markets since 1977. Mr.
     McNeill joined the  Sub-Advisor in 1990 and currently  serves as a managing
     director. The team emphasizes strict quantitative disciplines and continual
     risk monitoring.


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 April 25, 2003. 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 outstanding  performance  achieved
     over the one-, three-, and five-year periods ended February 28, 2003 by the
     Advisor's  portfolio  management teams responsible for managing  high-yield
     bond and adjustable rate  mortgage-backed  security portfolios for open-end
     funds.  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 0.55%
     of the Fund's average weekly Total Assets. The advisory fee will be payable
     monthly.


Sub-Advisor


          As authorized by the Advisory Agreement, First International Advisors,
     LLC, d/b/a  Evergreen  International  Advisors  (previously  defined as the
     "Sub-Advisor") has been assigned  responsibility  for providing  day-to-day
     investment management services to the portion of the Fund's assets that are
     invested in foreign  debt  securities,  subject to the  supervision  of the
     Advisor. The Sub-Advisor is located at Centurion House, 24 Monument Street,
     London,  England,  U.K.  EC3R 8AQ.  The  Sub-Advisor,  an  affiliate of the
     Advisor, is a wholly-owned subsidiary of Wachovia Corporation.


Investment Sub-Advisory Agreement


          The Sub-Advisor provides services to the Fund pursuant to the terms of
     a  sub-advisory   agreement  entered  into  between  the  Advisor  and  the
     Sub-Advisor   dated  as  of   April, 25, 2003  (the   "Sub-Advisory
     Agreement").  In consideration of the services provided by the Sub-Advisor,
     the  Advisor  pays a monthly fee to the  Sub-Advisor  equal to 0.05% of the
     Fund's Total Assets.

          The  Sub-Advisory  Agreement  was  approved  by the Board of  Trustees
     (including a majority of the Disinterested  Trustees) on April 25, 2003. In
     approving the Sub-Advisory  Agreement,  the Trustees  considered the nature
     and  quality  of  the  services  to be  provided  by  the  Sub-Advisor.  In
     particular,  the Trustees noted that the Sub-Advisor's portfolio management
     team had achieved  well-above average performance for the one-, three-, and
     five-year  periods  ended  February  28, 2003 in managing an  international
     fixed-income  security  portfolio for an open-end  fund.  The Trustees also
     considered  the  fact  that  the  Sub-Advisor's  fee  would  be paid by the
     Advisor.  The  Sub-Advisory  Agreement  will be approved by the Fund's sole
     shareholder before the Fund commences operations.

          The  Sub-Advisory  Agreement has an initial term of two years from the
     date of its  execution,  and may be  continued  in effect from year to year
     thereafter  if such  continuance  is  approved  annually  by the  Board  of
     Trustees or by vote of a majority of the outstanding  voting  securities of
     the Fund; provided that in either event the continuance is also approved by
     a  majority  of the  Disinterested  Trustees  by vote  cast in  person at a
     meeting called for the purpose of voting on such approval. The Sub-Advisory
     Agreement is terminable without penalty,  on 60 days' prior written notice:
     by the Board of Trustees,  by vote of a majority of the outstanding  voting
     securities  of  the  Fund;  by the  Advisor;  or by  the  Sub-Advisor.  The
     Sub-Advisory  Agreement also provides that it will terminate  automatically
     in the event of its  "assignment," as defined by the 1940 Act and the rules
     thereunder.


          Under the Sub-Advisory Agreement,  the Advisor will indemnify,  defend
     and hold harmless the Sub-Advisor and its officers, directors, shareholders
     and employees  from and against any and all claims,  liabilities,  actions,
     judgments,  causes of  action,  fines,  assessments,  penalties,  costs and
     expenses (including,  but not limited to, reasonable attorneys' fees, court
     costs,  the costs associated with  investigating  any claims and any agreed
     upon amount paid in settlement) arising out of, relating to or otherwise in
     connection with the Sub-Advisory  Agreement or the services provided by the
     Sub-Advisor  thereunder  or otherwise  relating to the Advisor or the Fund,
     their  operations  or  investors  in the  Fund,  except  where a  court  of
     competent jurisdiction has finally determined (excluding any appeal of such
     decision  unless such  decision is stayed  pending  such  appeal)  that the
     claim,  liability,  action,  judgment,  cause of action, fine,  assessment,
     penalty,  costs or expenses arose  directly out of the gross  negligence or
     willful  misconduct of the Sub-Advisor in rendering its services under this
     Agreement.

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,  Advisor  and the  Sub-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, Advisor and Sub-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 and its affiliate, the Sub-Advisor,
     which both also serve as  investment  adviser and  investment  sub-adviser,
     respectively,  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
     or  Sub-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 or Sub-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  and the  Sub-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 and the Sub-Advisor normally seek 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  and the  Sub-Advisor  seek 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 and
     the Sub-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 and the Sub-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 or  Sub-Advisor.  In
     addition,  consistent with Section 28(e) of the Securities  Exchange Act of
     1934, as amended (the "Exchange  Act"),  if the Advisor or the  Sub-Advisor
     determine  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 and the Sub-Advisor
     maintain 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 or the Sub-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 and the Sub-Advisor
     believe that no exact dollar value can be calculated for such services.

          The research received from broker-dealers may be useful to the Advisor
     and the Sub-Advisor in rendering investment management services to the Fund
     as well as other  investment  companies  or other  accounts  managed by the
     Advisor and the  Sub-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  and the  Sub-Advisor  in  carrying  out  their
     respective  obligations  to the Fund.  The receipt of such research has not
     reduced  the  Advisor's  or  Sub-Advisor's   normal  independent   research
     activities;  however,  it enables the Advisor and the  Sub-Adviser 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 or the  Sub-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 and the
     Sub-Advisor's  performance of their responsibilities in connection with the
     placement of portfolio transactions on behalf of the Fund.



                                     REPURCHASE OF COMMON SHARES

          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  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 that invest  predominantly  in high yield  securities 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.  To the extent  the  common  shares do trade at a
     discount, the Fund's Board of Trustees may from time to time engage in open
     market  repurchases or tender offers for shares after balancing the benefit
     to  shareholders of the increase in the net asset value per share resulting
     from such  purchases  against  the  decrease  in the assets of the Fund and
     potential  increase in the expense  ratio of expenses to assets of the Fund
     and consequent  reduction in yield. The Board of Trustees  believes that in
     addition to the beneficial  effects  described above, any such purchases or
     tender  offers may result in the  temporary  narrowing  of any discount but
     will not have any long-term effect on the level of any discount.

          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.

          Although  the  decision to take action in response to a discount  from
     net  asset  value  will be made by the  Board  of  Trustees  at the time it
     considers  such  issue,  it is the  Board's  present  policy,  which may be
     changed by the Board of Trustees,  not to authorize  repurchases  of common
     shares or a tender  offer for such  shares  if: (1) such  transactions,  if
     consummated,  would (a) result in the  delisting of the common  shares from
     the American Stock Exchange, or (b) impair the Fund's status as a regulated
     investment  company  under the Code,  (which  would make the Fund a taxable
     entity,  causing the Fund's  income to be taxed at the  corporate  level in
     addition to the taxation of  shareholders  who receive  dividends  from the
     Fund) or as a registered  closed-end investment company under the 1940 Act;
     (2) the Fund  would not be able to  liquidate  portfolio  securities  in an
     orderly  manner and  consistent  with the Fund's  investment  objective and
     policies  in order to  repurchase  shares;  or (3) there is, in the Board's
     judgment,  any (a)  material  legal  action  or  proceeding  instituted  or
     threatened  challenging such transactions or otherwise materially adversely
     affecting the Fund,  (b) general  suspension of or limitation on prices for
     trading  securities on the New York Stock  Exchange,  (c)  declaration of a
     banking  moratorium by federal or state  authorities  or any  suspension of
     payment  by  United  States  or New York  banks,  (d)  material  limitation
     affecting the Fund or the issuers of its portfolio securities by federal or
     state authorities on the extension of credit by lending  institutions or on
     the  exchange  of  foreign   currency,   (e)  commencement  of  war,  armed
     hostilities  or  other  international  or  national  calamity  directly  or
     indirectly  involving  the United  States,  or (f) other event or condition
     which  would have a material  adverse  effect  (including  any  adverse tax
     effect) on the Fund or its  shareholders  if shares were  repurchased.  The
     Board of Trustees  may in the future  modify these  conditions  in light of
     experience.

          The  repurchase  by the Fund of its  shares at prices  below net asset
     value will result in an  increase  in the net asset  value of those  shares
     that remain  outstanding.  However,  there can be no  assurance  that share
     repurchases or tender offers at or below net asset value will result in the
     Fund's  shares  trading  at  a  price  equal  to  their  net  asset  value.
     Nevertheless,  the fact  that  the  Fund's  shares  may be the  subject  of
     repurchase  or tender  offers  from  time to time,  or that the Fund may be
     converted to an open-end investment company,  may reduce any spread between
     market price and net asset value that might otherwise exist.

          In addition, a purchase by the Fund of its common shares will decrease
     the Fund's total  assets  which would likely have the effect of  increasing
     the Fund's expense ratio.  Any purchase by the Fund of its common shares at
     a time when  preferred  shares are  outstanding  will increase the leverage
     applicable to the outstanding common shares then remaining.

          Before deciding  whether to take any action if the common shares trade
     below net asset value,  the Fund's Board of Trustees would likely  consider
     all relevant  factors,  including  the extent and duration of the discount,
     the liquidity of the Fund's portfolio,  the impact of any action that might
     be taken on the Fund or its shareholders and market  considerations.  Based
     on  these  considerations,  even if the  Fund's  shares  should  trade at a
     discount,  the Board of Trustees may determine that, in the interest of the
     Fund and its shareholders, no action should be taken.



                                   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 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 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,  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 satisfy
     certain  quarterly  diversification  requirements.  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 earnings  (including  net capital gain) would be
     taxed as ordinary  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 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, and (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, (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 as of a record  date in  October,
     November or December and paid during the following  January will be treated
     for U.S.  federal  income tax  purposes  as  received  by  shareholders  on
     December 31 of the calendar year in which it is declared.

          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 may 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 net  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,  zero coupon
     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 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 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 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  may  invest  in  REMICs  and in REITs  that  hold  residual
     interests in REMICs.  Under Treasury  regulations,  a portion of the Fund's
     income from a REIT that is attributable  to a residual  interest in a REMIC
     (referred  to in the Code as an  "excess  inclusion")  will be  subject  to
     federal income tax in all events.  In addition,  such  regulations  provide
     that excess inclusion income of a regulated investment company, such as the
     Fund, will be allocated to shareholders of the regulated investment company
     in proportion to the dividends received by such shareholders, with the same
     consequences  as if  the  shareholders  held  the  related  REMIC  residual
     interest  directly.  In  general,  excess  inclusion  income  allocated  to
     shareholders  (i) cannot be offset by net  operating  losses  (subject to a
     limited  exception for certain thrift  institutions),  (ii) will constitute
     unrelated  business  taxable  income to  entities  (including  a  qualified
     pension plan, an individual retirement account, a 401(k) plan, a Keogh plan
     or other  tax-exempt  entity) subject to tax on unrelated  business income,
     thereby  potentially  requiring  such an entity  that is  allocated  excess
     inclusion income, and otherwise might not be required to file a tax return,
     to file a tax return and pay tax on such income, and (iii) in the case of a
     foreign  shareholder,  will not qualify for any  reduction in U.S.  federal
     withholding  tax. In  addition,  if at any time  during any taxable  year a
     "disqualified  organization" (as defined in the Code) is a record holder of
     a share in a regulated  investment company,  then the regulated  investment
     company  will be  subject  to a tax  equal to that  portion  of its  excess
     inclusion income for the taxable year that is allocable to the disqualified
     organization,  multiplied by the highest federal income tax rate imposed on
     corporations.


          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, 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 small
     portion of the Fund's  distributions,  from the dividends  attributable  to
     such  stocks,  may  qualify  for  the  dividends-received  deduction.  Such
     qualifying portion, if any, may affect a corporate  shareholder's liability
     for  alternative  minimum tax and/or result in basis  reductions  and other
     consequences in certain circumstances.

          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),  income  not  qualifying  for the
     dividends-received  deduction  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 rate of 30% for 2003 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.


          The Bush  Administration has announced a proposal to eliminate the tax
     on the  receipt of certain  dividends.  In  addition,  several  alternative
     proposals  regarding  the taxation of dividends and capital gains are being
     considered  by  Congress.  It is  uncertain  if,  and in what  form,  these
     proposals will  ultimately be adopted.  Accordingly,  it is not possible to
     evaluate how these proposals might affect the tax discussion herein.

          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
     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 advisors to determine the
     applicability   of  these   regulations   in  light  of  their   individual
     circumstances.


          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 Lehman
     Municipal  Bond Index,  the Merrill  Lynch  Global Bond Index,  the Merrill
     Lynch  Government  Master Index, the Merrill Lynch Mortgage Master 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, for example:

          The Fund seeks  attractive  yield  potential  while  maintaining a low
     correlation with 10-year  Treasuries,  which  historically  have moved with
     interest rates. Interest rates are currently at 40-year lows.

                          HISTORICAL INTEREST RATES FOR 10-YEAR TREASURIES*

                     DATE                                             VALUE(%)
                     ====                                             =====
                  04-01-1963                                          3.97
                  ==========                                          ====
                  05-01-1963                                          3.93
                  ==========                                          ====
                  06-01-1963                                          3.99
                  ==========                                          ====
                  07-01-1963                                          4.02
                  ==========                                          ====
                  08-01-1963                                          4.00
                  ==========                                          ====
                  09-01-1963                                          4.08
                  ==========                                          ====
                  10-01-1963                                          4.11
                  ==========                                          ====
                  11-01-1963                                          4.12
                  ==========                                          ====
                  12-01-1963                                          4.13
                  ==========                                          ====
                  01-01-1964                                          4.17
                  ==========                                          ====
                  02-01-1964                                          4.15
                  ==========                                          ====
                  03-01-1964                                          4.22
                  ==========                                          ====
                  04-01-1964                                          4.23
                  ==========                                          ====
                  05-01-1964                                          4.20
                  ==========                                          ====
                  06-01-1964                                          4.17
                  ==========                                          ====
                  07-01-1964                                          4.19
                  ==========                                          ====
                  08-01-1964                                          4.19
                  ==========                                          ====
                  09-01-1964                                          4.20
                  ==========                                          ====
                  10-01-1964                                          4.19
                  ==========                                          ====
                  11-01-1964                                          4.15
                  ==========                                          ====
                  12-01-1964                                          4.18
                  ==========                                          ====
                  01-01-1965                                          4.19
                  ==========                                          ====
                  02-01-1965                                          4.21
                  ==========                                          ====
                  03-01-1965                                          4.21
                  ==========                                          ====
                  04-01-1965                                          4.20
                  ==========                                          ====
                  05-01-1965                                          4.21
                  ==========                                          ====
                  06-01-1965                                          4.21
                  ==========                                          ====
                  07-01-1965                                          4.20
                  ==========                                          ====
                  08-01-1965                                          4.25
                  ==========                                          ====
                  09-01-1965                                          4.29
                  ==========                                          ====
                  10-01-1965                                          4.35
                  ==========                                          ====
                  11-01-1965                                          4.45
                  ==========                                          ====
                  12-01-1965                                          4.62
                  ==========                                          ====
                  01-01-1966                                          4.61
                  ==========                                          ====
                  02-01-1966                                          4.83
                  ==========                                          ====
                  03-01-1966                                          4.87
                  ==========                                          ====
                  04-01-1966                                          4.75
                  ==========                                          ====
                  05-01-1966                                          4.78
                  ==========                                          ====
                  06-01-1966                                          4.81
                  ==========                                          ====
                  07-01-1966                                          5.02
                  ==========                                          ====
                  08-01-1966                                          5.22
                  ==========                                          ====
                  09-01-1966                                          5.18
                  ==========                                          ====
                  10-01-1966                                          5.01
                  ==========                                          ====
                  11-01-1966                                          5.16
                  ==========                                          ====
                  12-01-1966                                          4.84
                  ==========                                          ====
                  01-01-1967                                          4.58
                  ==========                                          ====
                  02-01-1967                                          4.63
                  ==========                                          ====
                  03-01-1967                                          4.54
                  ==========                                          ====
                  04-01-1967                                          4.59
                  ==========                                          ====
                  05-01-1967                                          4.85
                  ==========                                          ====
                  06-01-1967                                          5.02
                  ==========                                          ====
                  07-01-1967                                          5.16
                  ==========                                          ====
                  08-01-1967                                          5.28
                  ==========                                          ====
                  09-01-1967                                          5.30
                  ==========                                          ====
                  10-01-1967                                          5.48
                  ==========                                          ====
                  11-01-1967                                          5.75
                  ==========                                          ====
                  12-01-1967                                          5.70
                  ==========                                          ====
                  01-01-1968                                          5.53
                  ==========                                          ====
                  02-01-1968                                          5.56
                  ==========                                          ====
                  03-01-1968                                          5.74
                  ==========                                          ====
                  04-01-1968                                          5.64
                  ==========                                          ====
                  05-01-1968                                          5.87
                  ==========                                          ====
                  06-01-1968                                          5.72
                  ==========                                          ====
                  07-01-1968                                          5.50
                  ==========                                          ====
                  08-01-1968                                          5.42
                  ==========                                          ====
                  09-01-1968                                          5.46
                  ==========                                          ====
                  10-01-1968                                          5.58
                  ==========                                          ====
                  11-01-1968                                          5.70
                  ==========                                          ====
                  12-01-1968                                          6.03
                  ==========                                          ====
                  01-01-1969                                          6.04
                  ==========                                          ====
                  02-01-1969                                          6.19
                  ==========                                          ====
                  03-01-1969                                          6.30
                  ==========                                          ====
                  04-01-1969                                          6.17
                  ==========                                          ====
                  05-01-1969                                          6.32
                  ==========                                          ====
                  06-01-1969                                          6.57
                  ==========                                          ====
                  07-01-1969                                          6.72
                  ==========                                          ====
                  08-01-1969                                          6.69
                  ==========                                          ====
                  09-01-1969                                          7.16
                  ==========                                          ====
                  10-01-1969                                          7.10
                  ==========                                          ====
                  11-01-1969                                          7.14
                  ==========                                          ====
                  12-01-1969                                          7.65
                  ==========                                          ====
                  01-01-1970                                          7.79
                  ==========                                          ====
                  02-01-1970                                          7.24
                  ==========                                          ====
                  03-01-1970                                          7.07
                  ==========                                          ====
                  04-01-1970                                          7.39
                  ==========                                          ====
                  05-01-1970                                          7.91
                  ==========                                          ====
                  06-01-1970                                          7.84
                  ==========                                          ====
                  07-01-1970                                          7.46
                  ==========                                          ====
                  08-01-1970                                          7.53
                  ==========                                          ====
                  09-01-1970                                          7.39
                  ==========                                          ====
                  10-01-1970                                          7.33
                  ==========                                          ====
                  11-01-1970                                          6.84
                  ==========                                          ====
                  12-01-1970                                          6.39
                  ==========                                          ====
                  01-01-1971                                          6.24
                  ==========                                          ====
                  02-01-1971                                          6.11
                  ==========                                          ====
                  03-01-1971                                          5.70
                  ==========                                          ====
                  04-01-1971                                          5.83
                  ==========                                          ====
                  05-01-1971                                          6.39
                  ==========                                          ====
                  06-01-1971                                          6.52
                  ==========                                          ====
                  07-01-1971                                          6.73
                  ==========                                          ====
                  08-01-1971                                          6.58
                  ==========                                          ====
                  09-01-1971                                          6.14
                  ==========                                          ====
                  10-01-1971                                          5.93
                  ==========                                          ====
                  11-01-1971                                          5.81
                  ==========                                          ====
                  12-01-1971                                          5.93
                  ==========                                          ====
                  01-01-1972                                          5.95
                  ==========                                          ====
                  02-01-1972                                          6.08
                  ==========                                          ====
                  03-01-1972                                          6.07
                  ==========                                          ====
                  04-01-1972                                          6.19
                  ==========                                          ====
                  05-01-1972                                          6.13
                  ==========                                          ====
                  06-01-1972                                          6.11
                  ==========                                          ====
                  07-01-1972                                          6.11
                  ==========                                          ====
                  08-01-1972                                          6.21
                  ==========                                          ====
                  09-01-1972                                          6.55
                  ==========                                          ====
                  10-01-1972                                          6.48
                  ==========                                          ====
                  11-01-1972                                          6.28
                  ==========                                          ====
                  12-01-1972                                          6.36
                  ==========                                          ====
                  01-01-1973                                          6.46
                  ==========                                          ====
                  02-01-1973                                          6.64
                  ==========                                          ====
                  03-01-1973                                          6.71
                  ==========                                          ====
                  04-01-1973                                          6.67
                  ==========                                          ====
                  05-01-1973                                          6.85
                  ==========                                          ====
                  06-01-1973                                          6.90
                  ==========                                          ====
                  07-01-1973                                          7.13
                  ==========                                          ====
                  08-01-1973                                          7.40
                  ==========                                          ====
                  09-01-1973                                          7.09
                  ==========                                          ====
                  10-01-1973                                          6.79
                  ==========                                          ====
                  11-01-1973                                          6.73
                  ==========                                          ====
                  12-01-1973                                          6.74
                  ==========                                          ====
                  01-01-1974                                          6.99
                  ==========                                          ====
                  02-01-1974                                          6.96
                  ==========                                          ====
                  03-01-1974                                          7.21
                  ==========                                          ====
                  04-01-1974                                          7.51
                  ==========                                          ====
                  05-01-1974                                          7.58
                  ==========                                          ====
                  06-01-1974                                          7.54
                  ==========                                          ====
                  07-01-1974                                          7.81
                  ==========                                          ====
                  08-01-1974                                          8.04
                  ==========                                          ====
                  09-01-1974                                          8.04
                  ==========                                          ====
                  10-01-1974                                          7.90
                  ==========                                          ====
                  11-01-1974                                          7.68
                  ==========                                          ====
                  12-01-1974                                          7.43
                  ==========                                          ====
                  01-01-1975                                          7.50
                  ==========                                          ====
                  02-01-1975                                          7.39
                  ==========                                          ====
                  03-01-1975                                          7.73
                  ==========                                          ====
                  04-01-1975                                          8.23
                  ==========                                          ====
                  05-01-1975                                          8.06
                  ==========                                          ====
                  06-01-1975                                          7.86
                  ==========                                          ====
                  07-01-1975                                          8.06
                  ==========                                          ====
                  08-01-1975                                          8.40
                  ==========                                          ====
                  09-01-1975                                          8.43
                  ==========                                          ====
                  10-01-1975                                          8.14
                  ==========                                          ====
                  11-01-1975                                          8.05
                  ==========                                          ====
                  12-01-1975                                          8.00
                  ==========                                          ====
                  01-01-1976                                          7.74
                  ==========                                          ====
                  02-01-1976                                          7.79
                  ==========                                          ====
                  03-01-1976                                          7.73
                  ==========                                          ====
                  04-01-1976                                          7.56
                  ==========                                          ====
                  05-01-1976                                          7.90
                  ==========                                          ====
                  06-01-1976                                          7.86
                  ==========                                          ====
                  07-01-1976                                          7.83
                  ==========                                          ====
                  08-01-1976                                          7.77
                  ==========                                          ====
                  09-01-1976                                          7.59
                  ==========                                          ====
                  10-01-1976                                          7.41
                  ==========                                          ====
                  11-01-1976                                          7.29
                  ==========                                          ====
                  12-01-1976                                          6.87
                  ==========                                          ====
                  01-01-1977                                          7.21
                  ==========                                          ====
                  02-01-1977                                          7.39
                  ==========                                          ====
                  03-01-1977                                          7.46
                  ==========                                          ====
                  04-01-1977                                          7.37
                  ==========                                          ====
                  05-01-1977                                          7.46
                  ==========                                          ====
                  06-01-1977                                          7.28
                  ==========                                          ====
                  07-01-1977                                          7.33
                  ==========                                          ====
                  08-01-1977                                          7.40
                  ==========                                          ====
                  09-01-1977                                          7.34
                  ==========                                          ====
                  10-01-1977                                          7.52
                  ==========                                          ====
                  11-01-1977                                          7.58
                  ==========                                          ====
                  12-01-1977                                          7.69
                  ==========                                          ====
                  01-01-1978                                          7.96
                  ==========                                          ====
                  02-01-1978                                          8.03
                  ==========                                          ====
                  03-01-1978                                          8.04
                  ==========                                          ====
                  04-01-1978                                          8.15
                  ==========                                          ====
                  05-01-1978                                          8.35
                  ==========                                          ====
                  06-01-1978                                          8.46
                  ==========                                          ====
                  07-01-1978                                          8.64
                  ==========                                          ====
                  08-01-1978                                          8.41
                  ==========                                          ====
                  09-01-1978                                          8.42
                  ==========                                          ====
                  10-01-1978                                          8.64
                  ==========                                          ====
                  11-01-1978                                          8.81
                  ==========                                          ====
                  12-01-1978                                          9.01
                  ==========                                          ====
                  01-01-1979                                          9.10
                  ==========                                          ====
                  02-01-1979                                          9.10
                  ==========                                          ====
                  03-01-1979                                          9.12
                  ==========                                          ====
                  04-01-1979                                          9.18
                  ==========                                          ====
                  05-01-1979                                          9.25
                  ==========                                          ====
                  06-01-1979                                          8.91
                  ==========                                          ====
                  07-01-1979                                          8.95
                  ==========                                          ====
                  08-01-1979                                          9.03
                  ==========                                          ====
                  09-01-1979                                          9.33
                  ==========                                          ====
                  10-01-1979                                          10.30
                  ==========                                          =====
                  11-01-1979                                          10.65
                  ==========                                          =====
                  12-01-1979                                          10.39
                  ==========                                          =====
                  01-01-1980                                          10.80
                  ==========                                          =====
                  02-01-1980                                          12.41
                  ==========                                          =====
                  03-01-1980                                          12.75
                  ==========                                          =====
                  04-01-1980                                          11.47
                  ==========                                          =====
                  05-01-1980                                          10.18
                  ==========                                          =====
                  06-01-1980                                          9.78
                  ==========                                          ====
                  07-01-1980                                          10.25
                  ==========                                          =====
                  08-01-1980                                          11.10
                  ==========                                          =====
                  09-01-1980                                          11.51
                  ==========                                          =====
                  10-01-1980                                          11.75
                  ==========                                          =====
                  11-01-1980                                          12.68
                  ==========                                          =====
                  12-01-1980                                          12.84
                  ==========                                          =====
                  01-01-1981                                          12.57
                  ==========                                          =====
                  02-01-1981                                          13.19
                  ==========                                          =====
                  03-01-1981                                          13.12
                  ==========                                          =====
                  04-01-1981                                          13.68
                  ==========                                          =====
                  05-01-1981                                          14.10
                  ==========                                          =====
                  06-01-1981                                          13.47
                  ==========                                          =====
                  07-01-1981                                          14.28
                  ==========                                          =====
                  08-01-1981                                          14.94
                  ==========                                          =====
                  09-01-1981                                          15.32
                  ==========                                          =====
                  10-01-1981                                          15.15
                  ==========                                          =====
                  11-01-1981                                          13.39
                  ==========                                          =====
                  12-01-1981                                          13.72
                  ==========                                          =====
                  01-01-1982                                          14.59
                  ==========                                          =====
                  02-01-1982                                          14.43
                  ==========                                          =====
                  03-01-1982                                          13.86
                  ==========                                          =====
                  04-01-1982                                          13.87
                  ==========                                          =====
                  05-01-1982                                          13.62
                  ==========                                          =====
                  06-01-1982                                          14.30
                  ==========                                          =====
                  07-01-1982                                          13.95
                  ==========                                          =====
                  08-01-1982                                          13.06
                  ==========                                          =====
                  09-01-1982                                          12.34
                  ==========                                          =====
                  10-01-1982                                          10.91
                  ==========                                          =====
                  11-01-1982                                          10.55
                  ==========                                          =====
                  12-01-1982                                          10.54
                  ==========                                          =====
                  01-01-1983                                          10.46
                  ==========                                          =====
                  02-01-1983                                          10.72
                  ==========                                          =====
                  03-01-1983                                          10.51
                  ==========                                          =====
                  04-01-1983                                          10.40
                  ==========                                          =====
                  05-01-1983                                          10.38
                  ==========                                          =====
                  06-01-1983                                          10.85
                  ==========                                          =====
                  07-01-1983                                          11.38
                  ==========                                          =====
                  08-01-1983                                          11.85
                  ==========                                          =====
                  09-01-1983                                          11.65
                  ==========                                          =====
                  10-01-1983                                          11.54
                  ==========                                          =====
                  11-01-1983                                          11.69
                  ==========                                          =====
                  12-01-1983                                          11.83
                  ==========                                          =====
                  01-01-1984                                          11.67
                  ==========                                          =====
                  02-01-1984                                          11.84
                  ==========                                          =====
                  03-01-1984                                          12.32
                  ==========                                          =====
                  04-01-1984                                          12.63
                  ==========                                          =====
                  05-01-1984                                          13.41
                  ==========                                          =====
                  06-01-1984                                          13.56
                  ==========                                          =====
                  07-01-1984                                          13.36
                  ==========                                          =====
                  08-01-1984                                          12.72
                  ==========                                          =====
                  09-01-1984                                          12.52
                  ==========                                          =====
                  10-01-1984                                          12.16
                  ==========                                          =====
                  11-01-1984                                          11.57
                  ==========                                          =====
                  12-01-1984                                          11.50
                  ==========                                          =====
                  01-01-1985                                          11.38
                  ==========                                          =====
                  02-01-1985                                          11.51
                  ==========                                          =====
                  03-01-1985                                          11.86
                  ==========                                          =====
                  04-01-1985                                          11.43
                  ==========                                          =====
                  05-01-1985                                          10.85
                  ==========                                          =====
                  06-01-1985                                          10.16
                  ==========                                          =====
                  07-01-1985                                          10.31
                  ==========                                          =====
                  08-01-1985                                          10.33
                  ==========                                          =====
                  09-01-1985                                          10.37
                  ==========                                          =====
                  10-01-1985                                          10.24
                  ==========                                          =====
                  11-19-8501                                          9.78
                  ==========                                          ====
                  12-01-1985                                          9.26
                  ==========                                          ====
                  01-01-1986                                          9.19
                  ==========                                          ====
                  02-01-1986                                          8.70
                  ==========                                          ====
                  03-01-1986                                          7.78
                  ==========                                          ====
                  04-01-1986                                          7.30
                  ==========                                          ====
                  05-01-1986                                          7.71
                  ==========                                          ====
                  06-01-1986                                          7.80
                  ==========                                          ====
                  07-01-1986                                          7.30
                  ==========                                          ====
                  08-01-1986                                          7.17
                  ==========                                          ====
                  09-01-1986                                          7.45
                  ==========                                          ====
                  10-01-1986                                          7.43
                  ==========                                          ====
                  11-01-1986                                          7.25
                  ==========                                          ====
                  12-01-1986                                          7.11
                  ==========                                          ====
                  01-01-1987                                          7.08
                  ==========                                          ====
                  02-01-1987                                          7.25
                  ==========                                          ====
                  03-01-1987                                          7.25
                  ==========                                          ====
                  04-01-1987                                          8.02
                  ==========                                          ====
                  05-01-1987                                          8.61
                  ==========                                          ====
                  06-01-1987                                          8.40
                  ==========                                          ====
                  07-01-1987                                          8.45
                  ==========                                          ====
                  08-01-1987                                          8.76
                  ==========                                          ====
                  09-01-1987                                          9.42
                  ==========                                          ====
                  10-01-1987                                          9.52
                  ==========                                          ====
                  11-01-1987                                          8.86
                  ==========                                          ====
                  12-01-1987                                          8.99
                  ==========                                          ====
                  01-01-1988                                          8.67
                  ==========                                          ====
                  02-01-1988                                          8.21
                  ==========                                          ====
                  03-01-1988                                          8.37
                  ==========                                          ====
                  04-01-1988                                          8.72
                  ==========                                          ====
                  05-01-1988                                          9.09
                  ==========                                          ====
                  06-01-1988                                          8.92
                  ==========                                          ====
                  07-01-1988                                          9.06
                  ==========                                          ====
                  08-01-1988                                          9.26
                  ==========                                          ====
                  09-01-1988                                          8.98
                  ==========                                          ====
                  10-01-1988                                          8.80
                  ==========                                          ====
                  11-01-1988                                          8.96
                  ==========                                          ====
                  12-01-1988                                          9.11
                  ==========                                          ====
                  01-01-1989                                          9.09
                  ==========                                          ====
                  02-01-1989                                          9.17
                  ==========                                          ====
                  03-01-1989                                          9.36
                  ==========                                          ====
                  04-01-1989                                          9.18
                  ==========                                          ====
                  05-01-1989                                          8.86
                  ==========                                          ====
                  06-01-1989                                          8.28
                  ==========                                          ====
                  07-01-1989                                          8.02
                  ==========                                          ====
                  08-01-1989                                          8.11
                  ==========                                          ====
                  09-01-1989                                          8.19
                  ==========                                          ====
                  10-01-1989                                          8.01
                  ==========                                          ====
                  11-01-1989                                          7.87
                  ==========                                          ====
                  12-01-1989                                          7.84
                  ==========                                          ====
                  01-01-1990                                          8.21
                  ==========                                          ====
                  02-01-1990                                          8.47
                  ==========                                          ====
                  03-01-1990                                          8.59
                  ==========                                          ====
                  04-01-1990                                          8.79
                  ==========                                          ====
                  05-01-1990                                          8.76
                  ==========                                          ====
                  06-01-1990                                          8.48
                  ==========                                          ====
                  07-01-1990                                          8.47
                  ==========                                          ====
                  08-01-1990                                          8.75
                  ==========                                          ====
                  09-01-1990                                          8.89
                  ==========                                          ====
                  10-01-1990                                          8.72
                  ==========                                          ====
                  11-01-1990                                          8.39
                  ==========                                          ====
                  12-01-1990                                          8.08
                  ==========                                          ====
                  01-01-1991                                          8.09
                  ==========                                          ====
                  02-01-1991                                          7.85
                  ==========                                          ====
                  03-01-1991                                          8.11
                  ==========                                          ====
                  04-01-1991                                          8.04
                  ==========                                          ====
                  05-01-1991                                          8.07
                  ==========                                          ====
                  06-01-1991                                          8.28
                  ==========                                          ====
                  07-01-1991                                          8.27
                  ==========                                          ====
                  08-01-1991                                          7.90
                  ==========                                          ====
                  09-01-1991                                          7.65
                  ==========                                          ====
                  10-01-1991                                          7.53
                  ==========                                          ====
                  11-01-1991                                          7.42
                  ==========                                          ====
                  12-01-1991                                          7.09
                  ==========                                          ====
                  01-01-1992                                          7.03
                  ==========                                          ====
                  02-01-1992                                          7.34
                  ==========                                          ====
                  03-01-1992                                          7.54
                  ==========                                          ====
                  04-01-1992                                          7.48
                  ==========                                          ====
                  05-01-1992                                          7.39
                  ==========                                          ====
                  06-01-1992                                          7.26
                  ==========                                          ====
                  07-01-1992                                          6.84
                  ==========                                          ====
                  08-01-1992                                          6.59
                  ==========                                          ====
                  09-01-1992                                          6.42
                  ==========                                          ====
                  10-01-1992                                          6.59
                  ==========                                          ====
                  11-01-1992                                          6.87
                  ==========                                          ====
                  12-01-1992                                          6.77
                  ==========                                          ====
                  01-01-1993                                          6.60
                  ==========                                          ====
                  02-01-1993                                          6.26
                  ==========                                          ====
                  03-01-1993                                          5.98
                  ==========                                          ====
                  04-01-1993                                          5.97
                  ==========                                          ====
                  05-01-1993                                          6.04
                  ==========                                          ====
                  06-01-1993                                          5.96
                  ==========                                          ====
                  07-01-1993                                          5.81
                  ==========                                          ====
                  08-01-1993                                          5.68
                  ==========                                          ====
                  09-01-1993                                          5.36
                  ==========                                          ====
                  10-01-1993                                          5.33
                  ==========                                          ====
                  11-01-1993                                          5.72
                  ==========                                          ====
                  12-01-1993                                          5.77
                  ==========                                          ====
                  01-01-1994                                          5.75
                  ==========                                          ====
                  02-01-1994                                          5.97
                  ==========                                          ====
                  03-01-1994                                          6.48
                  ==========                                          ====
                  04-01-1994                                          6.97
                  ==========                                          ====
                  05-01-1994                                          7.18
                  ==========                                          ====
                  06-01-1994                                          7.10
                  ==========                                          ====
                  07-01-1994                                          7.30
                  ==========                                          ====
                  08-01-1994                                          7.24
                  ==========                                          ====
                  09-01-1994                                          7.46
                  ==========                                          ====
                  10-01-1994                                          7.74
                  ==========                                          ====
                  11-01-1994                                          7.96
                  ==========                                          ====
                  12-01-1994                                          7.81
                  ==========                                          ====
                  01-01-1995                                          7.78
                  ==========                                          ====
                  02-01-1995                                          7.47
                  ==========                                          ====
                  03-01-1995                                          7.20
                  ==========                                          ====
                  04-01-1995                                          7.06
                  ==========                                          ====
                  05-01-1995                                          6.63
                  ==========                                          ====
                  06-01-1995                                          6.17
                  ==========                                          ====
                  07-01-1995                                          6.28
                  ==========                                          ====
                  08-01-1995                                          6.49
                  ==========                                          ====
                  09-01-1995                                          6.20
                  ==========                                          ====
                  10-01-1995                                          6.04
                  ==========                                          ====
                  11-01-1995                                          5.93
                  ==========                                          ====
                  12-01-1995                                          5.71
                  ==========                                          ====
                  01-01-1996                                          5.65
                  ==========                                          ====
                  02-01-1996                                          5.81
                  ==========                                          ====
                  03-01-1996                                          6.27
                  ==========                                          ====
                  04-01-1996                                          6.51
                  ==========                                          ====
                  05-01-1996                                          6.74
                  ==========                                          ====
                  06-01-1996                                          6.91
                  ==========                                          ====
                  07-01-1996                                          6.87
                  ==========                                          ====
                  08-01-1996                                          6.64
                  ==========                                          ====
                  09-01-1996                                          6.83
                  ==========                                          ====
                  10-01-1996                                          6.53
                  ==========                                          ====
                  11-01-1996                                          6.20
                  ==========                                          ====
                  12-01-1996                                          6.30
                  ==========                                          ====
                  01-01-1997                                          6.58
                  ==========                                          ====
                  02-01-1997                                          6.42
                  ==========                                          ====
                  03-01-1997                                          6.69
                  ==========                                          ====
                  04-01-1997                                          6.89
                  ==========                                          ====
                  05-01-1997                                          6.71
                  ==========                                          ====
                  06-01-1997                                          6.49
                  ==========                                          ====
                  07-01-1997                                          6.22
                  ==========                                          ====
                  08-01-1997                                          6.30
                  ==========                                          ====
                  09-01-1997                                          6.21
                  ==========                                          ====
                  10-01-1997                                          6.03
                  ==========                                          ====
                  11-01-1997                                          5.88
                  ==========                                          ====
                  12-01-1997                                          5.81
                  ==========                                          ====
                  01-01-1998                                          5.54
                  ==========                                          ====
                  02-01-1998                                          5.57
                  ==========                                          ====
                  03-01-1998                                          5.65
                  ==========                                          ====
                  04-01-1998                                          5.64
                  ==========                                          ====
                  05-01-1998                                          5.65
                  ==========                                          ====
                  06-01-1998                                          5.50
                  ==========                                          ====
                  07-01-1998                                          5.46
                  ==========                                          ====
                  08-01-1998                                          5.34
                  ==========                                          ====
                  09-01-1998                                          4.81
                  ==========                                          ====
                  10-01-1998                                          4.53
                  ==========                                          ====
                  11-01-1998                                          4.83
                  ==========                                          ====
                  12-01-1998                                          4.65
                  ==========                                          ====
                  01-01-1999                                          4.72
                  ==========                                          ====
                  02-01-1999                                          5.00
                  ==========                                          ====
                  03-01-1999                                          5.23
                  ==========                                          ====
                  04-01-1999                                          5.18
                  ==========                                          ====
                  05-01-1999                                          5.54
                  ==========                                          ====
                  06-01-1999                                          5.90
                  ==========                                          ====
                  07-01-1999                                          5.79
                  ==========                                          ====
                  08-01-1999                                          5.94
                  ==========                                          ====
                  09-01-1999                                          5.92
                  ==========                                          ====
                  10-01-1999                                          6.11
                  ==========                                          ====
                  11-01-1999                                          6.03
                  ==========                                          ====
                  12-01-1999                                          6.28
                  ==========                                          ====
                  01-01-2000                                          6.66
                  ==========                                          ====
                  02-01-2000                                          6.52
                  ==========                                          ====
                  03-01-2000                                          6.26
                  ==========                                          ====
                  04-01-2000                                          5.99
                  ==========                                          ====
                  05-01-2000                                          6.44
                  ==========                                          ====
                  06-01-2000                                          6.10
                  ==========                                          ====
                  07-01-2000                                          6.05
                  ==========                                          ====
                  08-01-2000                                          5.83
                  ==========                                          ====
                  09-01-2000                                          5.80
                  ==========                                          ====
                  10-01-2000                                          5.74
                  ==========                                          ====
                  11-01-2000                                          5.72
                  ==========                                          ====
                  12-01-2000                                          5.24
                  ==========                                          ====
                  01-01-2001                                          5.16
                  ==========                                          ====
                  02-01-2001                                          5.10
                  ==========                                          ====
                  03-01-2001                                          4.89
                  ==========                                          ====
                  04-01-2001                                          5.14
                  ==========                                          ====
                  05-01-2001                                          5.39
                  ==========                                          ====
                  06-01-2001                                          5.28
                  ==========                                          ====
                  07-01-2001                                          5.24
                  ==========                                          ====
                  08-01-2001                                          4.97
                  ==========                                          ====
                  09-01-2001                                          4.73
                  ==========                                          ====
                  10-01-2001                                          4.57
                  ==========                                          ====
                  11-01-2001                                          4.65
                  ==========                                          ====
                  12-01-2001                                          5.09
                  ==========                                          ====
                  01-01-2002                                          5.04
                  ==========                                          ====
                  02-01-2002                                          4.91
                  ==========                                          ====
                  03-01-2002                                          5.28
                  ==========                                          ====
                  04-01-2002                                          5.21
                  ==========                                          ====
                  05-01-2002                                          5.16
                  ==========                                          ====
                  06-01-2002                                          4.93
                  ==========                                          ====
                  07-01-2002                                          4.65
                  ==========                                          ====
                  08-01-2002                                          4.26
                  ==========                                          ====
                  09-01-2002                                          3.87
                  ==========                                          ====
                  10-01-2002                                          3.94
                  ==========                                          ====
                  11-01-2002                                          4.05
                  ==========                                          ====
                  12-01-2002                                          4.03
                  ==========                                          ====
                  01-01-2003                                          4.05
                  ==========                                          ====
                  02-01-2003                                          3.90
                  ==========                                          ====
                  03-01-2003                                          3.81
                  ==========                                          ====



          *PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.  Source: Board of
     Governors of the Federal  Reserve  System.  The chart uses the 10-Year U.S.
     Treasury  Constant  Maturity Rate as a proxy to illustrate  the  historical
     movement of interest rates.  Treasuries are U.S.  government  guaranteed to
     return  interest and  principal  at maturity.  It is not possible to invest
     directly  in an index.  This table is not  intended  to predict  the Fund's
     performance.




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 =  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:



         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:




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:



          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.



<PAGE>




                                            EXPERTS


          The  statement of assets and  liabilities  of the Fund as of May 16,
     2003 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.



<PAGE>



         FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT








                          EVERGREEN MANAGED INCOME FUND

                       Statement of Assets and Liabilities

                                  May 16, 2003

                   (With Independent Auditors' Report Thereon)



<PAGE>


                          EVERGREEN MANAGED INCOME FUND
                       Statement of Assets and Liabilities
                                  May 16, 2003





<TABLE>
<CAPTION>


<S>                   <C>                                                                                 <C>       <C>

ASSETS

                      Cash                                                                                 $         100,000
                      Deferred offering costs                                                                        600,000

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

                      Total Assets                                                                         $         700,000

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


LIABILITIES

                      Payable for offering costs                                                                    600,000

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


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




Shares Outstanding                                                                                                    5,000

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


Net asset value                                                                                                       $20.00

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

     ($100,000/5,000 shares outstanding)

</TABLE>

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







<PAGE>




                              EVERGREEN MANAGED INCOME FUND

                       Notes to Statement of Assets and Liabilities

                                       May 16, 2003

Note 1 - Organization

     Evergreen Managed Income Fund (the "Fund"),  a Delaware statutory trust, is
     registered under the Investment  Company Act of 1940, as amended (the "1940
     Act"), as a closed-end, diversified, management investment company.

     The Fund's  investment  objective is to seek a high level of current income
     consistent  with  limiting its overall  exposure to domestic  interest rate
     risk.

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  $600,000.  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 15,000,000  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
     0.55% 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,  Inc.  will serve as the  transfer  agent and  registrar  of the
     Fund's shares.

Note 5 - Fund Shares

     The Fund has authorized 100 million shares of no par value capital stock of
     which 5,000 shares were issued and outstanding at May 16, 2003.



<PAGE>


                        Independent Auditors' Report



The Board of Trustees and Shareholders
Evergreen Managed Income Fund:

We have  audited  the  accompanying  statement  of  assets  and  liabilities  of
Evergreen  Managed Income Fund ("the Fund"),  as of May 16, 2003. 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
Managed Income Fund as of May 16, 2003, in conformity with accounting principles
generally accepted in the United States of America.

                                                    /s/ KPMG LLP

Boston, Massachusetts
May 19, 2003




<PAGE>


                          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.


                             OMPARISON OF LONG-TERM BOND RATINGS
<TABLE>
<CAPTION>

     ================== ================ =============== =================================================
     <S>                <C>              <C>             <C>

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

</TABLE>


<PAGE>




                                           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:

     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

     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:

     -- 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

     -- 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.

<PAGE>

                           PART C -- OTHER INFORMATION

ITEM 24.   FINANCIAL STATEMENTS AND EXHIBITS


     (1)  FINANCIAL  STATEMENTS - The  following  financial  statement  has been
          incorporated by reference into the Registration Statement as described
          on page 65 of the Statement of Additional Information:

         (i)      Statement of Assets and Liabilities as of May 16, 2003; and


         (ii)    Notes to Financial Statements May 16, 2003.


     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.
<TABLE>
<S>                              <C>

(2)      EXHIBITS


- ---------------------------- ------------------------------------------------------------------------
Exhibit No.                  Description of Exhibits
- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------

(a)(1)                       Second Amended and Restated Certificate of Trust of Evergreen Income
                             Opportunity Fund dated April 24, 2003 is filed herein.

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

(a)(2)                       Second Amended and Restated Agreement and Declaration of Trust of
                             Evergreen Managed Income Fund is filed herein.

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

(b)                          By-laws are incorporated by reference to the Registrant's
                             Registration Statement on Form N-2 as filed with the Commission on
                             April 16, 2003, Files Nos. 333-104569 and 811-21331 (the "Registration
                             Statement").

- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------
(c)                          Not applicable.
- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------
(d)                          To be filed by Amendment.
- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------

(e)                          Terms and Conditions of Automatic Dividend Reinvestment Plan is filed
                             herein.

- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------
(f)                          Not applicable.
- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------

(g)(1)                       Form of Investment Advisory and Management Agreement between
                             Registrant and Evergreen Investment Management Company, LLC is filed
                             herein.

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

(g)(2)                       Sub-Advisory Agreement by and between Evergreen Investment Management
                             Company, LLC and First International Advisors, LLC is filed herein.

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

(h)                          Form of Purchase 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 filed herein.

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

(k)(1)                       Form of Administrative Services Agreement between Registrant and
                             Evergreen Investment Services, Inc. is filed herein.

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

(k)(2)                       Form of Transfer Agency and Service Agreement among Registrant,
                             EquiServe Trust Company, N.A. and EquiServe, Inc. is filed herein.

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

(l)                          Opinion and consent of counsel to be filed by Amendment.

- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------
(m)                          Not applicable.
- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------

(n)                          Consent of KPMG is filed herein.

- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------
(o)                          Not applicable.
- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------

(p)                          Initial Stock Purchase Agreement is filed herein.

- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------
(q)                          Not applicable.
- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------

(r)(1)                       Code of Ethics for Evergreen Managed Income Fund to be filed by
                             Amendment.

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

(r)(2)                       Code of Ethics for Evergreen Investment Management Company, LLC is
                             filed herein.

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

(r)(3)                       Code of Ethics for First International Advisors, LLC is filed herein.

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

(s)                          Powers of Attorney are filed herein.

- ---------------------------- ------------------------------------------------------------------------
</TABLE>


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                                            $24,270
                                                              ======
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                                     $--
                                                                   =
Legal fees and expenses                                     $115,000
                                                             =======
Underwriter expense reimbursement                            $75,000
                                                              ======
Miscellaneous                                                 $5,000
                                                               =====
Engraving and printing certificates                            $4,900
===================================                            ======
Marketing                                                    $230,330
=========                                                    ========
Total                                                       $600,000
                                                             =======



ITEM 27.   PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

         None.


ITEM 28.   NUMBER OF HOLDERS OF SECURITIES (as of May 19, 2003)
                                                  ========



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 ommissions.


     Provisions  for  the  indemnification  of  the  Registrant's  Trustees  and
officers are also  contained  in the  Registrant's  Second  Amended and Restated
Agreement and Declaration of Trust.


     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.




     Provisions  for  the  indemnification  of  the  Registrant's   Advisor  are
contained in the Investment Advisory and Management Agreement.

     Provisions for the  indemnification  of the  Registrant's  Sub-Advisor  are
contained in the Sub-Advisory Agreement.

     The  Purchase  Agreement  filed  in  response  to Item 24  (2)(h)  contains
provisions  requiring  indemnification  of the Registrant's  underwriters by the
Registrant.

     Provisions for the indemnification of Evergreen Investment Services,  Inc.,
the Registrant's  Administrator,  are contained in the  Administrative  Services
Agreement between Registrant and Evergreen Investment Services, Inc.

     Provisions for the  indemnification  of EquiServe,  Inc., the  Registrant's
transfer agent, are contained in the Transfer Agency and Service Agreement among
Registrant, EquiServe Trust Company, N.A. and EquiServe, Inc.




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.

     The information  required by this item with respect to First  International
Advisors,  LLC is incorporated by reference to the Form ADV (File No. 801-42427)
of First International Advisors, 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., P.O. Box 43010,  Providence,  Rhode Island
02940-3010.




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.


<PAGE>



                                   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. 1 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 20th day of May, 2003.

                                        EVERGREEN MANAGED INCOME FUND
                                                  ========

                                        By:  /s/ William M. Ennis
                                               William M. Ennis
                                              President
                                              (Chief Executive Officer)

     Pursuant to the  requirements  of the  Securities  Act of 1933, as amended,
this Pre-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following  persons in the  capacities  indicated on the 20th day of
May, 2003.
<TABLE>
<S>                                           <C>                                  <C>

         /s/ Michael H. Koonce                              /s/ Carol A. Kosel
         -----------------------------               ---------------------------
          Michael H. Koonce                             Carol A. Kosel
          Secretary                                     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*
         Trustee                            Trustee



         *By: /s/ Maureen E. Towle
                  ------------------------------
                  Maureen E. Towle
                  Attorney-in-Fact
</TABLE>

     *Maureen  E.  Towle,  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.




<PAGE>


<TABLE>
<S>                             <C>

                                                   EXHIBIT INDEX

- ---------------------------- ------------------------------------------------------------------------
Exhibit No.                  Description of Exhibits
- ---------------------------- ------------------------------------------------------------------------
- ---------------------------- ------------------------------------------------------------------------

(a)(1)                       Second Amended and Restated Certificate of Trust of Evergreen Income
                             Opportunity Fund dated April 24, 2003.

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

(a)(2)                       Second Amended and Restated Agreement and Declaration of Trust of
                             Evergreen Managed Income Fund.

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

(e)                         Terms and Conditions of Automatic Dividend Reinvestment Plan.

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

(g)(1)                       Form of Investment Advisory and Management Agreement between
                             Registrant and Evergreen Investment Management Company, LLC.

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

(g)(2)                       Sub-Advisory Agreement by and between Evergreen Investment Management
                             Company, LLC and First International Advisors, LLC.

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

(h)                          Form of Purchase Agreement.

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

(i)                          Deferred Compensation Plan.

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

(j)                          Form of Custodian Agreement by and between Registrant and State Street
                             Bank and Trust Company.

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

(k)(1)                       Form of Administrative Services Agreement between Registrant and
                             Evergreen Investment Services, Inc.

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

(k)(2)                       Form of Transfer Agency and Service Agreement among Registrant,
                             EquiServe Trust Company, N.A. and EquiServe, Inc.

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

(n)                          Consent of KPMG.

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

(p)                          Initial Stock Purchase Agreement.

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

(r)(2)                       Code of Ethics for Evergreen Investment Management Company, LLC.

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

(r)(3)                       Code of Ethics for First International Advisors, LLC is filed herein.

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

(s)                          Powers of Attorney.

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








</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A 1
<SEQUENCE>3
<FILENAME>certoftrust.txt
<TEXT>
                                STATE OF DELAWARE

                SECOND AMENDED AND RESTATED CERTIFICATE OF TRUST

                                       OF

                        EVERGREEN INCOME OPPORTUNITY FUND


     This Second Amended and Restated  Certificate of Trust is being executed as
of the 24th day of April 2003 for the  purpose of  amending  and  restating  the
Certificate of Trust of the Evergreen  Income  Opportunity  Fund which was filed
with the Secretary of State of the State of Delaware on April 14, 2003. Prior to
April  14,  2003,  the  Evergreen  Income  Opportunity  Fund had been  named the
Evergreen Income Fund. The Certificate of Trust of the Evergreen Income Fund was
filed with the Secretary of State of the State of Delaware on April 10, 2003.

         The undersigned hereby certifies as follows:

     1. Name.  The name of the statutory  trust is the Evergreen  Managed Income
Fund (the "Trust").

     2. Registered  Investment Company. The Trust is or will become a registered
investment company under the Investment Company Act of 1940, as amended.

     3. Registered  Office and Registered  Agent.  The registered  office of the
Trust  and of the  registered  agent of the Trust in the  State of  Delaware  is
located at 1209  Orange  Street,  Wilmington,  Delaware  19801.  The name of the
registered  agent of the Trust for  service of process at such  location  is The
Corporation Trust Company.

     4. Notice of Limitation of  Liabilities  of Series.  Notice is hereby given
that the Trust is or may hereafter be  constituted  a series  trust.  The debts,
liabilities,  obligations,  and expenses  incurred,  contracted for or otherwise
existing with respect to any particular series of the Trust shall be enforceable
against the assets of such series only,  and not against the assets of the Trust
generally.

     5.  Reservation of Rights.  The trustees of the Trust,  as set forth in its
governing  instrument,  reserve the right to amend, alter, change, or repeal any
provisions  contained  in  this  Certificate  of  Trust,  in the  manner  now or
hereafter prescribed by statute.

     6.  Effective  Date.  This Amended and Restated  Certificate of Trust shall
become  effective  immediately  upon filing with the Office of the  Secretary of
State of the State of Delaware.

     IN WITNESS WHEREOF,  the undersigned,  being trustee of the Trust, has duly
executed this Amended and Restated  Certificate  of Trust as of the day and year
first above written.



                                               /s/ Michael H. Koonce

                                               Michael H. Koonce
                                               Trustee and not individually



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A 2
<SEQUENCE>4
<FILENAME>agreeanddecoftrust.txt
<TEXT>

                           SECOND AMENDED AND RESTATED


                       AGREEMENT AND DECLARATION OF TRUST


                                       of


                          EVERGREEN MANAGED INCOME FUND



                           a Delaware Statutory Trust


                          Principal Place of Business:

                               200 Berkeley Street
                           Boston, Massachusetts 02116



                              Agent for Service of
                              Process in Delaware:

                          The Corporation Trust Company
                          The Corporation Trust Center
                               1209 Orange Street
                           Wilmington, Delaware 19801

<PAGE>

                                TABLE OF CONTENTS

         SECOND AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST


ARTICLE I             Names and Definitions...................................1
         Section 1.   Name....................................................1
         Section 2.   Definitions.............................................1
ARTICLE II            Purpose of Trust........................................2
ARTICLE III           Shares..................................................3
         Section 1.   Division of Beneficial Interest.........................3
         Section 2.   Ownership of Shares.....................................4
         Section 3.   Transfer of Shares......................................4
         Section 4.   Investments in the Trust................................4
         Section 5.   Status of Shares and Limitation of Personal Liability...4
         Section 6.   Establishment, Designation, Abolition or Termination
                        etc. of Series or Class...............................5
ARTICLE IV            Trustees................................................7
         Section 1.   Number of Trustees; Initial Trustees....................7
         Section 2.   Term of Office of Trustees; Classes.....................7
         Section 3.   Effect of Death, Resignation, etc. of a Trustee.........8
         Section 4.   Powers..................................................8
         Section 5.   Payment of Expenses by the Trust.......................12
         Section 6.   Payment of Expenses by Shareholders....................12
         Section 7.   Ownership of Assets of the Trust.......................12
         Section 8.   Service Contracts......................................12
         Section 9.   Trustees and Officers as Shareholders..................13
         Section 10.  Compensation...........................................13
ARTICLE V             Shareholders' Voting Powers and Meetings...............14
         Section 1.   Voting Powers, Meetings, Notice, and Record Dates......14
         Section 2.   Quorum and Required Vote...............................14
         Section 3.   Record Dates...........................................14
         Section 4.   Additional Provisions..................................15
ARTICLE VI            Net Asset Value, Distributions and Redemptions.........15
         Section 1.   Determination of Net Asset Value, Net
                        Income and Distributions.............................15
         Section 2.   Redemptions............................................15
ARTICLE VII           Limitation of Liability; Indemnification...............15
         Section 1.   Trustees, Shareholders, etc. Not Personally
                        Liable; Notice.......................................15
         Section 2.   Trustees' Good Faith Action; Expert Advice;
                        No Bond or Surety....................................16
         Section 3.   Indemnification of Shareholders........................16
         Section 4.   Indemnification of Trustees, Officers, etc.............17
         Section 5.   Compromise Payment.....................................18
         Section 6.   Indemnification Not Exclusive, etc.....................18
         Section 7.   Liability of Third Persons Dealing with Trustees.......18
         Section 8.   Insurance..............................................18
ARTICLE VIII          Miscellaneous..........................................18
         Section 1.   Termination of the Trust...............................18
         Section 2.   Conversion to an Open-End Investment Company...........19
         Section 3.   Reorganization.........................................20
         Section 4.   Certain Transactions...................................20
         Section 5.   Amendments.............................................22
         Section 6.   Filing of Copies; References; Headings.................23
         Section 7.   Applicable Law.........................................23
         Section 8.   Provisions in Conflict with Law or Regulations.........23
         Section 9.   Statutory Trust Only...................................24





                    SECOND AMENDED AND RESTATED AGREEMENT AND
               DECLARATION OF TRUST EVERGREEN MANAGED INCOME FUND


     THIS SECOND AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST is made
and entered into as of the date set forth below by the Trustees named  hereunder
for the purpose of forming a Delaware  statutory  trust in  accordance  with the
provisions hereinafter set forth.

     NOW, THEREFORE, the Trustees hereby direct that the Certificate of Trust be
filed with the Office of the  Secretary of State of the State of Delaware and do
hereby  declare that the Trustees will hold IN TRUST all cash,  securities,  and
other assets which the Trust now possesses or may hereafter acquire from time to
time in any manner and manage and dispose of the same upon the  following  terms
and conditions for the benefit of the holders of Shares of this Trust.

                                   ARTICLE I
                              Names and Definitions

     Section 1. Name. This Trust shall be known as Evergreen Managed Income Fund
and the Trustees  shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.

     Section 2. Definitions.  Whenever used herein, unless otherwise required by
the context or specifically provided:

     (a) "Adviser(s)" means a party or parties furnishing  services to the Trust
pursuant to any investment advisory or investment  management contract described
in Article IV, Section 8(a) hereof;

     (b)  "By-Laws"  shall mean the By-Laws of the Trust as amended from time to
time,  which By-Laws are expressly  herein  incorporated by reference as part of
the "governing instrument" within the meaning of the Delaware Act;

     (c)  "Certificate  of Trust" means the  certificate of trust, as amended or
restated from time to time, filed by the Trustees in the Office of the Secretary
of State of the State of Delaware in accordance with the Delaware Act;

     (d) "Class" means a class of Shares of a Series of the Trust established in
accordance with the provisions of Article III hereof;

     (e) "Commission" shall have the meaning given such term in the 1940 Act;

     (f) "Declaration of Trust" means this Second Amended and Restated Agreement
and Declaration of Trust, as amended or restated from time to time;

     (g)  "Delaware  Act" means the Delaware  Statutory  Trust Act, 12 Del. Code
Ann. ss.ss. 3801 et seq., as amended from time to time;

     (h) "Interested Person" shall have the meaning given it in Section 2(a)(19)
of the 1940 Act;

     (i) "1940 Act" means the  Investment  Company Act of 1940 and the rules and
regulations thereunder, all as amended from time to time;

     (j) "Person" means and includes  individuals,  corporations,  partnerships,
trusts,  associations,  joint ventures,  estates, and other entities, whether or
not legal  entities,  and  governments  and agencies and political  subdivisions
thereof, whether domestic or foreign;

     (k) "Principal  Underwriter"  shall have the meaning given such term in the
1940 Act;

     (l) "Series" means each Series of Shares  established and designated  under
or in  accordance  with the  provisions  of Article  III  hereof;  and where the
context  requires or where  appropriate,  shall be deemed to include  "Class" or
"Classes";

     (m) "Shareholder" means a record owner of outstanding Shares;

     (n)  "Shares"  means  the  shares of  beneficial  interest  into  which the
beneficial interest in the Trust shall be divided from time to time and includes
fractions of Shares,  whole Shares as well as any preferred  shares or preferred
units of beneficial interest which may be issued from time to time;

     (o)  "Trust"  means the  Delaware  Statutory  Trust  established  under the
Delaware Act by this  Declaration of Trust and the filing of the  Certificate of
Trust in the Office of the Secretary of State of the State of Delaware;

     (p) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is from time to time owned or held by or for the account of
the Trust; and

     (q) "Trustees" means the Person or Persons who have signed this Declaration
of Trust and all other  Persons  who may from  time to time be duly  elected  or
appointed to serve as Trustees in accordance with the provisions hereof, in each
case so long as such  Person  shall  continue in office in  accordance  with the
terms of this  Declaration  of Trust,  and reference  herein to a Trustee or the
Trustees  shall refer to such Person or Persons in his or her or their  capacity
as Trustees hereunder.

                                   ARTICLE II
                                Purpose of Trust

     The purpose of the Trust is to conduct,  operate and carry on the  business
of an  investment  company  registered  under the 1940 Act  through  one or more
Series and to carry on such other business as the Trustees may from time to time
determine. The Trustees shall not be limited by any law limiting the investments
which may be made by fiduciaries.



                                  ARTICLE III
                                     Shares

     Section 1. Division of Beneficial Interest.  The beneficial interest in the
Trust shall be divided  into one or more  Series.  The  Trustees may divide each
Series into Classes.  Subject to the further  provisions of this Article III and
any applicable  requirements of the 1940 Act, the Trustees shall have full power
and authority, in their sole discretion, and without obtaining any authorization
or vote of the  Shareholders  of any Series or Class thereof,  (i) to divide the
beneficial interest in each Series or Class thereof into Shares, with or without
par  value  as the  Trustees  shall  determine,  (ii) to  issue  Shares  without
limitation as to number  (including  fractional  Shares) to such Persons and for
such amount and type of consideration,  including cash or securities, subject to
any  restriction  set  forth in the  By-Laws,  at such time or times and on such
terms as the Trustees may deem appropriate, (iii) to establish and designate and
to change in any manner any Series or Class thereof and to fix such preferences,
voting powers, rights, duties and privileges and business purpose of each Series
or  Class  thereof  as the  Trustees  may  from  time to time  determine,  which
preferences,  voting  powers,  rights,  duties and  privileges  may be senior or
subordinate to (or in the case of business purpose, different from) any existing
Series or Class thereof and may be limited to specified  property or obligations
of the Trust or  profits  and  losses  associated  with  specified  property  or
obligations of the Trust,  (iv) to divide or combine the Shares of any Series or
Class  thereof  into a  greater  or lesser  number  without  thereby  materially
changing the proportionate  beneficial  interest of the Shares of such Series or
Class thereof in the assets held with respect to that Series, (v) to classify or
reclassify  any issued  Shares of any Series or Class thereof into shares of one
or more  Series or  Classes  thereof;  (vi) to change  the name of any Series or
Class  thereof;  (vii) to abolish or terminate any one or more Series or Classes
thereof; (viii) to refuse to issue Shares to any Person or class of Persons; and
(ix) to take such other  action with  respect to the Shares as the  Trustees may
deem desirable.

     To the extent that the Trustees authorize and issue preferred shares of any
Class or Series, they are hereby authorized and empowered to amend or supplement
this Declaration of Trust,  including an amendment or modification to the rights
of any outstanding  Shares at the time of such amendment or supplement,  as they
deem necessary or appropriate,  including to comply with the requirements of the
1940 Act or requirements  imposed by the rating  agencies or other Persons,  all
without the approval of Shareholders.  Any such supplement or amendment shall be
filed as is necessary. The Trustees are also authorized to take such actions and
retain such persons as they see fit to offer and sell such securities.

     Subject to the  distinctions  permitted among Classes of the same Series as
established by the Trustees,  consistent with the  requirements of the 1940 Act,
each Share of a Series of the Trust shall represent an equal beneficial interest
in the net assets of such Series, and each holder of Shares of a Series shall be
entitled to receive such Shareholder's pro rata share of distributions of income
and capital gains,  if any, made with respect to such Series and upon redemption
of the Shares of any Series,  such  Shareholder  shall be paid solely out of the
funds and property of such Series of the Trust.

     All references to Shares in this Declaration of Trust shall be deemed to be
Shares of any or all Series or Classes thereof, as the context may require.  All
provisions  herein  relating to the Trust shall apply  equally to each Series of
the Trust and each Class thereof, except as the context otherwise requires.

     All Shares issued hereunder,  including, without limitation,  Shares issued
in  connection  with a dividend  or other  distribution  in Shares or a split or
reverse  split of  Shares,  shall be fully  paid and  nonassessable.  Except  as
otherwise  provided by the  Trustees,  Shareholders  shall have no preemptive or
other right to subscribe to any additional  Shares or other securities issued by
the Trust.

     Section 2.  Ownership of Shares.  The ownership of Shares shall be recorded
on the books of the Trust or those of a transfer or similar agent for the Trust,
which  books  shall be  maintained  separately  for the Shares of each Series or
Class of the Trust. No certificates  certifying the ownership of Shares shall be
issued except as the Trustees may  otherwise  determine  from time to time.  The
Trustees may make such rules as they  consider  appropriate  for the issuance of
Share certificates,  the transfer of Shares of each Series or Class of the Trust
and similar  matters.  The record books of the Trust as kept by the Trust or any
transfer or similar  agent,  as the case may be, shall be  conclusive  as to the
identity of the  Shareholders of each Series or Class of the Trust and as to the
number of Shares of each  Series or Class of the Trust held from time to time by
each Shareholder.

     Section  3.  Transfer  of  Shares.  Except  as  otherwise  provided  by the
Trustees,  Shares  shall be  transferable  on the books of the Trust only by the
record holder  thereof or by his or her duly  authorized  agent upon delivery to
the Trustees or the Trust's  transfer  agent of a duly  executed  instrument  of
transfer,  together with a Share  certificate  if one is  outstanding,  and such
evidence of the genuineness of each such execution and authorization and of such
other  matters as may be  required  by the  Trustees.  Upon such  delivery,  and
subject to any further  requirements  specified  by the Trustees or contained in
the By-Laws,  the transfer shall be recorded on the books of the Trust.  Until a
transfer is so  recorded,  the holder of record of Shares  shall be deemed to be
the holder of such Shares for all  purposes  hereunder  and neither the Trustees
nor the Trust, nor any transfer agent or registrar or any officer,  employee, or
agent of the Trust, shall be affected by any notice of a proposed transfer.

     Section 4.  Investments  in the Trust.  Investments  may be accepted by the
Trust from Persons,  at such times, on such terms, and for such consideration as
the Trustees from time to time may authorize.

     Section 5. Status of Shares and  Limitation of Personal  Liability.  Shares
shall be deemed to be personal  property giving only the rights provided in this
instrument.  Every Shareholder by virtue of having become a Shareholder shall be
held to have  expressly  assented  and  agreed to the terms  hereof.  The death,
incapacity, dissolution,  termination, or bankruptcy of a Shareholder during the
existence of the Trust shall not operate to terminate the Trust, nor entitle the
representative of any such Shareholder to an accounting or to take any action in
court or elsewhere  against the Trust or the  Trustees,  but shall  entitle such
representative  only  to the  rights  of  such  Shareholder  under  this  Trust.
Ownership of Shares shall not entitle the  Shareholder to any title in or to the
whole or any part of the Trust Property or any right to call for a participation
or division of the same or for an accounting,  nor shall the ownership of Shares
constitute the  Shareholders  as partners.  No  Shareholder  shall be personally
liable  for the  debts,  liabilities,  obligations  and  expenses  incurred  by,
contracted for, or otherwise  existing with respect to, the Trust or any Series.
Neither the Trust nor the Trustees,  nor any officer,  employee, or agent of the
Trust shall have any power to bind  personally any  Shareholder,  nor, except as
specifically  provided  herein,  to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay.

     Section 6.  Establishment,  Designation,  Abolition or Termination  etc. of
Series or Class.  The  establishment  and  designation of any Series or Class of
Shares of the Trust shall be  effective  upon the  adoption by a majority of the
Trustees then in office of a resolution that sets forth such  establishment  and
designation  and the relative  rights and preferences of such Series or Class of
the Trust,  whether  directly  in such  resolution  or by  reference  to another
document including, without limitation, any registration statement of the Trust,
or as otherwise provided in such resolution. The abolition or termination of any
Series or Class of Shares of the Trust shall be effective upon the adoption by a
majority  of the  Trustees  then in office of a  resolution  that  abolishes  or
terminates such Series or Class.

     Shares of each  Series or Class of the Trust  established  pursuant to this
Article III,  unless  otherwise  provided in the  resolution  establishing  such
Series or Class, shall have the following relative rights and preferences:

     (a) Assets Held with  Respect to a  Particular  Series.  All  consideration
received  by the Trust for the issue or sale of Shares of a  particular  Series,
together with all assets in which such  consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof from whatever source derived
(including,  without limitation, any proceeds derived from the sale, exchange or
liquidation  of  such  assets  and  any  funds  or  payments  derived  from  any
reinvestment  of  such  proceeds  in  whatever  form  the  same  may  be)  shall
irrevocably  be held separate with respect to that Series for all purposes,  and
shall be so recorded upon the books of account of the Trust. Such consideration,
assets,  income,  earnings,  profits and proceeds thereof,  from whatever source
derived,  (including,  without  limitation) any proceeds  derived from the sale,
exchange or liquidation of such assets,  and any funds or payments  derived from
any reinvestment of such proceeds), in whatever form the same may be, are herein
referred  to as "assets  held with  respect to" that  Series.  In the event that
there are any assets, income,  earnings,  profits and proceeds thereof, funds or
payments which are not readily  identifiable  as assets held with respect to any
particular Series (collectively  "General Assets"),  the Trustees shall allocate
such General  Assets to,  between or among any one or more of the Series in such
manner and on such basis as the Trustees,  in their sole  discretion,  deem fair
and equitable,  and any General Assets so allocated to a particular Series shall
be held with respect to that Series.  Each such allocation by the Trustees shall
be conclusive and binding upon the  Shareholders of all Series for all purposes.
Separate and  distinct  records  shall be  maintained  for each Series,  and the
assets  held  with  respect  to each  Series  shall  be held and  accounted  for
separately from the assets held with respect to all other Series and the General
Assets of the Trust not allocated to such Series.

     (b) Liabilities Held with Respect to a Particular Series. The assets of the
Trust held with respect to each  particular  Series shall be charged against the
liabilities  of the Trust  held with  respect to that  Series and all  expenses,
costs,   charges,  and  reserves   attributable  to  that  Series,  except  that
liabilities and expenses  allocated  solely to a particular Class shall be borne
by that  Class.  Any  general  liabilities  of the Trust  which are not  readily
identifiable as being held with respect to any particular  Series or Class shall
be  allocated  and  charged by the  Trustees to and among any one or more of the
Series or Classes in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. All liabilities,  expenses,  costs, charges,
and  reserves  so  charged  to a  Series  or Class  are  herein  referred  to as
"liabilities  held with  respect to" that Series or Class.  Each  allocation  of
liabilities,  expenses,  costs,  charges,  and reserves by the Trustees shall be
conclusive  and binding upon the  Shareholders  of all Series or Classes for all
purposes.  Without  limiting  the  foregoing,  but  subject  to the right of the
Trustees to allocate general liabilities,  expenses,  costs, charges or reserves
as herein provided, the debts,  liabilities,  obligations and expenses incurred,
contracted for or otherwise  existing with respect to a particular  Series shall
be enforceable  against the assets held with respect to such Series only and not
against  the  assets of the Trust  generally  or against  the  assets  held with
respect  to  any  other  Series.  Notice  of  this  contractual   limitation  on
liabilities among Series may, in the Trustees'  discretion,  be set forth in the
Certificate  of Trust and upon the giving of such notice in the  Certificate  of
Trust, the statutory  provisions of Section 3804 of the Delaware Act relating to
limitations on liabilities  among Series (and the statutory effect under Section
3804 of setting  forth such notice in the  certificate  of trust)  shall  become
applicable  to the  Trust and each  Series.  Any  person  extending  credit  to,
contracting  with or having  any claim  against  any Series may look only to the
assets of that  Series to  satisfy  or enforce  any debt,  with  respect to that
Series. No Shareholder or former Shareholder of any Series shall have a claim on
or any right to any assets allocated or belonging to any other Series.

     (c) Dividends, Distributions, Redemptions, and Repurchases. Notwithstanding
any  other  provisions  of  this  Declaration  of  Trust,   including,   without
limitation,  Article  VI,  no  dividend  or  distribution,   including,  without
limitation, any distribution paid upon termination of the Trust or of any Series
or Class with respect to, nor any redemption or repurchase of, the Shares of any
Series or Class,  shall be effected by the Trust other than from the assets held
with respect to such Series,  nor shall any Shareholder or any particular Series
or Class  otherwise have any right or claim against the assets held with respect
to any other Series except to the extent that such  Shareholder has such a right
or claim  hereunder as a Shareholder  of such other Series.  The Trustees  shall
have full  discretion,  to the extent  not  inconsistent  with the 1940 Act,  to
determine which items shall be treated as income and which items as capital, and
each such  determination and allocation shall be conclusive and binding upon the
Shareholders.

     (d) Equality.  All the Shares of each particular  Series shall represent an
equal  proportionate  interest  in the assets  held with  respect to that Series
(subject to the  liabilities  held with respect to that Series or Class  thereof
and such rights and preferences as may have been established and designated with
respect to any Class  within  such  Series),  and each  Share of any  particular
Series  shall be equal to each other Share of that  Series.  With respect to any
Class of a Series,  each such Class shall represent interests in the assets held
with  respect  to  that  Series  and  shall  have  identical  voting,  dividend,
liquidation  and other  rights and the same terms and  conditions,  except  that
expenses allocated to a Class may be borne solely by such Class as determined by
the  Trustees  and a Class may have  exclusive  voting  rights  with  respect to
matters affecting only that Class.

     (e)  Fractions.  Any  fractional  Share of a Series or Class  thereof shall
carry  proportionately  all the rights and  obligations of a whole Share of that
Series or Class,  including rights with respect to voting,  receipt of dividends
and distributions, redemption of Shares and termination of the Trust.

     (f) Exchange  Privilege.  The Trustees  shall have the authority to provide
that the  holders  of Shares  of any  Series  or Class  shall  have the right to
exchange  said Shares for Shares of one or more other  Series of Shares or Class
of Shares of the Trust or of other  investment  companies  registered  under the
1940  Act  in  accordance  with  such  requirements  and  procedures  as  may be
established by the Trustees.

     (g) Combination of Series.  The Trustees shall have the authority,  without
the  approval  of the  Shareholders  of any  Series  or Class  unless  otherwise
required by  applicable  law, to combine  the assets and  liabilities  held with
respect to any two or more Series or Classes  into assets and  liabilities  held
with respect to a single Series or Class.

                                   ARTICLE IV
                                    Trustees

     Section 1. Number of  Trustees;  Initial  Trustees.  The number of Trustees
shall initially be 1 who shall be Michael H. Koonce.  Thereafter,  the number of
Trustees  shall at all times be at least  one and no more  than  such  number as
determined,  from time to time,  by the  Trustees  pursuant to Section 4 of this
Article IV.

     Section 2. Term of Office of Trustees; Classes.

     (a) Subject to the voting rights  established  with respect to a particular
Series or Class,  each Trustee shall hold office for life or until his successor
is elected or the Trust terminates. Notwithstanding the foregoing but subject to
the voting rights  established with respect to a particular Series or Class, (1)
any Trustee may resign at any time by  delivering to any officer of the Trust or
to a meeting of the Trustees a written instrument signed by him or her effective
upon such delivery unless  specified to be effective at some other time; (2) any
Trustee may be removed with cause at any time by a written  instrument signed by
at least  three-quarters of the then Trustees,  specifying the effective date of
removal; (3) any Trustee who requests to be retired, or who is declared bankrupt
or has become  physically or mentally  incapacitated  or is otherwise  unable to
serve, may be retired by a written  instrument signed by a majority of the other
Trustees,  specifying the effective date of retirement;  and (4) any Trustee may
be removed,  with or without cause, by a vote of at least a majority of the then
Trustees if such  removal is approved by the holders of at least  three-quarters
of the outstanding  Shares entitled to vote with respect to the election of such
Trustee  and  present  in person or by proxy at a  meeting  of the  Shareholders
called for such purpose.  In the event that less than a majority of the Trustees
holding  office have been  elected by the  Shareholders,  the  Trustees  then in
office shall take such actions as may be necessary under  applicable law for the
election  of  Trustees.  Except to the extent  expressly  provided  in a written
agreement with the Trust, no Trustee resigning and no Trustee removed shall have
any right to any compensation for any period following his or her resignation or
removal, or any right to damages on account of such removal.

     (b) The Board of Trustees shall be divided into three  classes,  designated
Class I, Class II and Class III. Each class shall  consist,  as nearly as may be
possible,  of one-third of the total number of trustees  constituting the entire
Board of Trustees. Within the limits above specified, the number of the Trustees
in each class shall be determined  by  resolution of the Board of Trustees.  The
Trustees may also  determine  by  resolution  those  Trustees in each Class that
shall be elected by  Shareholders  of a particular  class of Shares (e.g.,  by a
class of preferred Shares).  The term of office of the 1st class shall expire on
the date of the 1st annual meeting of  Shareholders  or special  meeting in lieu
thereof following the effective date of the Registration  Statement  relating to
the Shares under the  Securities  Act of 1933 (the "1933 Act").  The term of the
2nd class shall expire on the date of the 2nd annual meeting of  Shareholders or
special meeting in lieu thereof following the effective date of the Registration
Statement  relating to the Shares  under the 1933 Act. The term of the 3rd class
shall expire on the date of the 3rd annual  meeting of  Shareholders  or special
meeting  in lieu  thereof  following  the  effective  date  of the  Registration
Statement relating to the Shares under the 1933 Act. Upon expiration of the term
of office of each  class as set forth  above,  the  number of  Trustees  in such
class,  as  determined  by the Board of  Trustees,  shall be elected  for a term
expiring  on the date of the 3rd  annual  meeting  of  Shareholders  or  special
meeting in lieu thereof  following such expiration to succeed the Trustees whose
terms of office  expire.  The Trustees  shall be elected at an annual meeting of
the Shareholders or special meeting in lieu thereof called for that purpose.

     Section 3.  Effect of Death,  Resignation,  etc.  of a Trustee.  The death,
declination to serve, resignation,  retirement,  removal or incapacity of one or
more Trustees, or all of them, shall not operate to annul the Trust or to revoke
any existing agency created  pursuant to the terms of this Declaration of Trust.
Whenever  there shall be fewer than the  designated  number of  Trustees,  until
additional  Trustees are elected or  appointed  as provided  herein to bring the
total number of Trustees equal to the designated number, the Trustees in office,
regardless  of their number,  shall have all the powers  granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by this Declaration
of  Trust.  As  conclusive  evidence  of  such  vacancy,  a  written  instrument
certifying  the  existence  of such vacancy may be executed by an officer of the
Trust or by a majority of the Trustees. In the event of the death,  declination,
resignation,  retirement, removal, or incapacity of all the then Trustees within
a short  period of time and  without  the  opportunity  for at least one Trustee
being able to appoint  additional  Trustees to replace those no longer  serving,
the Trust's  Adviser(s)  are  empowered to appoint new  Trustees  subject to the
provisions of the 1940 Act.

     Section 4. Powers.  Subject to the provisions of this Declaration of Trust,
the  business of the Trust shall be managed by the  Trustees,  and the  Trustees
shall have all powers  necessary or convenient to carry out that  responsibility
including  the  power to engage  in  transactions  of all kinds on behalf of the
Trust as described in this Declaration of Trust. Without limiting the foregoing,
the Trustees may: adopt By-Laws not inconsistent  with this Declaration of Trust
providing  for the  management  of the  affairs  of the  Trust and may amend and
repeal such By-Laws to the extent that such By-Laws do not reserve that right to
the Shareholders;  enlarge or reduce the number of Trustees;  remove any Trustee
with cause at any time by written  instrument signed by at least  three-quarters
of the then  Trustees  prior to such  removal,  specifying  the date  when  such
removal shall become  effective,  and fill  vacancies  caused by  enlargement of
their number or by the death,  resignation,  retirement or removal of a Trustee;
elect and remove, with or without cause, such officers and appoint and terminate
such  agents as they  consider  appropriate;  appoint  from their own number and
establish  and  terminate  one or  more  committees,  consisting  of two or more
Trustees, that may exercise the powers and authority of the Board of Trustees to
the extent that the Trustees so determine;  employ one or more custodians of the
assets of the Trust and may authorize  such  custodians to employ  subcustodians
and to deposit  all or any part of such  assets in a system or  systems  for the
central  handling  of  securities  or with a  Federal  Reserve  Bank;  employ an
administrator  for the  Trust and may  authorize  such  administrator  to employ
subadministrators;  employ an investment  adviser or investment  advisers to the
Trust and may authorize such Advisers to employ  subadvisers;  retain a transfer
agent or a shareholder  servicing  agent, or both;  provide for the issuance and
distribution  of Shares by the Trust  directly or through one or more  Principal
Underwriters  or otherwise;  redeem,  repurchase and transfer Shares pursuant to
applicable  law; set record dates for the  determination  of  Shareholders  with
respect to various  matters;  declare and pay  dividends  and  distributions  to
Shareholders  of each  Series  from the  assets of such  Series;  and in general
delegate such authority as they consider  desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of the Trust or to
any such  custodian,  transfer or  shareholder  servicing  agent,  or  Principal
Underwriter.  Any determination as to what is in the interests of the Trust made
by the Trustees in good faith shall be conclusive.  In construing the provisions
of this  Declaration of Trust,  the presumption  shall be in favor of a grant of
power to the Trustees.  Unless  otherwise  specified herein or in the By-Laws or
required  by law,  any  action  by the  Trustees  shall be deemed  effective  if
approved or taken by a majority of the Trustees present at a meeting of Trustees
at which a quorum  of  Trustees  is  present,  within  or  without  the State of
Delaware.

     Without  limiting  the  foregoing,  the  Trustees  shall have the power and
authority to cause the Trust (or to act on behalf of the Trust):

     (a) To invest and reinvest cash, to hold cash uninvested,  and to subscribe
for, invest in, reinvest in, purchase or otherwise  acquire,  own, hold, pledge,
sell,  assign,  transfer,  exchange,  distribute,  write  options  on,  lend  or
otherwise deal in or dispose of contracts for the future acquisition or delivery
of fixed income or other  securities,  and  securities of every nature and kind,
including,   without  limitation,  all  types  of  bonds,  debentures,   stocks,
negotiable   or   non-negotiable   instruments,    obligations,   evidences   of
indebtedness,  certificates  of  deposit  or  indebtedness,  commercial  papers,
repurchase agreements,  bankers' acceptances,  and other securities of any kind,
issued,  created,  guaranteed,  or sponsored  by any and all Persons,  including
without limitation,  states,  territories,  and possessions of the United States
and  the  District  of  Columbia  and  any  political  subdivision,  agency,  or
instrumentality  thereof, any foreign government or any political subdivision of
the United States  Government or any foreign  government,  or any  international
instrumentality, or by any bank or savings institution, or by any corporation or
organization  organized  under the laws of the  United  States or of any  state,
territory,  or  possession  thereof,  or  by  any  corporation  or  organization
organized  under any foreign  law, or in "when  issued"  contracts  for any such
securities,  to  change  the  investments  of the  assets of the  Trust;  and to
exercise any and all rights,  powers, and privileges of ownership or interest in
respect  of any  and  all  such  investments  of  every  kind  and  description,
including,  without  limitation,  the right to consent  and  otherwise  act with
respect thereto,  with power to designate one or more Persons to exercise any of
said rights, powers, and privileges in respect of any of said instruments;

     (b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or write
options  (including,  options on futures contracts) with respect to or otherwise
deal in any property rights relating to any or all of the assets of the Trust or
any Series;

     (c) To vote or give  assent,  or  exercise  any rights of  ownership,  with
respect to stock or other  securities  or  property;  and to execute and deliver
proxies or powers of attorney to such  Person or Persons as the  Trustees  shall
deem proper,  granting to such Person or Persons such power and discretion  with
relation to securities or property as the Trustees shall deem proper;

     (d) To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities;

     (e) To hold any  security or property in a form not  indicating  any trust,
whether in bearer,  unregistered or other negotiable form, or in its own name or
in the  name  of a  custodian  or  subcustodian  or a  nominee  or  nominees  or
otherwise;

     (f) To  consent  to or  participate  in any  plan  for the  reorganization,
consolidation  or merger of any  corporation  or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such  corporation  or issuer;  and to pay calls or  subscriptions
with respect to any security held in the Trust;

     (g) To join with  other  security  holders in acting  through a  committee,
depositary,  voting trustee or otherwise,  and in that connection to deposit any
security  with, or transfer any security to, any such  committee,  depositary or
trustee,  and to delegate to them such power and authority  with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper,  and to agree to pay,  and to pay,  such  portion  of the  expenses  and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;

     (h) To  compromise,  arbitrate  or otherwise  adjust  claims in favor of or
against the Trust or any matter in controversy,  including,  but not limited to,
claims for taxes;

     (i) To enter into joint ventures,  general or limited  partnerships and any
other combinations or associations;

     (j) To borrow funds or other property in the name of the Trust  exclusively
for Trust purposes and in connection therewith to issue notes or other evidences
of  indebtedness;  and to  mortgage  and pledge the Trust  Property  or any part
thereof to secure any or all of such indebtedness;

     (k) To endorse or guarantee  the payment of any notes or other  obligations
of any Person; to make contracts of guaranty or suretyship,  or otherwise assume
liability for payment thereof;  and to mortgage and pledge the Trust Property or
any part thereof to secure any of or all of such obligations;

     (l) To purchase and pay for entirely out of Trust  Property such  insurance
as the  Trustees  may deem  necessary  or  appropriate  for the  conduct  of the
business, including, without limitation,  insurance policies insuring the assets
of the  Trust  or  payment  of  distributions  and  principal  on its  portfolio
investments,   and  insurance  polices  insuring  the  Shareholders,   Trustees,
officers,  employees,  agents, investment advisers,  principal underwriters,  or
independent  contractors  of the  Trust,  individually  against  all  claims and
liabilities of every nature  arising by reason of holding,  being or having held
any such  office or  position,  or by reason of any action  alleged to have been
taken or  omitted  by any such  Person as  Trustee,  officer,  employee,  agent,
investment adviser, principal underwriter, or independent contractor,  including
any action taken or omitted that may be  determined  to  constitute  negligence,
whether or not the Trust would have the power to indemnify  such Person  against
liability;

     (m) To adopt, establish and carry out pension, profit-sharing, share bonus,
share  purchase,  savings,  thrift and other  retirement,  incentive and benefit
plans and  trusts,  including  the  purchasing  of life  insurance  and  annuity
contracts as a means of providing such retirement and other benefits, for any or
all of the Trustees, officers, employees and agents of the Trust;

     (n) To operate as and carry out the business of an investment company,  and
exercise  all  the  powers  necessary  or  appropriate  to the  conduct  of such
operations;

     (o) To enter into contracts of any kind and description;

     (p) To employ as  custodian  of any assets of the Trust one or more  banks,
trust companies or companies that are members of a national  securities exchange
or such other  entities as the Commission may permit as custodians of the Trust,
subject  to any  conditions  set  forth in this  Declaration  of Trust or in the
By-Laws;

     (q) To employ  auditors,  counsel or other agents of the Trust,  subject to
any conditions set forth in this Declaration of Trust or in the By-Laws;

     (r) To interpret the investment policies,  practices, or limitations of any
Series or Class;

     (s) To  establish  separate  and distinct  Series with  separately  defined
investment  objectives and policies and distinct investment  purposes,  and with
separate  Shares  representing  beneficial  interests  in  such  Series,  and to
establish  separate  Classes,  all in accordance  with the provisions of Article
III;

     (t) To the full extent  permitted by the Delaware Act, to allocate  assets,
liabilities  and  expenses of the Trust to a  particular  Series and Class or to
apportion the same between or among two or more Series or Classes, provided that
any  liabilities or expenses  incurred by a particular  Series or Class shall be
payable  solely out of the assets  belonging to that Series or Class as provided
for in Article III;

     (u) To invest all of the  assets of the  Trust,  or any Series or any Class
thereof in a single investment
company;

     (v) Subject to the 1940 Act, to engage in any other  lawful act or activity
in which a statutory trust organized under the Delaware Act may engage.

     The Trust shall not be limited to investing in obligations  maturing before
the possible  termination  of the Trust or one or more of its Series.  The Trust
shall not in any way be bound or limited by any  present or future law or custom
in regard to  investment  by  fiduciaries.  The Trust  shall not be  required to
obtain  any court  order to deal with any  assets of the Trust or take any other
action hereunder.

     Section 5. Payment of Expenses by the Trust. The Trustees are authorized to
pay or cause to be paid out of the  principal or income of the Trust,  or partly
out of the principal and partly out of income,  as they deem fair, all expenses,
fees, charges,  taxes and liabilities incurred or arising in connection with the
Trust, or in connection with the management thereof,  including, but not limited
to, the Trustees' compensation and such expenses and charges for the services of
the Trust's officers,  employees,  Advisers,  Principal  Underwriter,  auditors,
counsel, custodian,  transfer agent, shareholder servicing agent, and such other
agents or  independent  contractors  and such other  expenses and charges as the
Trustees may deem necessary or proper to incur, which expenses,  fees,  charges,
taxes and liabilities shall be allocated in accordance with Article III, Section
6 hereof.

     Section 6. Payment of Expenses by Shareholders. The Trustees shall have the
power, as frequently as they may determine,  to cause each Shareholder,  or each
Shareholder of any particular  Series,  to pay directly,  in advance or arrears,
expenses of the Trust as described in Section 5 of this Article IV ("Expenses"),
in an  amount  fixed  from time to time by the  Trustees,  by  setting  off such
Expenses due from such  Shareholder from declared but unpaid dividends owed such
Shareholder  and/or by  reducing  the  number of Shares in the  account  of such
Shareholder by that number of full and/or fractional Shares which represents the
outstanding amount of such Expenses due from such Shareholder, provided that the
direct payment of such Expenses by Shareholders  is permitted  under  applicable
law.

     Section 7. Ownership of Assets of the Trust.  Title to all of the assets of
the Trust shall at all times be considered  as vested in the Trust,  except that
the Trustees  shall have power to cause legal title to any Trust  Property to be
held by or in the  name of one or more of the  Trustees,  or in the  name of the
Trust,  or in the name of any other  Person  as  nominee,  on such  terms as the
Trustees  may  determine.  The right,  title and interest of the Trustees in the
Trust Property shall vest  automatically in each Person who may hereafter become
a Trustee. Upon the resignation,  removal or death of a Trustee, he or she shall
automatically  cease to have any right,  title or  interest  in any of the Trust
Property,  and the  right,  title  and  interest  of such  Trustee  in the Trust
property shall vest  automatically in the remaining  Trustees.  Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.

     Section 8. Service Contracts.

     (a) Subject to such requirements and restrictions as may be set forth under
federal and/or state law and in the By-Laws, including,  without limitation, the
requirements  of Section 15 of the 1940 Act, the  Trustees  may, at any time and
from time to time, contract for exclusive or nonexclusive  advisory,  management
and/or  administrative  services  for the  Trust  or for any  Series  (or  Class
thereof)  with any Person and any such  contract may contain such other terms as
the Trustees may determine,  including,  without  limitation,  authority for the
Adviser(s) or  administrator to delegate certain or all of its duties under such
contracts  to other  qualified  investment  advisers and  administrators  and to
determine  from time to time without prior  consultation  with the Trustees what
investments shall be purchased, held sold or exchanged and what portion, if any,
of the assets of the Trust shall be held  uninvested  and to make changes in the
Trust's  investments,  or such other activities as may specifically be delegated
to such party.

     (b) The Trustees may also, at any time and from time to time, contract with
any Person,  appointing  such Person  exclusive or  nonexclusive  distributor or
Principal  Underwriter  for the Shares of one or more of the Series (or Classes)
or other securities to be issued by the Trust.

     (c) The Trustees are also empowered,  at any time and from time to time, to
contract  with any Person,  appointing  such  Person or Persons  the  custodian,
transfer agent and/or  shareholder  servicing agent for the Trust or one or more
of its Series.

     (d) The Trustees are further empowered,  at any time and from time to time,
to contract  with any Person to provide such other  services to the Trust or one
or more of the Series, as the Trustees  determine to be in the best interests of
the Trust and the applicable Series.

     (e) The fact that:

(i)  any  of  the  Shareholders,  Trustees,  or  officers  of  the  Trust  is  a
     shareholder,   director,  officer,  partner,  trustee,  employee,  Adviser,
     Principal  Underwriter,  distributor,  or  affiliate or agent of or for any
     Person,  or for any  parent  or  affiliate  of any  Person  with  which  an
     advisory,    management,   or   administration   contract,   or   Principal
     Underwriter's or  distributor's  contract,  or transfer agent,  shareholder
     servicing  agent or other  type of  service  contract  may have been or may
     hereafter  be  made,  or that  any  such  organization,  or any  parent  or
     affiliate  thereof,  is a Shareholder  or has an interest in the Trust;  or
     that

(ii) any Person with which an advisory,  management,  or administration contract
     or Principal  Underwriter's or distributor's contract, or transfer agent or
     shareholder servicing agent contract may have been or may hereafter be made
     also has an advisory,  management, or administration contract, or Principal
     Underwriter's  or  distributor's or other service contract with one or more
     other Persons, or has other business or interests,

     shall not affect the validity of any such contract or  disqualify  any
     Shareholder,  Trustee or officer of the Trust from voting upon or executing
     the same, or create any liability or accountability to the Trust or its
     shareholders.

     Section 9. Trustees and Officers as Shareholders.  Any Trustee,  officer or
agent of the Trust may acquire,  own and dispose of Shares to the same extent as
if he or she were not a Trustee,  officer or agent;  and the  Trustees may issue
and sell and cause to be issued and sold Shares to, and redeem such Shares from,
any such  Person or any firm or  company  in which  such  Person is  interested,
subject  only to the  general  limitations  contained  herein or in the  By-Laws
relating to the sale and redemption of such Shares.

     Section 10.  Compensation.  The Trustees in such capacity shall be entitled
to  reasonable  compensation  from the Trust and they may fix the amount of such
compensation.  Nothing  herein  shall in any way prevent the  employment  of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for such services by the Trust.

                                   ARTICLE V
                    Shareholders' Voting Powers and Meetings

     Section  1.  Voting  Powers,  Meetings,   Notice,  and  Record  Dates.  The
Shareholders  shall have power to vote only:  (i) for the election or removal of
Trustees as provided in Article IV,  Section 2 hereof,  and (ii) with respect to
such additional  matters  relating to the Trust as may be required by applicable
law, this Declaration of Trust, the By-Laws or any registration statement of the
Trust with the  Commission  (or any  successor  agency) or as the  Trustees  may
consider necessary or desirable.  Shareholders shall be entitled to one vote for
each dollar,  and a fractional vote for each fraction of a dollar,  of net asset
value per  Share for each  Share  held,  as to any  matter on which the Share is
entitled to vote.  Notwithstanding  any other  provision of this  Declaration of
Trust, on any matters submitted to a vote of the Shareholders, all shares of the
Trust  then  entitled  to vote  shall be voted in  aggregate,  except:  (i) when
required by the 1940 Act, Shares shall be voted by individual Series;  (ii) when
the matter  involves any action that the Trustees  have  determined  will affect
only the interests of one or more Series,  then only Shareholders of such Series
shall be entitled to vote thereon; and (iii) when the matter involves any action
that the Trustees have  determined will affect only the interests of one or more
Classes,  then only the  Shareholders of such Class or Classes shall be entitled
to vote  thereon.  There  shall  be no  cumulative  voting  in the  election  of
Trustees.  Shares  may be voted in person  or by proxy.  A proxy may be given in
writing. The By-Laws may provide that proxies may also, or may instead, be given
by an electronic  or  telecommunications  device or in any other  manner.  Until
Shares are issued,  the Trustees may exercise all rights of Shareholders and may
take any action required by law, this  Declaration of Trust or the By-Laws to be
taken by the  Shareholders.  Meetings  of the  Shareholders  shall be called and
notice  thereof and record dates  therefor shall be given and set as provided in
the By-Laws.

     Section  2.  Quorum  and  Required  Vote.  Except  when a larger  quorum is
required by  applicable  law, by the  By-Laws or by this  Declaration  of Trust,
thirty-three  and a third percent (33 1/3%) of the Shares issued and outstanding
shall constitute a quorum at a Shareholders' meeting but any lesser number shall
be sufficient for adjourned  sessions.  When any one or more Series (or Classes)
is to vote as a  single  Series  (or  Class)  separate  from any  other  Shares,
thirty-three and a third percent (33 1/3%) of the Shares of each such Series (or
Class)  issued and  outstanding  shall  constitute  a quorum at a  Shareholders'
meeting of that Series (or Class).  Except when a larger vote is required by any
provision of this Declaration of Trust or the By-Laws or by applicable law, when
a quorum is present at any meeting,  a majority of the Shares voted shall decide
any  questions  and a  plurality  of the  Shares  voted  shall  elect a Trustee,
provided  that  where  any  provision  of law or of this  Declaration  of  Trust
requires  that the holders of any Series shall vote as a Series (or that holders
of a Class shall vote as a Class),  then a majority of the Shares of that Series
(or Class) voted on the matter (or a plurality with respect to the election of a
Trustee)  shall  decide  that  matter  insofar  as that  Series  (or  Class)  is
concerned.

     Section 3. Record Dates. For the purpose of determining the Shareholders of
any Series (or Class) who are entitled to receive  payment of any dividend or of
any other  distribution,  the Trustees  may from time to time fix a date,  which
shall be before the date for the payment of such dividend or such other payment,
as the record date for  determining  the  Shareholders of such Series (or Class)
having the right to receive  such  dividend or  distribution.  Without  fixing a
record date,  the Trustees may for  distribution  purposes close the register or
transfer  books for one or more  Series  (or  Classes)  at any time prior to the
payment  of a  distribution.  Nothing  in this  Section  shall be  construed  as
precluding the Trustees from setting different record dates for different Series
(or Classes).

     Section  4.  Additional   Provisions.   The  By-Laws  may  include  further
provisions for Shareholders' votes and meetings and related matters.

                                   ARTICLE VI
                 Net Asset Value, Distributions and Redemptions

     Section 1.  Determination of Net Asset Value, Net Income and Distributions.
Subject to applicable law and Article III,  Section 6 hereof,  the Trustees,  in
their absolute  discretion,  may prescribe and shall set forth in the By-Laws or
in a duly adopted vote of the Trustees such bases and time for  determining  the
per Share or net asset  value of the Shares of any Series or Class or net income
attributable  to the  Shares  of any  Series or Class,  or the  declaration  and
payment of dividends and  distributions on the Shares of any Series or Class, as
they may deem necessary or desirable.

     Section 2.  Redemptions.  Except as provided  with  respect to a particular
Class in the By-laws or the resolutions  establishing such Class,  Shares of the
Trust will not be redeemed or repurchased  by the Trust,  except as the Trustees
shall  determine from time to time and the Trust shall be under no obligation to
redeem or repurchase  Shares. The Trustees may specify  conditions,  prices, and
places of redemption,  may specify binding  requirements  for the proper form or
forms of requests  for  redemption  and may  specify the amount of any  deferred
sales charge to be withheld from redemption proceeds.  Payment of the redemption
price may be wholly or partly in securities or other assets at the value of such
securities or assets used in such determination of net asset value, or may be in
cash.  Upon  redemption,  Shares may be reissued from time to time. The Trustees
may require  Shareholders to redeem Shares for any reason under terms set by the
Trustees,  including, but not limited to, the failure of a Shareholder to supply
a taxpayer  identification  number if  required to do so, or to have the minimum
investment  required,  or to pay when due for the  purchase of Shares  issued to
him. To the extent permitted by law, the Trustees may retain the proceeds of any
redemption of Shares  required by them for payment of amounts due and owing by a
Shareholder to the Trust or any Series or Class or any  governmental  authority.
Notwithstanding  the  foregoing,  the  Trustees  may  postpone  payment  of  the
redemption  price and may suspend the right of the  Shareholders  to require any
Series  or Class to  redeem  Shares  during  any  period of time when and to the
extent permissible under the 1940 Act.

                                  ARTICLE VII
                    Limitation of Liability; Indemnification

     Section 1. Trustees,  Shareholders, etc. Not Personally Liable; Notice. The
Trustees,  officers,  employees and agents of the Trust, in incurring any debts,
liabilities or obligations,  or in limiting or omitting any other actions for or
in connection  with the Trust,  are or shall be deemed to be acting as Trustees,
officers,  employees or agents of the Trust and not in their own capacities.  No
Shareholder  shall be  subject to any  personal  liability  whatsoever  in tort,
contract or  otherwise  to any other  Person or Persons in  connection  with the
assets or the affairs of the Trust or of any Series, and subject to Section 4 of
this Article VII, no Trustee,  officer,  employee or agent of the Trust shall be
subject to any personal liability whatsoever in tort, contract, or otherwise, to
any other  Person or  Persons  in  connection  with the assets or affairs of the
Trust or of any  Series,  save only  that  arising  from his or her own  willful
misfeasance,  bad faith,  gross  negligence or reckless  disregard of the duties
involved  in the  conduct  of his or her office or the  discharge  of his or her
functions. The Trust (or if the matter relates only to a particular Series, that
Series)  shall  be  solely  liable  for  any  and all  debts,  claims,  demands,
judgments, decrees, liabilities or obligations of any and every kind, against or
with  respect to the Trust or such  Series in tort,  contract  or  otherwise  in
connection  with the assets or the affairs of the Trust or such Series,  and all
Persons dealing with the Trust or any Series shall be deemed to have agreed that
resort shall be had solely to the Trust  Property of the Trust (or if the matter
relates only to a particular  Series,  that of such Series),  for the payment or
performance thereof.

     The  Trustees  may provide  that every note,  bond,  contract,  instrument,
certificate or undertaking  made or issued by the Trustees or by any officers or
officer shall give notice that a Certificate of Trust in respect of the Trust is
on file with the  Secretary  of State of the State of Delaware and may recite to
the effect that the same was executed or made by or on behalf of the Trust or by
them as Trustees or Trustee or as officers or officer, and not individually, and
that the  obligations of any instrument made or issued by the Trustees or by any
officer  of  officers  of the  Trust  are not  binding  upon  any of them or the
Shareholders  individually  but are binding only upon the assets and property of
the  Trust,  or the  particular  Series  in  question,  as the case may be.  The
omission of any statement to such effect from such instrument  shall not operate
to bind any  Trustees  or Trustee or  officers  or  officer or  Shareholders  or
Shareholder  individually,  or to  subject  the  assets  of  any  Series  to the
obligations of any other Series.

     Section 2. Trustees' Good Faith Action;  Expert Advice;  No Bond or Surety.
The exercise by the Trustees of their powers and discretions  hereunder shall be
binding upon  everyone  interested.  Subject to Section 4 of this Article VII, a
Trustee shall be liable for his or her own willful misfeasance, bad faith, gross
negligence  or reckless  disregard of the duties  involved in the conduct of the
office of Trustee,  and for nothing else,  and shall not be liable for errors of
judgment or mistakes of fact or law. Subject to the foregoing,  (i) the Trustees
shall not be responsible or liable in any event for any neglect or wrongdoing of
any officer, agent, employee, consultant, Adviser, administrator, distributor or
Principal  Underwriter,  custodian or transfer agent, dividend disbursing agent,
shareholder  servicing  agent or  accounting  agent of the Trust,  nor shall any
Trustee be responsible  for the act or omission of any other  Trustee;  (ii) the
Trustees may take advice of counsel or other experts with respect to the meaning
and  operation of this  Declaration  of Trust and their duties as Trustees,  and
shall be under no  liability  for any act or  omission in  accordance  with such
advice or for  failing to follow such  advice;  and (iii) in  discharging  their
duties, the Trustees,  when acting in good faith, shall be entitled to rely upon
the books of account of the Trust and upon written  reports made to the Trustees
by any officer appointed by them, any independent public  accountant,  and (with
respect to the subject matter of the contract involved) any officer,  partner or
responsible  employee of a contracting party employed by the Trust. The Trustees
as such shall not be required  to give any bond or surety or any other  security
for the performance of their duties.

     Section 3.  Indemnification of Shareholders.  If any Shareholder (or former
Shareholder)  of the Trust shall be charged or held to be personally  liable for
any  obligation  or  liability  of the Trust solely by reason of being or having
been a Shareholder  and not because of such  Shareholder's  acts or omissions or
for some  other  reason,  the Trust  (upon  proper  and  timely  request  by the
Shareholder) may assume the defense against such charge and satisfy any judgment
thereon or may reimburse the Shareholders  for expenses,  and the Shareholder or
former  Shareholder  (or the heirs,  executors,  administrators  or other  legal
representatives  thereof,  or in the case of a corporation or other entity,  its
corporate or other general  successor)  shall be entitled (but solely out of the
assets of the Series of which such  Shareholder or former  Shareholder is or was
the holder of Shares) to be held harmless from and indemnified  against all loss
and expense arising from such liability.

     Section 4.  Indemnification  of  Trustees,  Officers,  etc.  Subject to the
limitations,  if applicable,  hereinafter set forth in this Section 4, the Trust
shall  indemnify  (from the assets of one or more Series to which the conduct in
question  relates)  each  of  its  Trustees,   officers,  employees  and  agents
(including  Persons who serve at the Trust's  request as directors,  officers or
trustees  of  another  organization  in which the Trust  has any  interest  as a
shareholder,  creditor or otherwise  (hereinafter,  together  with such Person's
heirs, executors,  administrators or personal  representative,  referred to as a
"Covered Person")) against all liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines and penalties,  and
expenses,  including  reasonable  accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or  other   proceeding,   whether  civil  or  criminal,   before  any  court  or
administrative  or legislative  body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such Covered Person may
be or may have been  threatened,  while in office  or  thereafter,  by reason of
being or having been such a Trustee or officer, director or trustee, except with
respect  to any  matter as to which it has been  determined  that  such  Covered
Person (i) did not act in good faith in the reasonable  belief that such Covered
Person's  action was in or not opposed to the best  interests  of the Trust;  or
(ii) had acted with willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office;
and (iii) for a criminal proceeding, had reasonable cause to believe that his or
her conduct was  unlawful  (the conduct  described in (i),  (ii) and (iii) being
referred to hereafter as "Disabling Conduct").  A determination that the Covered
Person is entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the  proceeding was brought that the
Covered Person to be indemnified was not liable by reason of Disabling  Conduct,
(ii)  dismissal  of a court  action or an  administrative  proceeding  against a
Covered Person for  insufficiency of evidence of Disabling  Conduct,  or (iii) a
reasonable determination,  based upon a review of the facts, that the indemnitee
was not liable by reason of  Disabling  Conduct by (a) a vote of a majority of a
quorum of the  Trustees  who are  neither  "interested  persons" of the Trust as
defined  in the 1940  Act nor  parties  to the  proceeding  (the  "Disinterested
Trustees"), or (b) an independent legal counsel in a written opinion.  Expenses,
including  accountants'  and counsel fees so incurred by any such Covered Person
(but excluding  amounts paid in satisfaction  of judgments,  in compromise or as
fines or  penalties),  may be paid  from  time to time by one or more  Series to
which the conduct in question related in advance of the final disposition of any
such action,  suit or  proceeding;  provided that the Covered  Person shall have
undertaken  to repay the  amounts  so paid to such  Series  if it is  ultimately
determined that  indemnification  of such expenses is not authorized  under this
Article VII and (i) the Covered  Person  shall have  provided  security for such
undertaking, (ii) the Trust shall be insured against losses arising by reason of
any  lawful  advances,  or (iii) a  majority  of a quorum  of the  Disinterested
Trustees,  or an  independent  legal  counsel in a written  opinion,  shall have
determined,  based on a review of readily  available facts (as opposed to a full
trial type  inquiry),  that there is reason to believe  that the Covered  Person
ultimately will be found entitled to indemnification.

     Section 5. Compromise Payment. As to any matter disposed of by a compromise
payment by any such Covered Person referred to in Section 4 of this Article VII,
pursuant to a consent decree or otherwise,  no such  indemnification  either for
said  payment  or  for  any  other  expenses  shall  be  provided   unless  such
indemnification  shall  be  approved  (i)  by a  majority  of a  quorum  of  the
Disinterested  Trustees  or (ii) by an  independent  legal  counsel in a written
opinion. Approval by the Trustees pursuant to clause (i) or by independent legal
counsel  pursuant to clause (ii) shall not prevent the recovery from any Covered
Person of any amount paid to such Covered  Person in  accordance  with either of
such  clauses  as   indemnification  if  such  Covered  Person  is  subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in or not opposed
to the best  interests  of the Trust or to have been  liable to the Trust or its
Shareholders by reason of willful  misfeasance,  bad faith,  gross negligence or
reckless disregard of the duties involved in the conduct of the Covered Person's
office.

     Section 6. Indemnification Not Exclusive, etc. The right of indemnification
provided  by this  Article  VII shall not be  exclusive  of or affect  any other
rights to which any such Covered Person or shareholder may be entitled.  As used
in this  Article VII, a  "disinterested"  Person is one against whom none of the
actions,  suits or other proceedings in question,  and no other action,  suit or
other  proceeding on the same or similar  grounds is then or has been pending or
threatened.  Nothing  contained  in this  Article VII shall affect any rights to
indemnification  to which  personnel  of the  Trust,  other  than  Trustees  and
officers,  and other Persons may be entitled by contract or otherwise under law,
nor the power of the Trust to  purchase  and  maintain  liability  insurance  on
behalf of any such Person.

     Section 7.  Liability of Third  Persons  Dealing with  Trustees.  No person
dealing  with the  Trustees  shall be bound to make any inquiry  concerning  the
validity of any transaction  made or to be made by the Trustees or to see to the
application  of any payments made or property  transferred  to the Trust or upon
its order.

     Section 8.  Insurance.  The Trustees shall be entitled and empowered to the
fullest  extent  permitted by law to purchase  with Trust assets  insurance  for
liability  and for all  expenses  reasonably  incurred or paid or expected to be
paid by a Trustee,  officer,  employee, or agent of the Trust in connection with
any claim, action, suit, or proceeding in which he or she may become involved by
virtue of his or her capacity or former capacity as a Trustee of the Trust.

                                  ARTICLE VIII
                                  Miscellaneous

     Section 1. Termination of the Trust.

     (a) Unless terminated as provided herein,  the Trust shall continue without
limitation  of  time.   Subject  to  the  affirmative  vote  of  not  less  than
three-quarters of the Shares outstanding and entitled to vote of the Trust or of
each Series to be affected, the Trustees may:

     (i)  sell and convey all or  substantially  all of the assets of all Series
          or any affected Series to another Series or to any other  corporation,
          association,  trust or other  organization,  or a series thereof,  for
          adequate  consideration,  which  may  include  the  assumption  of all
          outstanding  obligations,  taxes and  other  liabilities,  accrued  or
          contingent, of the Trust or any affected Series, and which may include
          shares of or interests in such Series, entity, or series thereof;

     (ii) merge with or into,  consolidate  or  exchange  Shares  with any other
          entity; or

     (iii)at any time sell and convert  into money all or  substantially  all of
          the assets of all Series or any affected Series.

     Provided,  however,  if at least  three-quarters  of the  Trustees  then in
     office have  approved  the  transactions  in (i) or (ii)  above,  then such
     actions may be approved by the affirmative vote of a majority of the Shares
     outstanding and entitled to vote of the Trust or the affected Series.

          Upon  making  reasonable  provision  for  the  payment  of  all  known
     liabilities of all Series or any affected  Series in either (i) or (ii), by
     such assumption or otherwise,  the Trustees shall  distribute the remaining
     proceeds or assets (as the case may be) ratably among the  Shareholders  of
     all Series or any affected Series;  however,  the payment to any particular
     Class of such  Series  may be  reduced  by any fees,  expenses  or  charges
     allocated to that Class.

          (b) Upon completion of the  distribution of the remaining  proceeds or
     assets  pursuant to  subsection  (a),  the Trust or affected  Series  shall
     terminate and the Trustees and the Trust shall be discharged of any and all
     further  liabilities  and duties  hereunder  with  respect  thereto and the
     right,  title and  interest of all parties  therein  shall be canceled  and
     discharged.  Upon termination of the Trust, following completion of winding
     up of its business,  the Trustees shall cause a certificate of cancellation
     of the  Trust's  certificate  of trust to be filed in  accordance  with the
     Delaware Act, which  certificate of  cancellation  may be signed by any one
     Trustee.

          Section 2. Conversion to an Open-End Investment Company.

          Notwithstanding  any other  provisions of this Declaration of Trust or
     the By-Laws of the Trust,  a favorable  vote of a majority of the  Trustees
     then in office  followed by the  favorable  vote of the holders of not less
     than  three-quarters  of the  Shares  of  each  affected  class  or  series
     outstanding,  voting as  separate  classes or series,  shall be required to
     approve,  adopt or authorize an amendment to this Declaration of Trust that
     makes the  Shares a  "redeemable  security"  as that term is defined in the
     1940 Act, unless such amendment has been approved by  three-quarters of the
     Trustees,  in which case  approval  by a vote of a  majority  of the Shares
     outstanding and entitled to vote shall be required.  Upon the adoption of a
     proposal to convert the Trust from a  "closed-end  company" to an "open-end
     company"  as those  terms  are  defined  by the 1940 Act and the  necessary
     amendments to this  Declaration of Trust to permit such a conversion of the
     Trust's  outstanding  Shares  entitled  to  vote,  the  Trust  shall,  upon
     complying with any  requirements  of the 1940 Act and state law,  become an
     "open-end" investment company. Such affirmative vote or consent shall be in
     addition  to the vote or  consent of the  holders  of the Shares  otherwise
     required  by law,  or any  agreement  between  the Trust  and any  national
     securities exchange.

          Section 3. Reorganization.

          (a) Except as provided in clause (b) of this  Section 3 or in Sections
     1 and 4 of  this  Article  VIII,  the  Trustees  may,  without  Shareholder
     approval  unless such approval is required by applicable law, (i) cause the
     Trust to merge or  consolidate  with or into or transfer its assets and any
     liabilities  to one  or  more  trusts  (or  series  thereof  to the  extent
     permitted  by  law),  partnerships,  associations,  corporations  or  other
     business   entities   (including   trusts,   partnerships,    associations,
     corporations  or  other  business  entities  created  by  the  Trustees  to
     accomplish  such  merger or  consolidation  or  transfer  of assets and any
     liabilities) so long as the surviving or resulting  entity is an investment
     company  as  defined  in the 1940 Act,  or is a series  thereof,  that will
     succeed to or assume the Trust's  registration  under the 1940 Act and that
     is formed, organized, or existing under the laws of the United States or of
     a state,  commonwealth,  possession or colony of the United States,  unless
     otherwise  permitted  under the 1940 Act, (ii) cause any one or more Series
     (or Classes) of the Trust to merge or consolidate  with or into or transfer
     its assets and any liabilities to any one or more other Series (or Classes)
     of the Trust,  one or more  trusts  (or  series or  classes  thereof to the
     extent  permitted by law),  partnerships,  associations,  or  corporations,
     (iii)  cause the Shares to be  exchanged  under or pursuant to any state or
     federal  statute to the extent  permitted by law or (iv) cause the Trust to
     reorganize as a corporation, limited liability company or limited liability
     partnership under the laws of Delaware or any other state or jurisdiction.

          (b)  Pursuant  to and in  accordance  with the  provisions  of Section
     3815(f) of the Delaware Act, and  notwithstanding  anything to the contrary
     contained  in  this  Declaration  of  Trust,  an  agreement  of  merger  or
     consolidation or exchange or transfer of assets and liabilities approved by
     the Trustees in accordance with this Section 3 may (i) effect any amendment
     to the  governing  instrument of the Trust or (ii) effect the adoption of a
     new  governing  instrument  of the Trust if the Trust is the  surviving  or
     resulting trust in the merger or consolidation.

          (c) The Trustees may create one or more statutory  trusts to which all
     or any part of the assets, liabilities,  profits, or losses of the Trust or
     any Series or Class  thereof  may be  transferred  and may  provide for the
     conversion  of  Shares in the Trust or any  Series  or Class  thereof  into
     beneficial  interests  in any such  newly  created  trust or  trusts or any
     series or classes thereof.

          Section 4. Certain Transactions.

          (a)  Notwithstanding  any other provision of this Declaration of Trust
     and subject to the  exceptions  provided in paragraph  (d) of this Section,
     the types of transactions  described in paragraph (c) of this Section shall
     require the affirmative  vote or consent of a majority of the Trustees then
     in office  followed  by the  affirmative  vote or consent of holders of not
     less than  three-quarters  of the Shares of each  affected  class or series
     outstanding,  votes voting as separate classes or series,  when a Principal
     Shareholder (as defined in paragraph (b) of this Section) is a party to the
     transaction.  Such  affirmative vote or consent shall be in addition to the
     vote or consent of the  holders of Shares  otherwise  required by law or by
     the  terms of any  class or  series  of  preferred  stock,  whether  now or
     hereafter  authorized,  or any agreement between the Trust and any national
     securities exchange.

          (b) The term  "Principal  Shareholder"  shall  mean  any  corporation,
     Person  or  other  entity  which  is  the  beneficial  owner,  directly  or
     indirectly,  of five percent (5%) or more of the outstanding  Shares of any
     class or series and shall  include any  affiliate  or  associates,  as such
     terms are defined in clause (ii) below, of a Principal Shareholder. For the
     purpose of this  Section,  in addition to the Shares  which a  corporation,
     Person or other entity  beneficially  owns directly,  (a) any  corporation,
     Person or other  entity shall be deemed to be the  beneficial  owner of any
     Shares (i) which it has the right to acquire  pursuant to any  agreement or
     upon exercise of conversion rights or warrants, or otherwise (but excluding
     share options granted by the Trust) or (ii) which are  beneficially  owned,
     directly or indirectly  (including Shares deemed owned through  application
     of clause (i) above, by any other corporation,  Person or entity with which
     its  "affiliate"  or  "associate"  (as  defined  below) has any  agreement,
     arrangement or understanding for the purpose of acquiring,  holding, voting
     or disposing of Shares, of which is its "affiliate" or "associate" as those
     terms are defined in Rule 12b-2 of the General Rules and Regulations  under
     the Securities  Exchange Act of 1934, and (b) the outstanding  Shares shall
     include  Shares  deemed owned through  application  of clauses (i) and (ii)
     above but shall not include any other Shares which may be issuable pursuant
     to any  agreement,  or upon exercise of conversion  rights or warrants,  or
     otherwise.

     (c) This Section shall apply to the following transactions:

          (i)  The merger or consolidation of the Trust or any subsidiary of the
               Trust with or into any Principal Shareholder.

          (ii) The  issuance  of any  securities  of the Trust to any  Principal
               Shareholder  for  cash  (other  than  pursuant  to any  automatic
               dividend reinvestment plan).

          (iii)The  sale,  lease or  exchange  to the  Trust  or any  subsidiary
               thereof,  in exchange for securities of the Trust,  of any assets
               of 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  twelve-month
               period.)

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

          (d) The  provisions of this Section shall not be applicable to (i) any
     of  the  transactions  described  in  paragraph  (c)  of  this  Section  if
     three-quarters  of  the  Trustees  shall  by  resolution  have  approved  a
     memorandum of understanding with such Principal Shareholder with respect to
     and substantially consistent with such transaction,  in which case approval
     by the vote of a majority of the Shares  outstanding  and  entitled to vote
     shall be the only vote of  Shareholders  required by this Section,  or (ii)
     any such transaction with any entity of which a majority of the outstanding
     shares of all  classes and series of a stock  normally  entitled to vote in
     elections of directors is owner of record or  beneficially by the Trust and
     its subsidiaries.

          (e) The Board of Trustees  shall have the power and duty to  determine
     for the purposes of this Section on the basis of  information  known to the
     Trust whether (i) a corporation,  person or entity  beneficially  owns five
     percent (5%) or more of the outstanding Shares of any class or series, (ii)
     a  corporation,  person or  entity is an  "affiliate"  or  "associate"  (as
     defined above) of another,  (iii) the assets being acquired or leased to or
     by the Trust or any subsidiary thereof constitute a substantial part of the
     assets of the Trust and have an  aggregate  fair market  value of less than
     $1,000,000,  and  (iv)  the  memorandum  of  understanding  referred  to in
     paragraph  (d)  hereof is  substantially  consistent  with the  transaction
     covered thereby. Any such determination shall be conclusive and binding for
     all purposes of this Section.

          Section 5. Amendments.

          (a) Except as  specifically  provided in this  Section 5, the Trustees
     may, without Shareholder vote, restate, amend, or otherwise supplement this
     Declaration of Trust.  Shareholders shall have the right to vote on (i) any
     amendment  that  would  affect  their  right to vote  granted in Article V,
     Section 1 hereof,  (ii) any  amendment to this  Section 5 of Article  VIII;
     (iii) any amendment that may require their vote under  applicable law or by
     the Trust's registration statement, as filed with the Commission,  and (iv)
     any  amendment  submitted  to them  for  their  vote by the  Trustees.  Any
     amendment  required or permitted to be submitted to the Shareholders  that,
     as the Trustees  determine,  shall affect the  Shareholders  of one or more
     Series shall be  authorized  by a vote of the  Shareholders  of each Series
     affected  and no vote of  Shareholders  of a Series not  affected  shall be
     required.  Notwithstanding  anything else herein, no amendment hereof shall
     limit the rights to  insurance  provided by Article VII hereof with respect
     to any acts or omissions of Persons covered thereby prior to such amendment
     nor shall any such amendment limit the rights to indemnification referenced
     in Article  VII  hereof as  provided  in the  By-Laws  with  respect to any
     actions or omissions of Persons  covered  thereby prior to such  amendment.
     The Trustees may, without  Shareholder vote,  restate,  amend, or otherwise
     supplement the Certificate of Trust as they deem necessary or desirable.

          (b) The Trustees may not amend this  Declaration of Trust to eliminate
     the  rights  of  Shareholders  of any  Class or Series as set forth in this
     Section 5(b) to vote on any amendment of this  Declaration  of Trust or the
     By-Laws  or alter or amend the  percentage  of voting  Shares  required  to
     approve any amendment or action which requires a specific  Shareholder vote
     under this  Declaration of Trust or the By-Laws  unless an equivalent  vote
     has  authorized  such an amendment of the  Declaration of Trust or By-Laws.
     Any amendment  (other than an amendment  establishing the rights of another
     Class of  Shares,  even if the rights of such  Class  adversely  effect the
     rights of any existing Class) which adversely affects the holders of one or
     more Classes or Series of Shares shall  require a vote of the  Shareholders
     holding  a  majority  of the  Shares of each  Class or Series so  adversely
     affected and entitled to vote  thereon and no vote of  Shareholders  of any
     Class or Series not so adversely  affected  shall be required,  except that
     any amendment of any provision of Article VII,  Sections 1, 2, 3 or 4 shall
     require the vote of the Shareholders  holding  three-quarters of the Shares
     of each  Class and  Series  entitled  to vote  thereon,  regardless  of the
     percentage of Trustees recommending such amendment.

          Section 6. Filing of Copies;  References;  Headings. The original or a
     copy of this instrument and of each  restatement  and/or  amendment  hereto
     shall be kept at the office of the Trust where it may be  inspected  by any
     Shareholder.  Anyone dealing with the Trust may rely on a certificate by an
     officer  of the Trust as to  whether  or not any such  restatements  and/or
     amendments  have been made and as to any  matters  in  connection  with the
     Trust hereunder;  and, with the same effect as if it were the original, may
     rely on a copy  certified  by an  officer of the Trust to be a copy of this
     instrument  or  of  any  such  restatements  and/or  amendments.   In  this
     instrument and in any such restatements  and/or  amendments,  references to
     this  instrument,  and all  expressions  such as  "herein,"  "hereof,"  and
     "hereunder,"  shall be deemed to refer to this  instrument  as  amended  or
     affected by any such restatements  and/or  amendments.  Headings are placed
     herein for  convenience  of reference only and shall not be taken as a part
     hereof or  control or affect the  meaning,  construction  or effect of this
     instrument.  Whenever  the singular  number is used herein,  the same shall
     include the plural;  and the neuter,  masculine and feminine  genders shall
     include each other,  as applicable.  This instrument may be executed in any
     number of counterparts each of which shall be deemed an original.

Section 7.        Applicable Law.

          (a) The Trust is created under, and this Declaration of Trust is to be
     governed by, and construed and enforced in accordance with, the laws of the
     State  of  Delaware.  The  Trust  shall be of the  type  commonly  called a
     statutory  trust,  and without  limiting the provisions  hereof,  the Trust
     specifically reserves the right to exercise any of the powers or privileges
     afforded to statutory trusts or actions that may be engaged in by statutory
     trusts  under the  Delaware  Act,  and the absence of a specific  reference
     herein to any such  power,  privilege,  or action  shall not imply that the
     Trust may not exercise such power or privilege or take such actions.

          (b) Notwithstanding the first sentence of Section 7(a) of this Article
     VIII,  there shall not be  applicable to the Trust,  the Trustees,  or this
     Declaration  of Trust either the  provisions of Section 3540 of Title 12 of
     the Delaware Code or any  provisions  of the laws  (statutory or common) of
     the State of Delaware  (other than the Delaware  Act)  pertaining to trusts
     that relate to or regulate:  (i) the filing with any court or  governmental
     body or agency  of  Trustee  accounts  or  schedules  of  trustee  fees and
     charges;  (ii)  affirmative   requirements  to  post  bonds  for  trustees,
     officers,  agents,  or  employees  of a  trust;  (iii)  the  necessity  for
     obtaining  a  court  or  other   governmental   approval   concerning   the
     acquisition,  holding,  or disposition of real or personal  property;  (iv)
     fees or other sums applicable to trustees, officers, agents or employees of
     a trust;  (v) the  allocation  of receipts  and  expenditures  to income or
     principal;  (vi)  restrictions  or limitations on the  permissible  nature,
     amount, or concentration of trust  investments or requirements  relating to
     the titling,  storage, or other manner of holding of trust assets; or (vii)
     the  establishment of fiduciary or other standards or  responsibilities  or
     limitations on the acts or powers or liabilities or authorities  and powers
     of trustees that are  inconsistent  with the  limitations or liabilities or
     authorities  and powers of the  Trustees  set forth or  referenced  in this
     Declaration of Trust; or (viii)  activities  similar to those referenced in
     the foregoing items (i) through (vii).

          Section 8. Provisions in Conflict with Law or Regulations.

          (a) The provisions of this Declaration of Trust are severable,  and if
     the Trustees  shall  determine,  with the advice of counsel,  that any such
     provision  is in  conflict  with the 1940  Act,  the  regulated  investment
     company provisions of the Internal Revenue Code of 1986, as amended (or any
     successor statute thereto),  and the regulations  thereunder,  the Delaware
     Act  or  with  other  applicable  laws  and  regulations,  the  conflicting
     provision  shall  be  deemed  never  to  have  constituted  a part  of this
     Declaration  of Trust;  provided,  however,  that such  decision  shall not
     affect any of the  remaining  provisions  of this  Declaration  of Trust or
     render  invalid  or  improper  any action  taken or  omitted  prior to such
     determination.

          (b) If any  provision  of this  Declaration  of  Trust  shall  be held
     invalid  or   unenforceable  in  any   jurisdiction,   such  invalidity  or
     unenforceability  shall attach only to such provision in such  jurisdiction
     and  shall,   not  in  any  manner  affect  such  provision  in  any  other
     jurisdiction  or any other  provision of this  Declaration  of Trust in any
     jurisdiction.

          Section 9.  Statutory  Trust Only. It is the intention of the Trustees
     to create a statutory  trust  pursuant to the  Delaware  Act. It is not the
     intention  of  the  Trustees  to  create  a  general  partnership,  limited
     partnership, joint stock association, corporation, bailment, or any form of
     legal  relationship  other than a statutory  trust pursuant to the Delaware
     Act.  Nothing in this  Declaration  of Trust shall be construed to make the
     Shareholders,  either by  themselves  or with the  Trustees,  partners,  or
     members of a joint stock association.


          IN WITNESS WHEREOF, the Trustee named below does hereby make and enter
     into this Second Amended and Restated Agreement and Declaration of Trust as
     of the 24th day of April, 2003.



                                           /s/ Michael H. Koonce

                                           Michael H. Koonce
                                           Trustee and not individually


                         THE PRINCIPAL PLACE OF BUSINESS
                                OF THE TRUST IS:

                               200 Berkeley Street
                           Boston, Massachusetts 02116









</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2E
<SEQUENCE>5
<FILENAME>dividendreinplan.txt
<TEXT>


                          EVERGREEN MANAGED INCOME FUND

                      AUTOMATIC DIVIDEND REINVESTMENT PLAN

                               TERMS AND CONDITION

Pursuant to the Automatic Dividend Reinvestment Plan (the "Plan") of Evergreen
Managed Income Fund (the "Trust"), unless a holder (each, a "Shareholder") of
the Trust's common shares of beneficial interest (the "Common Shares") otherwise
elects, all dividends and capital gain distributions on such Shareholder's
Common Shares will be automatically reinvested by EquiServe Trust Company, N.A.,
as agent for Shareholders in administering the Plan (the "Plan Agent"), in
additional Common Shares of the Trust. Shareholders who elect not to participate
in the Plan will receive all dividends and other distributions payable in cash
paid by check mailed directly to the Shareholder of record (or, if the Common
Shares are held in street or other nominee name, then to such nominee) by
EquiServe Trust Company, N.A., as the Dividend Disbursing Agent. Shareholders
may elect not to participate in the Plan and to receive all dividends and
capital gain distributions in cash by contacting the Plan Agent. Enrollment,
purchase or sales of shares and other transactions or services offered by the
Plan can be directed to the Plan Agent through the following:

TELEPHONE

Telephone the Plan Agent, including sale of shares toll-free within the United
States and Canada:

1-800-731-6001

An automated voice response system is available 24 hours a day, 7 days a week.
Customer service representatives are available from 9:00 a.m. to 7:00 p.m.,
Eastern Standard Time, Monday through Friday (except holidays).

IN WRITING

You may also write to the Plan Agent at the following  address:  EquiServe Trust
Company,  N.A., P.O. Box 43010,  Providence,  RI 02940-3010.  Be sure to include
your name,  address,  daytime phone number,  social security or tax I. D. number
and a reference to Evergreen Income Advantage Fund on all correspondence.

Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received by the Plan Agent
prior to any dividend record date; otherwise such termination or resumption will
be effective with respect to any subsequently declared dividend or other
distribution.

The Plan Agent will open an account for each Shareholder under the Plan in the
same name in which such Shareholder's Common Shares are registered. Whenever the
Trust declares an income dividend or a capital gain distribution (collectively
referred to as "dividends") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in Common
Shares. The Common Shares will be acquired by the Plan Agent for the
participants' accounts, depending upon the circumstances described below, either
(i) through the receipt of additional unissued but authorized Common Shares from
the Trust ("newly issued Common Shares") or (ii) by purchase of outstanding
Common Shares on the open market ("open-market purchases") on the American Stock
Exchange (the "AMEX"), the primary national securities exchange on which the
common shares are traded (the "Exchange"), or elsewhere.

If, on the payment date for any dividend or distribution, the net asset value
per Common Share is equal to or less than the market price per Common Share plus
estimated brokerage trading fees (such condition being referred to herein as
"market premium"), the Plan Agent will invest the dividend amount in newly
issued Common Shares on behalf of the participants. The number of newly issued
Common Shares to be credited to each participant's account will be determined by
dividing the dollar amount of the dividend or distribution by the greater of (i)
the net asset value per Common Share on the payment date, or (ii) 95% of the
market price per Common Share on the payment date.

If, on the payment date for any dividend or distribution, the net asset value
per Common 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 Common Shares acquired on behalf of the
participants in open-market purchases.

In the event of a market discount on the payment date for any dividend or
distribution, the Plan Agent will have until the last business day before the
next date on which the Common Shares trade on an "ex-dividend" basis or in no
event more than 30 days after the record date for such dividend, whichever is
sooner (the "last purchase date"), to invest the dividend amount in Common
Shares acquired in open-market purchases. It is contemplated that the Trust will
pay monthly income dividends. Therefore, the period during which open-market
purchases can be made will exist only from the payment date of each dividend
through the date before the next "ex-dividend" date, which typically will be
approximately ten days. The weighted average price plus brokerage commissions of
all Common Shares purchased by the Plan Agent as Plan Agent shall be the price
per Common Share allocable to each participant. If, before the Plan Agent has
completed its open-market purchases, the market price of a Common Share exceeds
the net asset value per Common Share, the average per Common Share purchase
price paid by the Plan Agent may exceed the net asset value of the Common
Shares, resulting in the acquisition of fewer Common Shares on the dividend
payment date. If the Plan Agent is unable to invest the full Distribution amount
in purchases in the open market or if the market discount shifts to a market
premium during the purchase period then the Agent may cease making purchases in
the open market the instant the Plan Agent is notified of a market premium and
may invest the uninvested portion of the Distribution in newly issued Common
Shares received by the Trust at the net asset value per Common Share at the
close of business provided that, if the net asset value is less than or equal to
95% of the then current market price per Common Share, the dollar amount of the
Distribution will be divided by 95% of the market price on the payment date.
Participants should note that they will not be able to instruct the Agent to
purchase Common Shares at a specific time or at a specific price.

The Plan Agent maintains all Shareholders' accounts in the Plan and furnishes
written confirmation of all transactions in the accounts, including information
needed by Shareholders for tax records. Common Shares in the account of each
Plan participant will be held by the Plan Agent in non-certificated form in the
name of the Plan participant.

In the case of Shareholders such as banks, brokers or nominees that hold Common
Shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of Common Shares certified from time to time
by the record Shareholder and held for the account of beneficial owners who
participate in the Plan.

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

VOTING

Each Shareholder proxy will include those Common Shares purchased or received
pursuant to the Plan. The Plan Agent will forward all proxy solicitation
materials to participants and vote proxies for Common Shares held pursuant to
the Plan in accordance with the instructions of the participants.

TAXATION

The automatic reinvestment of dividends will not relieve participants of any
federal, state or local income tax that may be payable (or required to be
withheld) on such dividends.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2G1
<SEQUENCE>6
<FILENAME>advisoryagree.txt
<TEXT>

                  INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

         AGREEMENT made as of the 25th day of April 2003, by and between
EVERGREEN MANAGED INCOME FUND, a Delaware statutory trust (the "Trust") and
EVERGREEN INVESTMENT MANAGEMENT COMPANY, LLC, a Delaware limited liability
company, (the "Adviser").

         WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust.

         THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:

         1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets of the Trust in conformity with the Trust's
investment objectives and restrictions as may be set forth in the Trust's
prospectus and statement of additional information, or as in effect from time to
time, all subject to the supervision of the Board of Trustees of the Trust, for
the period and on the terms set forth in this Agreement. The Adviser hereby
accepts such appointment and agrees during such period, at its own expense, to
render the services and to assume the obligations set forth herein, for the
compensation provided herein. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.

         2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of the Trust with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of the Trust. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are used in
Section 28(e) of the Securities Exchange Act of 1934 (the "1934 Act")) provided
to the Trust and/or other accounts over which the Adviser or an affiliate of the
Adviser exercises investment discretion. The Adviser is authorized to pay a
broker-dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Trust which is in excess of the amount
of commission another broker-dealer would have charged for effecting that
transaction if, but only if, the Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer viewed in terms of that particular
transaction or in terms of all of the accounts over which investment discretion
is so exercised.

         3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:

(a)  the  compensation  (if any) of the Trustees of the Trust who are affiliated
     with the Adviser or with its  affiliates,  or with any adviser  retained by
     the Adviser, and of all officers of the Trust as such; and

(b)  all  expenses  of the  Adviser  incurred in  connection  with its  services
     hereunder.

         The Trust assumes and shall pay all other expenses of the Trust,
including, without limitation:

(a)               all charges and expenses of any custodian or depository
                  appointed by the Trust for the safekeeping of the cash,
                  securities and other property of the Trust;
(b)               all charges and expenses for bookkeeping and auditors;
(c)               all charges and expenses of any transfer agents and registrars
                  appointed by the Trust;
(d)               all fees of all Trustees of the
                  Trust who are not affiliated with the Adviser or any of its
                  affiliates,
                  or with any adviser retained by the Adviser;
(e)               all brokers' fees, expenses, and commissions and issue and
                  transfer taxes chargeable to the Trust in connection with
                  transactions involving securities and other property to which
                  the Trust is a party;
(f)               all stock exchange listing expenses;
(g)               all taxes and trust fees payable by the Trust to Federal,
                  state, or other governmental agencies;
(h)               all costs of
                  certificates representing shares of the Trust;
(i)               all fees
                  and expenses involved in registering and maintaining
                  registrations of the Trust with the
                  Securities and Exchange Commission (the "Commission") and
                  registering or qualifying the Trust's shares under state or
                  other securities laws, including, without limitation, the
                  preparation and printing of registration statements,
                  prospectuses, and statements of additional information for
                  filing with the Commission and other authorities;
(j)               expenses of preparing, printing, and mailing prospectuses and
                  statements of additional information to shareholders of the
                  Trust;
(k)               all expenses of shareholders' and Trustees' meetings and of
                  preparing, printing, and mailing notices, reports, and proxy
                  materials to shareholders of the Trust;
(l)               all charges and expenses of legal counsel for the Trust and
                  for Trustees of the Trust in connection with legal matters
                  relating to the Trust, including, without limitation, legal
                  services rendered in connection with the Trust's existence,
                  trust, and financial structure and relations with its
                  shareholders, registrations and qualifications of securities
                  under Federal, state, and other laws, issues of securities,
                  expenses which the Trust have herein assumed, whether
                  customary or not, and extraordinary matters, including,
                  without limitation, any litigation involving the Trust, its
                  Trustees, officers, employees, or agents;
(m)               all charges and expenses of filing annual and other reports
                  with the Commission and other authorities; and
(n)               all extraordinary expenses and charges of the Trust .

         In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust will promptly reimburse the Adviser therefor.

         The services of the Adviser to the Trust hereunder are not to be deemed
exclusive, and the Adviser shall be free to render similar services to others.

         4. As compensation for the Adviser's services to the Trust during the
period of this Agreement, the Trust will pay to the Adviser a fee at the annual
rate of 0.55% of its total assets (defined as net assets of the Trust plus
borrowings or other leverage for investment purposes to the extent excluded in
calculating net assets).

         The Adviser's fee is computed as of the close of business on each
business day.

         A pro rata portion of the Trust's fee shall be payable in arrears at
the end of each day or calendar month as the Adviser may from time to time
specify to the Trust. If and when this Agreement terminates, any compensation
payable hereunder for the period ending with the date of such termination shall
be payable upon such termination. Amounts payable hereunder shall be promptly
paid when due.

         5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust all of the services
to be provided by the Adviser hereunder, if such agreement is approved as
required by law. Such agreement may delegate to such SubAdviser all of Adviser's
rights, obligations, and duties hereunder.

         6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the performance
of this Agreement, except a loss resulting from the Adviser's willful
misfeasance, bad faith, gross negligence, or from reckless disregard by it of
its obligations and duties under this Agreement. Any person, even though also an
officer, Director, partner, employee, or agent of the Adviser, who may be or
become an officer, Trustee, employee, or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust
(other than services or business in connection with the Adviser's duties
hereunder), to be rendering such services to or acting solely for the Trust and
not as an officer, Director, partner, employee, or agent or one under the
control or direction of the Adviser even though paid by it.

         7. The Trust shall cause the books and accounts to be audited at least
once each year by a reputable independent public accountant or organization of
public accountant or organization of public accountants who shall render a
report to the Trust.

         8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of Wachovia Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of Wachovia Corporation are or may be interested in the Trust or any Adviser as
Trustees, Directors, officers, shareholders or otherwise; that the Adviser (or
any such successor) is or may be interested in the Trust or any SubAdviser as
shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.

         9. This Agreement shall continue in effect for two years from the date
set forth above and after such date (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.

         10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of the Trust; and on sixty days' written notice to the Trust,
this Agreement may be terminated at any time without the payment of any penalty
by the Adviser. This Agreement shall automatically terminate upon its assignment
(as that term is defined in the 1940 Act). Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed postage prepaid, to the
other party at the main office of such party.

         11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the Trust and by the vote of a majority of
Trustees of the Trust who are not interested persons (as that term is defined in
the 1940 Act) of the Adviser, any predecessor of the Adviser, or of the Trust,
cast in person at a meeting called for the purpose of voting on such approval. A
"majority of the outstanding voting securities" of the Trust or the affected
Funds shall have, for all purposes of this Agreement, the meaning provided
therefor in the 1940 Act.

         12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.

         13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.


<PAGE>




         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                        EVERGREEN MANAGED INCOME FUND


                                        By:  /s/ Maureen E. Towle
                                        Name: Maureen E. Towle
                                        Title:  Assistant Secretary


                                        EVERGREEN INVESTMENT
                                        MANAGEMENT COMPANY, LLC


                                        By:  /s/ Michael H. Koonce
                                        Name: Michael H. Koonce
                                        Title: Secretary

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2G 2
<SEQUENCE>7
<FILENAME>subadvisoryagree.txt
<TEXT>

                             SUB-ADVISORY AGREEMENT


         AGREEMENT made this 25th day of April, 2003, by and between Evergreen
Investment Management Company, LLC (the "Adviser"), and First International
Advisors, LLC (the "Sub-adviser").

         WHEREAS, the Adviser serves as investment adviser to the Evergreen
Managed Income Fund (the "Trust"), a Delaware statutory trust which has filed a
registration statement under the Investment Company Act of 1940, as amended (the
"1940 Act") and the Securities Act of 1933 (the "Registration Statement"); and

         WHEREAS, the Adviser desires to avail itself of the services, advice
and assistance of the Sub-adviser to assist the Adviser in providing investment
advisory services to the Trust, as amended from time to time; and

         WHEREAS, the Sub-adviser is registered under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), is engaged in the business of
rendering investment advisory services to investment companies and other
institutional clients and desires to provide such services to the Adviser;

         NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follow:

         1. Employment of the Sub-adviser. The Adviser hereby employs the
Sub-adviser to manage the investment and reinvestment of the Trust's assets,
subject to the control and direction of the Trust's Board of Trustees, for the
period and on the terms hereinafter set forth. The Sub-adviser hereby accepts
such employment and agrees during such period to render the services and to
assume the obligations herein set forth for the compensation herein provided.
The Sub-adviser shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized (whether herein
or otherwise), have no authority to act for or represent the Adviser or the
Trust in any way. The Sub-adviser may execute Trust documentation, agreements,
contracts and other documents requested by brokers, dealers, counterparties and
other persons in connection with its providing advisory services to the Trust.

         2. Obligations of Services to be provided by the Sub-adviser. The
Sub-adviser undertakes to provide the following services and to assume the
following obligations:

                  a. The Sub-adviser shall manage the investment and
         reinvestment of the portfolio assets of the Trust, all without prior
         consultation with the Adviser, subject to and in accordance with (i)
         the investment objective and policies of the Trust set forth in the
         Trust's Prospectus and Statement of Additional Information as from time
         to time in effect (the "Governing Documents"), (ii) the requirements
         applicable to registered investment companies under applicable laws,
         including without limitation the 1940 Act and Subchapter M of the
         Internal Revenue Code of 1986, as amended (the "Code") and (iii) any
         written instructions which the Adviser or the Trust's Board of Trustees
         may issue from time-to-time. The Sub-adviser also agrees to conduct its
         activities hereunder in accordance with any applicable procedures or
         policies adopted by the Trust's Board of Trustees as from time to time
         in effect (the "Procedures"). The Adviser has provided to the
         Sub-adviser copies of all Governing Documents and Procedures and shall
         promptly provide to the Sub-adviser any amendments or supplements
         thereto. Subject to and in pursuance of the foregoing, the Sub-adviser
         shall make all determinations with respect to the purchase and sale of
         portfolio securities and shall take such action necessary to implement
         the same. The Sub-adviser shall render such reports to the Trust's
         Board of Trustees and the Adviser as they may reasonably request
         concerning the investment activities of the Trust. Unless the Adviser
         gives the Sub-adviser written instructions to the contrary, the
         Sub-adviser shall, in good faith and in a manner which it reasonably
         believes best serves the interests of the Trust's shareholders, direct
         the Trust's custodian as to how to vote such proxies as may be
         necessary or advisable in connection with any matters submitted to a
         vote of shareholders of securities held in the Trust.

                  b. Absent instructions of the Adviser to the contrary, the
         Sub-adviser shall, in the name of the Trust, place orders for the
         execution of portfolio transactions with or through such brokers,
         dealers or other financial institutions as it may select. The
         Sub-adviser shall use its best efforts to obtain best execution on all
         portfolio transactions executed on behalf of the Trust, provided that,
         so long as the Sub-adviser has complied with Section 28(e) of the
         Securities Exchange Act of 1934, the Sub-adviser may cause the Trust to
         pay a commission on a transaction in excess of the amount of commission
         another broker-dealer would have charged.

                  c. In connection with the placement of orders for the
         execution of the portfolio transactions of the Trust, the Sub-adviser
         shall create and maintain all records pertaining to the purchase and
         sale of securities by the Sub-adviser on behalf of the Trust required
         by Rule 31a-1(b)(5) and (9) under the 1940 Act. All such records shall
         be the property of the Trust and shall be available for inspection and
         use by the Securities and Exchange Commission ("SEC"), the Trust, the
         Adviser or any person retained by the Trust at all reasonable times.
         Where applicable, such records shall be maintained by the Sub-adviser
         for the periods and in the places required by Rule 31a-2 under the 1940
         Act.

                  d. The Sub-adviser shall bear its expenses of providing
         services pursuant to this Agreement.

         3. Compensation of the Sub-adviser. In full consideration of services
rendered pursuant to this Agreement, the Adviser will pay the Sub-adviser a fee
at the annual rate set forth in Schedule A hereto of the value of the Trust's
average daily total assets. Such fee shall be accrued daily and paid monthly as
soon as practicable after the end of each month. If the Sub-adviser shall serve
for less than the whole of any month, the foregoing compensation shall be
prorated. For the purpose of determining fees payable to the Sub-adviser, the
value of the Trust's net assets shall be computed at the times and in the manner
determined by the Trust's Board of Trustees and set forth in the Governing
Documents.

         4. Other Activities of the Sub-adviser. The services of the Sub-adviser
hereunder are not to be deemed exclusive, and the Sub-adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired.

         5. Use of Names. The Adviser shall not use the name of the Sub-adviser
or any of its affiliates in any prospectus, sales literature or other material
relating to the Trust in any manner not approved prior thereto by the
Sub-adviser; provided, however, that the Adviser may use the name of the
Sub-adviser and its affiliates in any such material that merely refers in
accurate terms to the Sub-adviser's appointment hereunder. The Sub-adviser shall
not use the name of the Trust or the Adviser in any material relating to the
Sub-adviser in any manner not approved prior thereto by the Adviser; provided,
however, that the Sub-adviser may use the name of the Adviser or the Trust in
any material that merely refers in accurate terms to the appointment of the
Sub-adviser hereunder.

         6. Liability of the Sub-adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Sub-adviser, the Sub-adviser shall not be liable for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security. Subject to the foregoing, nothing herein shall constitute a waiver of
any rights or remedies that the Trust may have under any federal or state
securities laws.

         7. Limitation of Trust's Liability. The Sub-adviser acknowledges that
it has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Sub-adviser agrees that
any of the Trust's obligations shall be limited to the assets of the Trust and
that the Sub-adviser shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trust officer, employee or agent of the
Trust.

         8. Renewal, Termination and Amendment. This Agreement shall continue in
effect, unless sooner terminated as hereinafter provided, until December 31,
2001 and shall continue in full force and effect for successive periods of one
year thereafter, but only so long as each such continuance is specifically
approved at least annually by vote of the holders of a majority of the
outstanding voting securities of the Trust or by vote of a majority of the
Trustees who are not parties to this Agreement or interested persons of any such
party, cast in accordance with the provisions of the 1940 Act. This Agreement
may be terminated at any time without payment of any penalty, by the Adviser,
the Trust's Board of Trustees, or by a vote of a majority of the outstanding
voting securities of the Trust upon 60 days prior written notice to the
Sub-adviser or by the Sub-adviser upon 90 days prior written notice to the
Adviser, or upon such shorter notice as may be mutually agreed upon. This
Agreement shall terminate automatically and immediately upon termination of the
Management Agreement between the Adviser and the Trust. This Agreement shall
terminate automatically and immediately in the event of its assignment. The
terms "assignment" and vote of a majority of the outstanding voting securities"
shall have the meaning set forth for such terms in the 1940 Act. This Agreement
may be amended at any time by the Sub-adviser and the Adviser, subject to
approval by the Trust's Board of Trustees and, if required by applicable SEC
rules and regulations, a vote of a majority of the Trust's outstanding voting
securities.
         9. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties without the consent of the other party
hereto except as required by law, rule or regulation. The Adviser hereby
consents to the disclosure to third parties of investment results and other data
of the Trust in connection with providing composite investment results and
related information of the Sub-adviser.

         10. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statue, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.

         11. Miscellaneous. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in several counterparts, all of which together shall
for all purposes constitute one Agreement, binding on the parties.

         IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.


                            EVERGREEN INVESTMENT MANAGEMENT COMPANY, LLC

                            By: /s/ Michael H. Koonce
                                Name: Michael H. Koonce
                                Title: Secretary


                            FIRST INTERNATIONAL ADVISORS, LLC

                            By: /s/ George R. McNeill
                                Name: George R. McNeill
                                Title: Managing Director










<PAGE>



                                                             April 25, 2003

                                   Schedule A


         As compensation for the Sub-adviser's services to the Trust during the
period of this Agreement, the Adviser will pay to the Sub-adviser a fee at the
annual rate of:

                           I.       Evergreen Managed Income Fund
- --------------------------------------------------------------------------------

                  0.05% of the Average Daily Total Assets of the Trust (defined
                  as net assets of the Trust plus borrowings or other leverage
                  for investment purposes to the extent excluded in calculating
                  net assets)




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2H
<SEQUENCE>8
<FILENAME>purchaseagmt.txt
<TEXT>

                           Evergreen Managed Income Fund
                           (a Delaware statutory trust)


                     [ ] Common Shares of Beneficial Interest
                                  (No Par Value)


                            FORM OF PURCHASE AGREEMENT

                                                              June [ ], 2003

Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
               Incorporated
Wachovia Securities, Inc.
A.G. Edwards & Sons, Inc.
Prudential Securities Incorporated
UBS Warburg LLC

c/o Merrill Lynch, Pierce, Fenner & Smith
               Incorporated
North Tower
World Financial Center
New York, New York 10080

Ladies and Gentlemen:

     Evergreen Managed Income Fund, a Delaware  statutory trust (the "Fund") and
the Fund's investment adviser,  Evergreen Investment  Management Company, LLC, a
Delaware  limited  liability  company (the  "Adviser")  and First  International
Advisors,  LLC,  d/b/a  Evergreen  International  Advisors,  a Delaware  limited
liability  company  (the  "Sub-adviser,"  and  together  with the  Adviser,  the
"Advisers"),  each  confirms its  agreement  with Merrill  Lynch & Co.,  Merrill
Lynch,  Pierce,  Fenner & Smith  Incorporated  ("Merrill Lynch") and each of the
other Underwriters named in Schedule A hereto (collectively, the "Underwriters",
which  term  shall also  include  any  underwriter  substituted  as  hereinafter
provided in Section 10 hereof),  for whom Merrill  Lynch,  Wachovia  Securities,
Inc., A.G.  Edwards & Sons,  Inc.,  Prudential  Securities  Incorporated and UBS
Warburg   LLC  are   acting   as   representatives   (in  such   capacity,   the
"Representatives"),  with  respect  to the  issue  and  sale by the Fund and the
purchase  by  the  Underwriters,  acting  severally  and  not  jointly,  of  the
respective number of common shares of beneficial interest,  no par value, of the
Fund  ("Common  Shares")  set forth in said  Schedule A, and with respect to the
grant by the Fund to the Underwriters,  acting severally and not jointly, of the
option  described  in Section  2(b)  hereof to  purchase  all or any part of [ ]
additional  Common  Shares to cover  over-allotments,  if any. The aforesaid [ ]
Common Shares (the "Initial Securities") to be purchased by the Underwriters and
all or any part of the [ ] Common  Shares  subject  to the option  described  in
Section  2(b)  hereof  (the  "Option   Securities")   are  hereinafter   called,
collectively, the "Securities."

     The  Fund  understands  that  the  Underwriters  propose  to make a  public
offering of the Securities as soon as the  Representatives  deem advisable after
this Agreement has been executed and delivered.


     The Fund has  filed  with  the  Securities  and  Exchange  Commission  (the
"Commission")  a  registration  statement  on Form N-2 (No.  333-104569  and No.
811-21331)  covering the registration of the Securities under the Securities Act
of 1933,  as  amended  (the  "1933  Act"),  including  the  related  preliminary
prospectus or  prospectuses,  and a notification on Form N-8A of registration of
the Fund as an investment  company under the Investment  Company Act of 1940, as
amended (the "1940 Act"),  and the rules and regulations of the Commission under
the 1933 Act and the 1940 Act (the  "Rules  and  Regulations").  Promptly  after
execution and delivery of this  Agreement,  the Fund will either (i) prepare and
file a prospectus in accordance  with the  provisions of Rule 430A ("Rule 430A")
of the Rules and  Regulations  and paragraph (c) or (h) of Rule 497 ("Rule 497")
of the Rules and  Regulations  or (ii) if the Fund has elected to rely upon Rule
434 ("Rule 434") of the Rules and Regulations,  prepare and file a term sheet (a
"Term  Sheet") in accordance  with the  provisions of Rule 434 and Rule 497. The
information  included  in any  such  prospectus,  that  was  omitted  from  such
registration  statement at the time it became effective but that is deemed to be
part  of  such  registration  statement  at the  time it  became  effective,  if
applicable,  (a) pursuant to paragraph  (b) of Rule 430A is referred to as "Rule
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each prospectus used before such registration  statement
became effective, and any prospectus that omitted, as applicable,  the Rule 430A
Information or the Rule 434 Information,  that was used after such effectiveness
and prior to the  execution  and delivery of this  Agreement,  including in each
case any statement of additional information  incorporated therein by reference,
is  herein  called a  "preliminary  prospectus."  Such  registration  statement,
including  the  exhibits  thereto  and  schedules  thereto at the time it became
effective and including the Rule 430A  Information or the Rule 434  Information,
as applicable,  is herein called the "Registration  Statement." Any registration
statement  filed pursuant to Rule 462(b) of the Rules and  Regulations is herein
referred to as the "Rule 462(b)  Registration  Statement," and after such filing
the term  "Registration  Statement"  shall include the Rule 462(b)  Registration
Statement.  The final prospectus in the form first furnished to the Underwriters
for use in  connection  with  the  offering  of the  Securities,  including  the
statement of additional information incorporated therein by reference, is herein
called the "Prospectus." If Rule 434 is relied on, the term  "Prospectus"  shall
refer to the preliminary prospectus dated [ ], 2003 together with the Term Sheet
and all references in this  Agreement to the date of the  Prospectus  shall mean
the date of the Term Sheet.  For purposes of this  Agreement,  all references to
the Registration Statement,  any preliminary  prospectus,  the Prospectus or any
Term Sheet or any  amendment  or  supplement  to any of the  foregoing  shall be
deemed to include the copy filed with the Commission  pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").

     All references in this Agreement to financial  statements and schedules and
other  information   which  is  "contained,"   "included"  or  "stated"  in  the
Registration  Statement,  any preliminary prospectus or the Prospectus (or other
references  of like  import)  shall  be  deemed  to mean  and  include  all such
financial  statements and schedules and other  information which is incorporated
by reference in the Registration  Statement,  any preliminary  prospectus or the
Prospectus, as the case may be.

SECTION 1.        Representations and Warranties.

(a) Representations and Warranties by the Fund and the Adviser. The Fund and the
Adviser  jointly and severally  represent and warrant to each  Underwriter as of
the date hereof, as of the Closing Time referred to in Section 2(c) hereof,  and
as of each Date of Delivery (if any)  referred to in Section  2(b)  hereof,  and
agree with each Underwriter, as follows:

     (i) Compliance with  Registration  Requirements.  Each of the  Registration
     Statement and any Rule 462(b)  Registration  Statement has become effective
     under the 1933 Act and no stop order  suspending the  effectiveness  of the
     Registration  Statement or any Rule 462(b) Registration  Statement has been
     issued  under  the 1933  Act,  or  order of  suspension  or  revocation  of
     registration  pursuant to Section 8(e) of the 1940 Act, and no  proceedings
     for any such  purpose  have  been  instituted  or are  pending  or,  to the
     knowledge of the Fund or the Adviser,  are  contemplated by the Commission,
     and any request on the part of the Commission  for  additional  information
     has been complied with.

     At the  respective  times  the  Registration  Statement,  any  Rule  462(b)
Registration   Statement  and  any  post-effective   amendments  thereto  became
effective and at the Closing Time (and, if any Option  Securities are purchased,
at  the  Date  of  Delivery),   the  Registration  Statement,  the  Rule  462(b)
Registration  Statement,  the  notification  of Form N-8A and any amendments and
supplements  thereto complied and will comply in all material  respects with the
requirements of the 1933 Act, the 1940 Act and the Rules and Regulations and did
not and will not contain an untrue statement of a material fact or omit to state
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements therein not misleading.  Neither the Prospectus nor any amendments or
supplements  thereto,  at the  time the  Prospectus  or any  such  amendment  or
supplement was issued and at the Closing Time (and, if any Option Securities are
purchased,  at the  Date of  Delivery),  included  or  will  include  an  untrue
statement  of a material  fact or omitted or will omit to state a material  fact
necessary  in  order  to  make  the  statements  therein,  in the  light  of the
circumstances  under which they were made, not misleading.  If Rule 434 is used,
the Fund will comply with the  requirements of Rule 434 and the Prospectus shall
not be  "materially  different",  as such  term is used in Rule  434,  from  the
prospectus  included  in the  Registration  Statement  at  the  time  it  became
effective.

     Each  preliminary  prospectus  and  the  prospectus  filed  as  part of the
Registration  Statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 497 under the 1933 Act,  complied when so filed in all
material respects with the Rules and Regulations and each preliminary prospectus
and the Prospectus delivered to the Underwriters for use in connection with this
offering was identical to the  electronically  transmitted  copies thereof filed
with the  Commission  pursuant  to EDGAR,  except  to the  extent  permitted  by
Regulation S-T.

     If a Rule 462(b) Registration  Statement is required in connection with the
offering and sale of the  Securities,  the Fund has complied or will comply with
the  requirements  of Rule 111 under the 1933 Act  Regulations  relating  to the
payment of filing fees thereof.

     (ii) Independent  Accountants.  The accountants who certified the statement
     of assets  and  liabilities  included  in the  Registration  Statement  are
     independent  public  accountants  as required by the 1933 Act and the Rules
     and Regulations.

     (iii)  Financial  Statements.  The  statement  of  assets  and  liabilities
     included in the  Registration  Statement and the Prospectus,  together with
     the related notes,  presents  fairly the financial  position of the Fund at
     the date  indicated;  said  statement has been prepared in conformity  with
     generally accepted accounting principles ("GAAP").

     (iv) Expense  Summary.  The  information set forth in the Prospectus in the
     Fee Table has been prepared in accordance with the requirements of Form N-2
     and to the extent estimated or projected, such estimates or projections are
     reasonably believed to be attainable and reasonably based.

     (v) No Material  Adverse  Change.  Since the  respective  dates as of which
     information  is given in the  Registration  Statement  and the  Prospectus,
     except as otherwise stated therein,  (A) there has been no material adverse
     change  in the  condition,  financial  or  otherwise,  or in the  earnings,
     business affairs or business  prospects of the Fund, whether or not arising
     in the ordinary course of business (a "Material Adverse Effect"), (B) there
     have been no transactions entered into by the Fund, other than those in the
     ordinary  course of business,  which are material with respect to the Fund,
     and (C) there has been no dividend or  distribution  of any kind  declared,
     paid or made by the Fund on any class of its capital stock.

     (vi) Good  Standing of the Fund.  The Fund has been duly  organized  and is
     validly existing as a trust in good standing under the laws of the State of
     Delaware  and has the power and  authority  to own,  lease and  operate its
     properties  and to conduct its business as described in the  Prospectus and
     to enter into and perform its  obligations  under this  Agreement;  and the
     Fund is duly  qualified as a foreign  trust to transact  business and is in
     good standing in each other  jurisdiction  in which such  qualification  is
     required,  whether by reason of the ownership or leasing of property or the
     conduct of  business,  except  where the  failure so to qualify or to be in
     good standing would not result in a Material Adverse Effect.

     (vii) No Subsidiaries. The Fund has no subsidiaries.

     (viii)  Investment  Company  Status.  The Fund is duly  registered with the
     Commission  under  the  1940  Act as a  closed-end  diversified  management
     investment  company,  and no  order of  suspension  or  revocation  of such
     registration  has  been  issued  or  proceedings   therefor   initiated  or
     threatened by the Commission.

     (ix) Officers and  Trustees.  No person is serving or acting as an officer,
     trustee or  investment  adviser of the Fund except in  accordance  with the
     provisions of the 1940 Act and the Rules and Regulations and the Investment
     Advisers Act of 1940, as amended (the  "Advisers  Act"),  and the rules and
     regulations  of the  Commission  promulgated  under the  Advisers  Act (the
     "Advisers  Act  Rules  and  Regulations").   Except  as  disclosed  in  the
     Registration  Statement and the  Prospectus (or any amendment or supplement
     to either of them),  no trustee of the Fund is an  "interested  person" (as
     defined in the 1940 Act) of the Fund or an "affiliated  person" (as defined
     in the 1940 Act) of any Underwriter.

     (x)  Capitalization.  The  authorized,  issued  and  outstanding  shares of
     beneficial interest of the Fund is as set forth in the Prospectus as of the
     date  thereof  under the caption  "Description  of Shares."  All issued and
     outstanding  shares  of  beneficial  interest  of the Fund  have  been duly
     authorized and validly issued and are fully paid and non-assessable, except
     as provided for in the Fund's  declaration of trust,  and have been offered
     and sold or exchanged by the Fund in compliance  with all  applicable  laws
     (including, without limitation, federal and state securities laws); none of
     the  outstanding  shares of  beneficial  interest of the Fund was issued in
     violation of the preemptive or other similar  rights of any  securityholder
     of the Fund.

     (xi)  Authorization  and  Description of  Securities.  The Securities to be
     purchased by the  Underwriters  from the Fund have been duly authorized for
     issuance and sale to the Underwriters  pursuant to this Agreement and, when
     issued and delivered by the Fund pursuant to this Agreement against payment
     of the  consideration  set forth herein,  will be validly  issued and fully
     paid and  non-assessable,  except as provided for in the Fund's declaration
     of trust.  The Common Shares  conform to all  statements  relating  thereto
     contained in the Prospectus and such description conforms to the rights set
     forth in the  instruments  defining the same;  no holder of the  Securities
     will be subject to personal liability by reason of being such a holder; and
     the issuance of the  Securities  is not subject to the  preemptive or other
     similar rights of any securityholder of the Fund.

     (xii)  Absence of Defaults and  Conflicts.  The Fund is not in violation of
     its  declaration  of trust or bylaws,  or in default in the  performance or
     observance of any obligation, agreement, covenant or condition contained in
     any contract, indenture, mortgage, deed of trust, loan or credit agreement,
     note,  lease or other  agreement or instrument to which it is a party or by
     which it may be  bound,  or to which any of the  property  or assets of the
     Fund is subject  (collectively,  "Agreements and  Instruments")  except for
     such  violations  or defaults  that would not result in a Material  Adverse
     Effect; and the execution,  delivery and performance of this Agreement, the
     Management Agreement, the Administration Agreement, the Custodian Agreement
     and the Transfer  and Dividend  Disbursing  Agent and  Registrar  Agreement
     referred to in the Registration  Statement (as used herein, the "Management
     Agreement," the "Administration  Agreement," the "Custodian  Agreement" and
     the "Transfer  and Dividend  Disbursing  Agency and  Registrar  Agreement,"
     respectively) and the consummation of the transactions  contemplated herein
     and in the Registration  Statement  (including the issuance and sale of the
     Securities  and the use of the proceeds from the sale of the  Securities as
     described  in the  Prospectus  under the  caption  "Use of  Proceeds")  and
     compliance  by the Fund  with its  obligations  hereunder  have  been  duly
     authorized  by all  necessary  corporate  action  and do not and will  not,
     whether  with or  without  the giving of notice or passage of time or both,
     conflict with or constitute a breach of, or default or Repayment  Event (as
     defined below) under,  or result in the creation or imposition of any lien,
     charge or encumbrance  upon any property or assets of the Fund pursuant to,
     the  Agreements and  Instruments  (except for such  conflicts,  breaches or
     defaults  or liens,  charges  or  encumbrances  that  would not result in a
     Material Adverse  Effect),  nor will such action result in any violation of
     the  provisions  of the  declaration  of trust or bylaws of the Fund or any
     applicable law, statute, rule, regulation,  judgment, order, writ or decree
     of  any  government,  government  instrumentality  or  court,  domestic  or
     foreign, having jurisdiction over the Fund or any of its assets, properties
     or  operations.  As used  herein,  a  "Repayment  Event" means any event or
     condition  which gives the holder of any note,  debenture or other evidence
     of indebtedness (or any person acting on such holder's behalf) the right to
     require the repurchase, redemption or repayment of all or a portion of such
     indebtedness by the Fund.

     (xiii)  Absence  of  Proceedings.  There is no  action,  suit,  proceeding,
     inquiry or  investigation  before or  brought by any court or  governmental
     agency or body, domestic or foreign,  now pending,  or, to the knowledge of
     the Fund or the Adviser,  threatened,  against or affecting the Fund, which
     is required to be disclosed in the  Registration  Statement  (other than as
     disclosed  therein),  or which might  reasonably be expected to result in a
     Material  Adverse  Effect,   or  which  might  reasonably  be  expected  to
     materially and adversely affect the properties or assets of the Fund or the
     consummation  of the  transactions  contemplated  in this  Agreement or the
     performance by the Fund of its obligations hereunder.  The aggregate of all
     pending legal or  governmental  proceedings to which the Fund is a party or
     of which  any of its  property  or  assets  is the  subject  which  are not
     described  in  the  Registration  Statement,   including  ordinary  routine
     litigation incidental to the business,  could not reasonably be expected to
     result in a Material Adverse Effect.

     (xiv) Accuracy of Exhibits.  There are no contracts or documents  which are
     required to be described in the Registration Statement or the Prospectus or
     to be filed as  exhibits  thereto  by the 1933 Act,  the 1940 Act or by the
     Rules  and  Regulations  which  have not  been so  described  and  filed as
     required.

     (xv) Possession of Intellectual  Property.  The Fund owns or possesses,  or
     can acquire on reasonable terms, adequate patents, patent rights, licenses,
     inventions,   copyrights,  know-how  (including  trade  secrets  and  other
     unpatented  and/or  unpatentable  proprietary or confidential  information,
     systems or  procedures),  trademarks,  service marks,  trade names or other
     intellectual property (collectively,  "Intellectual Property") necessary to
     carry  on the  business  now  operated  by the  Fund,  and the Fund has not
     received any notice or is not  otherwise  aware of any  infringement  of or
     conflict  with asserted  rights of others with respect to any  Intellectual
     Property  or  of  any  facts  or  circumstances   which  would  render  any
     Intellectual  Property invalid or inadequate to protect the interest of the
     Fund  therein,  and which  infringement  or conflict (if the subject of any
     unfavorable  decision,  ruling or finding)  or  invalidity  or  inadequacy,
     singly or in the aggregate, would result in a Material Adverse Effect.

     (xvi) Absence of Further  Requirements.  No filing with, or  authorization,
     approval,  consent, license, order,  registration,  qualification or decree
     of, any court or governmental  authority or agency is necessary or required
     for the performance by the Fund of its obligations hereunder, in connection
     with the  offering,  issuance or sale of the  Securities  hereunder  or the
     consummation of the  transactions  contemplated  by this Agreement,  except
     such as have been  already  obtained or as may be  required  under the 1933
     Act, the 1940 Act,  the  Securities  Exchange Act of 1934,  as amended (the
     "1934 Act"), or under the rules of the American Stock Exchange  ("AMEX") or
     the  National  Association  of  Securities  Dealers,  Inc ("NASD") or state
     securities laws.

     (xvii) Possession of Licenses and Permits. The Fund possesses such permits,
     licenses,  approvals,  consents  and  other  authorizations  (collectively,
     "Governmental Licenses") issued by the appropriate federal, state, local or
     foreign  regulatory  agencies or bodies necessary to operate its properties
     and to conduct the business as contemplated in the Prospectus;  the Fund is
     in  compliance  with the  terms  and  conditions  of all such  Governmental
     Licenses, except where the failure so to comply would not, singly or in the
     aggregate, have a Material Adverse Effect; all of the Governmental Licenses
     are valid and in full force and effect,  except when the invalidity of such
     Governmental Licenses or the failure of such Governmental Licenses to be in
     full force and effect  would not have a Material  Adverse  Effect;  and the
     Fund has not received any notice of proceedings  relating to the revocation
     or modification of any such Governmental  Licenses which,  singly or in the
     aggregate,  if the subject of an unfavorable  decision,  ruling or finding,
     would result in a Material Adverse Effect.

     (xviii)  Advertisements.   Any  advertising,   sales  literature  or  other
     promotional material (including "prospectus wrappers", "broker kits," "road
     show   slides"  and  "road  show   scripts"  and   "electronic   road  show
     presentations")  authorized  in writing by or  prepared  by the Fund or the
     Advisers  used in  connection  with the public  offering of the  Securities
     (collectively,  "sales material") does not contain an untrue statement of a
     material  fact or omit to  state a  material  fact  required  to be  stated
     therein  or  necessary  to make  the  statements  therein  not  misleading.
     Moreover,  all sales  material  complied  and will  comply in all  material
     respects with the  applicable  requirements  of the 1933 Act, the 1940 Act,
     the Rules and Regulations and the rules and interpretations of the NASD.

     (xix)  Subchapter  M. The Fund  intends  to direct  the  investment  of the
     proceeds of the offering described in the Registration  Statement in such a
     manner as to comply with the  requirements  of Subchapter M of the Internal
     Revenue  Code of 1986,  as  amended  ("Subchapter  M of the  Code"  and the
     "Code,"  respectively),  and intends to qualify as a  regulated  investment
     company under Subchapter M of the Code.

(xx) Distribution of Offering Materials. The Fund has not distributed and, prior
to the  later  to  occur  of (A) the  Closing  Time  and (B)  completion  of the
distribution  of the  Shares,  will not  distribute  any  offering  material  in
connection with the offering and sale of the Shares other than the  Registration
Statement, a preliminary prospectus,  the Prospectus or other materials, if any,
permitted by the 1933 Act or the 1940 Act or the Rules and Regulations.

(xxi) Accounting  Controls.  The Fund maintains a system of internal  accounting
controls  sufficient to provide reasonable  assurances that (A) transactions are
executed in accordance with management's  general or specific  authorization and
with the applicable  requirements of the 1940 Act, the Rules and Regulations and
the Code; (B)  transactions  are recorded as necessary to permit  preparation of
financial statements in conformity with generally accepted accounting principles
and to maintain  accountability  for assets and to maintain  compliance with the
books and records requirements under the 1940 Act and the Rules and Regulations;
(C)  access to assets is  permitted  only in  accordance  with the  management's
general or  specific  authorization;  and (D) the  recorded  accountability  for
assets is compared with existing assets at reasonable  intervals and appropriate
action is taken with respect to any differences.

(xxii) Absence of Undisclosed  Payments.  To the Fund's  knowledge,  neither the
Fund nor any  employee or agent of the Fund has made any payment of funds of the
Fund or received or retained any funds,  which payment,  receipt or retention of
funds is of a character required to be disclosed in the Prospectus.

(xxiii)  Material  Agreements.  This Agreement,  the Management  Agreement,  the
Sub-Advisory Agreement,  the Administration  Agreement,  the Custodian Agreement
and the Transfer and Dividend  Disbursing  Agency and Registrar  Agreement  have
each been duly  authorized by all  requisite  action on the part of the Fund and
executed and  delivered  by the Fund,  as of the dates noted  therein,  and each
complies  with  all  applicable   provisions  of  the  1940  Act.  Assuming  due
authorization,  execution and delivery by the other parties thereto with respect
to  the  Management  Agreement,  the  Administration  Agreement,  the  Custodian
Agreement  and  the  Transfer  and  Dividend  Disbursing  Agency  and  Registrar
Agreement,  each of the Management Agreement, the Administration  Agreement, the
Custodian  Agreement  and  the  Transfer  and  Dividend  Disbursing  Agency  and
Registrar  Agreement  constitutes  a valid and  binding  agreement  of the Fund,
enforceable  in  accordance  with its terms,  except as affected by  bankruptcy,
insolvency, fraudulent conveyance, reorganization,  moratorium and other similar
laws relating to or affecting  creditors'  rights  generally,  general equitable
principles (whether considered in a proceeding in equity or at law).

(xxiv)  Registration  Rights.  There are no persons with registration  rights or
other  similar  rights  to  have  any  securities  registered  pursuant  to  the
Registration Statement or otherwise registered by the Fund under the 1933 Act.

(xxv) AMEX Listing.  The Securities have been duly authorized for listing,  upon
notice of issuance,  on the AMEX and the Fund's  registration  statement on Form
8-A under the 1934 Act has become effective.

(b)  Representations  and  Warranties  by the  Advisers.  Each  of the  Advisers
represents  and warrants to each  Underwriter  as of the date hereof,  as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof as follows:

     (i) Good Standing of the Advisers. Each Adviser has been duly organized and
     is validly  existing and in good  standing as a limited  liability  company
     under the laws of the State of Delaware  with full power and  authority  to
     own,  lease and  operate  its  properties  and to conduct  its  business as
     described in the Prospectus and each is duly qualified as a foreign company
     to transact business and is in good standing in each other  jurisdiction in
     which such qualification is required.

     (ii) Investment Adviser Status. Each of the Advisers is duly registered and
     in good  standing with the  Commission  as an investment  adviser under the
     Advisers Act, and is not prohibited by the Advisers Act or the 1940 Act, or
     the rules and regulations under such acts, from acting under the Management
     Agreement for the Fund as contemplated by the Prospectus.

     (iii)  Description  of  Advisers.  The  description  of the Advisers in the
     Registration  Statement and the Prospectus (and any amendment or supplement
     to either of them) complied and complies in all material  respects with the
     provisions  of the 1933 Act, the 1940 Act, the Advisers  Act, the Rules and
     Regulations  and the  Advisers  Act Rules and  Regulations  and is true and
     correct  and does not contain any untrue  statement  of a material  fact or
     omit to state any material fact required to be stated  therein or necessary
     in order  to make the  statements  therein,  in light of the  circumstances
     under which they were made, not misleading.

     (iv)  Capitalization.  Each of the  Advisers  has the  financial  resources
     available  to  it  necessary  for  the  performance  of  its  services  and
     obligations as contemplated in the Prospectus, this Agreement and under the
     Management Agreement or Sub-Advisory Agreement to which it is a party.

     (v)  Authorization of Agreements;  Absence of Defaults and Conflicts.  This
     Agreement,  the Management  Agreement,  the Sub-Advisory  Agreement and the
     Additional Compensation Agreement have each been duly authorized,  executed
     and delivered by each Adviser that is a party  thereto,  and the Management
     Agreement,  the  Sub-Advisory  Agreement  and the  Additional  Compensation
     Agreement each constitute a valid and binding obligation of each respective
     Adviser,  enforceable  against it in accordance  with its terms,  except as
     affected by bankruptcy, insolvency, fraudulent conveyance,  reorganization,
     moratorium  and other  similar  laws  relating to or  affecting  creditors'
     rights generally and general equitable  principles (whether considered in a
     proceeding in equity or at law);  and neither the execution and delivery of
     this Agreement, the Management Agreement, the Sub-Advisory Agreement or the
     Additional  Compensation  Agreement  nor the  performance  by either of the
     Advisers of its obligations  hereunder or thereunder will conflict with, or
     result in a breach of any of the terms and  provisions  of, or  constitute,
     with or without  the  giving of notice or lapse of time or both,  a default
     under, any agreement or instrument to which either Adviser is a party or by
     which  it is  bound,  the  agreement  and  articles  of  organization,  the
     operating agreement,  the bylaws or other organizational  documents of each
     Adviser, or to each Adviser's knowledge, by any law, order, decree, rule or
     regulation  applicable to it of any jurisdiction,  court,  federal or state
     regulatory body,  administrative  agency or other  governmental body, stock
     exchange or securities association having jurisdiction over the Advisers or
     its properties or operations;  and no consent,  approval,  authorization or
     order of any court or governmental  authority or agency is required for the
     consummation  by the  Advisers  of the  transactions  contemplated  by this
     Agreement,  the Management  Agreement,  the Sub-Advisory  Agreement and the
     Additional Compensation  Agreement,  except as have been obtained or may be
     required under the 1933 Act, the 1940 Act, the 1934 Act or state securities
     laws.

     (vi) No Material  Adverse  Change.  Since the respective  dates as of which
     information  is given in the  Registration  Statement  and the  Prospectus,
     except as otherwise stated therein,  there has not occurred any event which
     should  reasonably  be  expected to have a material  adverse  effect on the
     ability of either Adviser to perform its respective  obligations under this
     Agreement and the respective Management Agreement or Sub-Advisory Agreement
     to which it is a party.

     (vii) Absence of Proceedings. There is no action, suit, proceeding, inquiry
     or investigation  before or brought by any court or governmental  agency or
     body, domestic or foreign, now pending, or, to the knowledge of each of the
     Advisers, threatened against or affecting either Adviser or any "affiliated
     person" of either  Adviser (as such term is defined in the 1940 Act) or any
     partners, directors, officers or employees of the foregoing, whether or not
     arising in the  ordinary  course of  business,  which might  reasonably  be
     expected  to  result  in any  material  adverse  change  in the  condition,
     financial or otherwise, or earnings, business affairs or business prospects
     of the relevant Adviser,  materially and adversely affect the properties or
     assets of the relevant Adviser or materially impair or adversely affect the
     ability of the  relevant  Adviser to function as an  investment  adviser or
     perform its obligations under the Management  Agreement or the Sub-Advisory
     Agreement,  or  which  is  required  to be  disclosed  in the  Registration
     Statement and the Prospectus.

     (viii) Absence of Violation or Default. Each Adviser is not in violation of
     its agreement and articles of organization,  operating agreement, bylaws or
     other organizational documents or in default under any agreement, indenture
     or instrument.

(c) Officer's Certificates. Any certificate signed by any officer of the Fund or
an Adviser delivered to the  Representatives  or to counsel for the Underwriters
shall be  deemed  a  representation  and  warranty  by the Fund or the  relevant
Adviser,  as the case may be,  to each  Underwriter  as to the  matters  covered
thereby.

SECTION 2.        Sale and Delivery to Underwriters; Closing.

(a)  Initial  Securities.  On the basis of the  representations  and  warranties
herein  contained and subject to the terms and conditions  herein set forth, the
Fund agrees to sell to each  Underwriter,  severally  and not jointly,  and each
Underwriter, severally and not jointly, agrees to purchase from the Fund, at the
price per share set forth in  Schedule B, the number of Initial  Securities  set
forth in Schedule A opposite the name of such  Underwriter,  plus any additional
number of Initial  Securities  which such  Underwriter  may become  obligated to
purchase pursuant to the provisions of Section 10 hereof.

(b) Option  Securities.  In addition,  on the basis of the  representations  and
warranties  herein contained and subject to the terms and conditions  herein set
forth, the Fund hereby grants an option to the  Underwriters,  severally and not
jointly,  to purchase up to an  additional [ ] Common Shares in the aggregate at
the price per share set forth in  Schedule  B, less an amount per share equal to
any dividends or  distributions  declared by the Fund and payable on the Initial
Securities but not payable on the Option  Securities.  The option hereby granted
will  expire 45 days after the date hereof and may be  exercised  in whole or in
part from time to time only for the  purpose of covering  over-allotments  which
may be made in  connection  with the  offering and  distribution  of the Initial
Securities  upon notice by the  Representatives  to the Fund  setting  forth the
number  of  Option  Securities  as to which the  several  Underwriters  are then
exercising  the option and the time and date of payment  and  delivery  for such
Option  Securities.  Any such time and date of delivery  (a "Date of  Delivery")
shall be  determined by the  Representatives,  but shall not be later than seven
full business days after the exercise of said option,  nor in any event prior to
the Closing Time, as hereinafter  defined.  If the option is exercised as to all
or any  portion  of the  Option  Securities,  each of the  Underwriters,  acting
severally and not jointly,  will purchase that proportion of the total number of
Option  Securities then being  purchased which the number of Initial  Securities
set forth in Schedule A opposite the name of such Underwriter bears to the total
number  of  Initial  Securities,  subject  in each case to such  adjustments  as
Merrill Lynch in its  discretion  shall make to eliminate any sales or purchases
of a fractional number of Option Securities.

(c)  Payment.  Payment of the purchase  price for, and delivery of  certificates
for, the Initial  Securities  shall be made at the offices of Clifford Chance US
LLP, 200 Park Avenue,  New York,  New York 10166 or at such other place as shall
be agreed upon by the Representatives and the Fund, at 10:00 A.M. (Eastern time)
on the third (fourth,  if the pricing  occurs after 4:30 P.M.  (Eastern time) on
any  given  day)  business  day  after  the date  hereof  (unless  postponed  in
accordance with the provisions of Section 10), or such other time not later than
ten business days after such date as shall be agreed upon by the Representatives
and the Fund (such time and date of payment and  delivery  being  herein  called
"Closing Time").

     In  addition,  in the event  that any or all of the Option  Securities  are
purchased by the  Underwriters,  payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices,  or at such other place as shall be agreed upon by the  Representatives
and the Fund,  on each Date of  Delivery  as  specified  in the notice  from the
Representatives to the Fund.

     Payment shall be made to the Fund by wire transfer of immediately available
funds  to a  bank  account  designated  by the  Fund,  against  delivery  to the
Representatives  for the respective accounts of the Underwriters of certificates
for  the  Securities  to be  purchased  by  them.  It is  understood  that  each
Underwriter  has  authorized  the  Representatives,  for its account,  to accept
delivery  of,  receipt  for,  and make  payment of the  purchase  price for, the
Initial  Securities  and the Option  Securities,  if any, which it has agreed to
purchase.   Merrill  Lynch,  individually  and  not  as  representative  of  the
Underwriters,  may (but shall not be obligated  to) make payment of the purchase
price  for the  Initial  Securities  or the  Option  Securities,  if any,  to be
purchased by any  Underwriter  whose funds have not been received by the Closing
Time or the  relevant  Date of  Delivery,  as the case may be, but such  payment
shall not relieve such Underwriter from its obligations hereunder.

(d) Denominations; Registration. Certificates for the Initial Securities and the
Option Securities, if any, shall be in such denominations and registered in such
names as the  Representatives  may request in writing at least one full business
day before the Closing  Time or the relevant  Date of Delivery,  as the case may
be. The certificates for the Initial  Securities and the Option  Securities,  if
any, will be made available for examination and packaging by the Representatives
in the City of New York not later than 10:00 A.M. (Eastern time) on the business
day prior to the Closing Time or the relevant Date of Delivery,  as the case may
be.

SECTION 3.        Covenants.

(a) The  Fund  and the  Adviser,  jointly  and  severally,  covenant  with  each
Underwriter as follows:

     (i) Compliance with Securities  Regulations  and Commission  Requests.  The
     Fund,  subject to Section  3(a)(ii),  will comply with the  requirements of
     Rule 430A or Rule 434, as applicable,  and will notify the  Representatives
     immediately, and confirm the notice in writing, (i) when any post-effective
     amendment to the  Registration  Statement  shall become  effective,  or any
     supplement  to the  Prospectus  or any amended  Prospectus  shall have been
     filed,  (ii) of the receipt of any comments from the  Commission,  (iii) of
     any  request  by the  Commission  for  any  amendment  to the  Registration
     Statement  or  any  amendment  or  supplement  to  the  Prospectus  or  for
     additional  information,  and (iv) of the issuance by the Commission of any
     stop order suspending the effectiveness of the Registration Statement or of
     any order  preventing or suspending the use of any preliminary  prospectus,
     or of the suspension of the qualification of the Securities for offering or
     sale  in any  jurisdiction,  or of the  initiation  or  threatening  of any
     proceedings  for any of such  purposes.  The Fund will promptly  effect the
     filings necessary pursuant to Rule 497 and will take such steps as it deems
     necessary to ascertain promptly whether the form of prospectus  transmitted
     for filing under Rule 497 was received for filing by the Commission and, in
     the event that it was not, it will promptly file such prospectus.  The Fund
     will make every  reasonable  effort to  prevent  the  issuance  of any stop
     order,  or order of suspension or  revocation of  registration  pursuant to
     Section  8(e) of the 1940  Act,  and,  if any such  stop  order or order of
     suspension or revocation of registration  is issued,  to obtain the lifting
     thereof at the earliest possible moment.

     (ii) Filing of Amendments. The Fund will give the Representatives notice of
     its  intention  to  file  or  prepare  any  amendment  to the  Registration
     Statement  (including any filing under Rule 462(b)),  any Term Sheet or any
     amendment,  supplement or revision to either the prospectus included in the
     Registration   Statement  at  the  time  it  became  effective  or  to  the
     Prospectus,  will  furnish  the  Representatives  with  copies  of any such
     documents a reasonable amount of time prior to such proposed filing or use,
     as the case may be, and will not file or use any such document to which the
     Representatives or counsel for the Underwriters shall object.

     (iii) Delivery of Registration  Statements.  The Fund has furnished or will
     deliver to the  Representatives  and counsel for the Underwriters,  without
     charge, signed copies of the Registration Statement as originally filed and
     of  each  amendment   thereto   (including   exhibits  filed  therewith  or
     incorporated  by reference  therein) and signed  copies of all consents and
     certificates  of  experts,  and will also  deliver to the  Representatives,
     without  charge,  a  conformed  copy  of  the  Registration   Statement  as
     originally filed and of each amendment thereto (without  exhibits) for each
     of the  Underwriters.  The copies of the  Registration  Statement  and each
     amendment  thereto  furnished to the Underwriters  will be identical to the
     electronically   transmitted  copies  thereof  filed  with  the  Commission
     pursuant to EDGAR, except to the extent permitted by Regulation S-T.

     (iv) Delivery of Prospectuses.  The Fund has delivered to each Underwriter,
     without  charge,  as many  copies of each  preliminary  prospectus  as such
     Underwriter  reasonably requested,  and the Fund hereby consents to the use
     of such  copies  for  purposes  permitted  by the 1933  Act.  The Fund will
     furnish to each  Underwriter,  without  charge,  during the period when the
     Prospectus is required to be delivered  under the 1933 Act or the 1934 Act,
     such number of copies of the  Prospectus  (as amended or  supplemented)  as
     such Underwriter may reasonably request.  The Prospectus and any amendments
     or supplements  thereto  furnished to the Underwriters will be identical to
     the  electronically  transmitted  copies  thereof filed with the Commission
     pursuant to EDGAR, except to the extent permitted by Regulation S-T.

     (v)  Continued  Compliance  with  Securities  Laws.  If at any time  when a
     prospectus is required by the 1933 Act to be delivered in  connection  with
     sales of the Securities,  any event shall occur or condition shall exist as
     a result  of which it is  necessary,  in the  opinion  of  counsel  for the
     Underwriters or for the Fund, to amend the Registration  Statement or amend
     or supplement the Prospectus in order that the Prospectus  will not include
     any untrue  statements  of a material fact or omit to state a material fact
     necessary in order to make the  statements  therein not  misleading  in the
     light  of the  circumstances  existing  at the  time it is  delivered  to a
     purchaser,  or if it shall be necessary, in the opinion of such counsel, at
     any such time to amend the  Registration  Statement or amend or  supplement
     the Prospectus in order to comply with the  requirements of the 1933 Act or
     the Rules and Regulations, the Fund will promptly prepare and file with the
     Commission,  subject to Section  3(a)(ii),  such amendment or supplement as
     may be  necessary  to correct  such  statement  or  omission or to make the
     Registration Statement or the Prospectus comply with such requirements, and
     the Fund will  furnish to the  Underwriters  such  number of copies of such
     amendment or supplement as the Underwriters may reasonably request.

     (vi)  Blue Sky  Qualifications.  The Fund  will  use its best  efforts,  in
     cooperation with the  Underwriters,  to qualify the Securities for offering
     and sale  under the  applicable  securities  laws of such  states and other
     jurisdictions of the United States as the Representatives may designate and
     to maintain such qualifications in effect for a period of not less than one
     year from the later of the effective date of the Registration Statement and
     any Rule 462(b) Registration  Statement;  provided,  however, that the Fund
     shall not be obligated to file any general consent to service of process or
     to  qualify  as a  foreign  trust  or as a  dealer  in  securities  in  any
     jurisdiction  in which  it is not so  qualified  or to  subject  itself  to
     taxation in respect of doing  business in any  jurisdiction  in which it is
     not otherwise so subject. In each jurisdiction in which the Securities have
     been so qualified, the Fund will file such statements and reports as may be
     required by the laws of such jurisdiction to continue such qualification in
     effect  for a period of not less than one year from the  effective  date of
     the Registration Statement and any Rule 462(b) Registration Statement.

     (vii) Rule 158. The Fund will timely file such reports pursuant to the 1934
     Act  as  are  necessary  in  order  to  make  generally  available  to  its
     securityholders  as soon  as  practicable  an  earnings  statement  for the
     purposes  of,  and to  provide  the  benefits  contemplated  by,  the  last
     paragraph of Section 11(a) of the 1933 Act.

     (viii) Use of Proceeds.  The Fund will use the net proceeds  received by it
     from the sale of the  Securities in the manner  specified in the Prospectus
     under "Use of Proceeds".

     (ix) Listing.  The Fund will use its reasonable  best efforts to effect the
     listing  of the  Securities  on the AMEX,  subject  to notice of  issuance,
     concurrently with the effectiveness of the Registration Statement.

     (x) Restriction on Sale of Securities. During a period of 180 days from the
     date of the  Prospectus,  the Fund will  not,  without  the  prior  written
     consent of Merrill Lynch, (A) directly or indirectly,  offer, pledge, sell,
     contract to sell,  sell any option or contract to  purchase,  purchase  any
     option or contract to sell, grant any option,  right or warrant to purchase
     or  otherwise  transfer  or  dispose  of Common  Shares  or any  securities
     convertible  into or exercisable or exchangeable  for Common Shares or file
     any  registration  statement  under the 1933 Act with respect to any of the
     foregoing  or (B)  enter  into  any  swap  or any  other  agreement  or any
     transaction  that transfers,  in whole or in part,  directly or indirectly,
     the economic  consequence  of ownership of the Common  Shares,  whether any
     such swap or  transaction  described  in  clause  (A) or (B) above is to be
     settled by delivery of Common Shares or such other  securities,  in cash or
     otherwise.  The foregoing sentence shall not apply to (1) the Securities to
     be sold  hereunder  or (2) Common  Shares  issued  pursuant to any dividend
     reinvestment plan.

     (xi)  Reporting  Requirements.   The  Fund,  during  the  period  when  the
     Prospectus is required to be delivered  under the 1933 Act or the 1934 Act,
     will file all documents  required to be filed with the Commission  pursuant
     to the 1940 Act and the 1934 Act within the time  periods  required  by the
     1940 Act and the Rules and  Regulations  and the 1934 Act and the rules and
     regulations of the Commission thereunder, respectively.

     (xii)  Subchapter  M.  The  Fund  will  comply  with  the  requirements  of
     Subchapter M of the Code to qualify as a regulated investment company under
     the Code.

     (xiii) No  Manipulation  of Market  for  Securities.  The Fund will not (a)
     take, directly or indirectly, any action designed to cause or to result in,
     or that might  reasonably be expected to constitute,  the  stabilization or
     manipulation  of the price of any  security of the Fund to  facilitate  the
     sale or resale of the  Securities,  and (b) until the Closing  Date, or the
     Date of Delivery,  if any, (i) sell,  bid for or purchase the Securities or
     pay any person any compensation for soliciting  purchases of the Securities
     or (ii) pay or agree to pay to any person any  compensation  for soliciting
     another to purchase any other securities of the Fund.

     (xiv) Rule 462(b) Registration  Statement.  If the Fund elects to rely upon
     Rule 462(b), the Fund shall file a Rule 462(b) Registration  Statement with
     the  Commission in compliance  with Rule 462(b) by 10:00 P.M.,  Washington,
     D.C. time, on the date of this Agreement, and the Fund shall at the time of
     filing  either pay to the  Commission  the  filing fee for the Rule  462(b)
     Registration Statement or give irrevocable  instructions for the payment of
     such fee pursuant to Rule 111(b) under the 1933 Act.

(b) The Adviser  covenants with each  Underwriter  that for a period of 180 days
from the date of the  Prospectus,  the  Adviser  will not,  without  your  prior
written  consent  which  consent  shall  not be  unreasonably  withheld,  act as
investment adviser to any other closed end registered  investment company having
an investment  objective,  policies and  restrictions  substantially  similar to
those of the Fund.

SECTION 4.        Payment of Expenses.

(a) Expenses.  The Fund will pay all expenses incident to the performance of its
obligations  under this Agreement,  including (i) the preparation,  printing and
filing  of  the  Registration  Statement  (including  financial  statements  and
exhibits)  as  originally  filed  and  of  each  amendment  thereto,   (ii)  the
preparation,  printing and delivery to the  Underwriters of this Agreement,  any
Agreement  among  Underwriters  and such other  documents  as may be required in
connection  with the  offering,  purchase,  sale,  issuance  or  delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters,  including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
Securities to the  Underwriters,  (iv) the fees and  disbursements of the Fund's
counsel, accountants and other advisers, (v) the qualification of the Securities
under  securities  laws in accordance  with the  provisions of Section  3(a)(vi)
hereof,  including  filing fees and the  reasonable  fees and  disbursements  of
counsel for the Underwriters in connection  therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing
and  delivery  to the  Underwriters  of copies of each  preliminary  prospectus,
Prospectus  and any amendments or supplements  thereto,  (vii) the  preparation,
printing and delivery to the  Underwriters  of copies of the Blue Sky Survey and
any  supplement  thereto,  (viii) the fees and expenses of any transfer agent or
registrar  for the  Securities,  (ix)  the  filing  fees  incident  to,  and the
reasonable fees and  disbursements  of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities, (x) the
fees and expenses  incurred in connection  with the listing of the Securities on
the AMEX and (xi) the printing of any sales  material.  Also, the Fund shall pay
to  Merrill  Lynch,  on  behalf  of the  Underwriters,  $.0067  per share of the
securities  purchased  pursuant to this  agreement as partial  reimbursement  of
expenses incurred in connection with the offering. The Adviser has agreed to pay
organizational  expenses and offering  costs (other than sales load) of the Fund
that exceed $.04 per Common Share.

(b)   Termination  of  Agreement.   If  this  Agreement  is  terminated  by  the
Representatives  in accordance  with the provisions of Section 5 or Section 9(a)
hereof, the Fund and the Adviser,  jointly and severally,  agree that they shall
reimburse the Underwriters for all of their  out-of-pocket  expenses,  including
the reasonable fees and disbursements of counsel for the Underwriters.

SECTION 5.        Conditions of Underwriters' Obligations.

     The  obligations of the several  Underwriters  hereunder are subject to the
accuracy  of the  representations  and  warranties  of the Fund and the  Adviser
contained in Section 1 hereof or in  certificates  of any officer of the Fund or
the Adviser delivered  pursuant to the provisions  hereof, to the performance by
the Fund and the Adviser of their  respective  covenants  and other  obligations
hereunder, and to the following further conditions:

(a)  Effectiveness  of  Registration  Statement.   The  Registration  Statement,
including any Rule 462(b)  Registration  Statement,  has become effective and at
Closing Time no stop order  suspending  the  effectiveness  of the  Registration
Statement shall have been issued under the 1933 Act, no notice or order pursuant
to Section 8(e) of the 1940 Act shall have been issued,  and no proceedings with
respect to either shall have been initiated or threatened by the Commission, and
any request on the part of the Commission for additional  information shall have
been  complied  with  to  the   reasonable   satisfaction   of  counsel  to  the
Underwriters.  A prospectus containing the Rule 430A Information shall have been
filed  with the  Commission  in  accordance  with Rule 497 (or a  post-effective
amendment  providing  such  information  shall  have  been  filed  and  declared
effective in accordance with the  requirements of Rule 430A) or, if the Fund has
elected to rely on upon Rule 434,  a Term  Sheet  shall have been filed with the
Commission in accordance with Rule 497.

(b)  Opinion  of  Counsel  for Fund  and the  Advisers.  At  Closing  Time,  the
Representatives shall have received the favorable opinions,  dated as of Closing
Time, from Sullivan & Worcester LLP, counsel for the Fund and Michael H. Koonce,
Esq.,  counsel for the Advisers,  in form and substance  satisfactory to counsel
for the Underwriters,  together with signed or reproduced copies of such letters
for each of the other  Underwriters  substantially  to the  effect  set forth in
Exhibit A hereto and to such further effect as counsel to the  Underwriters  may
reasonably request.

(c) Opinion of Counsel for  Underwriters.  At Closing Time, the  Representatives
shall have received the favorable opinion, dated as of Closing Time, of Clifford
Chance US LLP, counsel for the Underwriters,  together with signed or reproduced
copies of such  letter for each of the other  Underwriters  with  respect to the
matters set forth in clauses (A) (i), (ii), (vi), (vii) (solely as to preemptive
or other  similar  rights  arising by  operation  of law or under the charter or
bylaws of the Fund),  (viii)  through (x),  inclusive,  (xiv)  (solely as to the
information  in the  Prospectus  under  "Description  of  Shares")  and the last
paragraph of Exhibit A hereto.  In giving such opinion such counsel may rely, as
to all matters governed by the laws of  jurisdictions  other than the law of the
State of New York and the federal law of the United States, upon the opinions of
counsel satisfactory to the  Representatives.  Such counsel may also state that,
insofar as such opinion  involves  factual  matters,  they have  relied,  to the
extent  they  deem  proper,  upon  certificates  of  officers  of the  Fund  and
certificates of public officials.

(d) Officers'  Certificates.  At Closing Time,  there shall not have been, since
the date hereof or since the respective  dates as of which  information is given
in the Prospectus,  any material  adverse change in the condition,  financial or
otherwise,  or in the earnings,  business  affairs or business  prospects of the
Fund,  whether  or not  arising  in the  ordinary  course of  business,  and the
Representatives  shall have  received  (A) a  certificate  of a duly  authorized
officer of the Fund and of the chief  financial or chief  accounting  officer of
the Fund and of the  President or a Vice  President or Managing  Director of the
Adviser, dated as of Closing Time, to the effect that (i) there has been no such
material  adverse change,  (ii) the  representations  and warranties in Sections
1(a) and (b)  hereof  are true and  correct  with the same  force and  effect as
though  expressly made at and as of Closing Time, (iii) each of the Fund and the
Adviser,  respectively,  has complied  with all  agreements  and  satisfied  all
conditions on its part to be performed or satisfied at or prior to Closing Time,
and  (iv)  no  stop  order  suspending  the  effectiveness  of the  Registration
Statement,  or order of suspension or  revocation  of  registration  pursuant to
Section  8(e) of the 1940 Act, has been issued and no  proceedings  for any such
purpose  have  been  instituted  or  are  pending  or  are  contemplated  by the
Commission  and  (B) a  certificate  of the  President  or a Vice  President  or
Managing  Director of the  Sub-Adviser,  dated as of Closing Time, to the effect
that  (i)  there  has  been  no  such  material  adverse  change  and  (ii)  the
representations  and warranties in Section 1(b) hereof are true and correct with
the same force and effect as though  expressly  made at and as of Closing  Time,
(iii) each of the Fund and the Sub-Adviser,  respectively, has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to Closing Time, and (iv) the  description of the Sub-Adviser in the
Registration  Statement and the  Prospectus  (and any amendment or supplement to
either of them) is true and correct and does not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading.

(e) Accountant's Comfort Letter. At the time of the execution of this Agreement,
the Representatives  shall have received from KPMG LLP a letter dated such date,
in form and substance satisfactory to the Representatives,  together with signed
or  reproduced  copies  of  such  letter  for  each  of the  other  Underwriters
containing  statements  and  information  of the  type  ordinarily  included  in
accountants'  "comfort  letters" to  underwriters  with respect to the financial
statements  and certain  financial  information  contained  in the  Registration
Statement and the Prospectus.

(f) Bring-down Comfort Letter. At Closing Time, the  Representatives  shall have
received  from KPMG LLP a letter,  dated as of Closing  Time, to the effect that
they reaffirm the statements made in the letter furnished pursuant to subsection
(e) of this Section,  except that the specified date referred to shall be a date
not more than three business days prior to Closing Time.

(g)  Approval  of  Listing.  At Closing  Time,  the  Securities  shall have been
approved for listing on the AMEX, subject only to official notice of issuance.

(h) Execution of Additional  Compensation  Agreement.  At Closing Time,  Merrill
Lynch shall have received the Additional Compensation Agreement,  dated the date
of the Closing Time, as executed by the Adviser.

(i) No Objection.  The NASD has  confirmed  that it has not raised any objection
with respect to the fairness and  reasonableness  of the underwriting  terms and
arrangements.

(j)  Conditions  to  Purchase  of  Option  Securities.  In the  event  that  the
Underwriters  exercise their option  provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities,  the representations and warranties
of the Fund contained herein and the statements in any certificates furnished by
the Fund hereunder shall be true and correct as of each Date of Delivery and, at
the relevant Date of Delivery, the Representatives shall have received:

(i) Officers' Certificates. Certificates, dated such Date of Delivery, of a duly
authorized  officer of the Fund and of the chief  financial or chief  accounting
officer  of the  Fund  and of the  President  or a Vice  President  or  Managing
Director of each of the Advisers  confirming that the  information  contained in
the  certificate  delivered  by each of them at the  Closing  Time  pursuant  to
Section 5(d) hereof remains true and correct as of such Date of Delivery.

(ii) Opinions of Counsel for the Fund and the Advisers.  The favorable  opinions
of Sullivan & Worcester LLP, counsel for the Fund, and Michael H. Koonce,  Esq.,
counsel for the Advisers, in form and substance  satisfactory to counsel for the
Underwriters,  dated such Date of Delivery, relating to the Option Securities to
be purchased  on such Date of Delivery  and  otherwise to the same effect as the
opinion required by Section 5(b) hereof.

(iii) Opinion of Counsel for the Underwriters. The favorable opinion of Clifford
Chance US LLP,  counsel  for the  Underwriters,  dated  such  Date of  Delivery,
relating to the Option  Securities  to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by Section 5(c) hereof.

(iv) Bring-down  Comfort  Letter.  A letter from KPMG LLP, in form and substance
satisfactory   to  the   Representatives   and  dated  such  Date  of  Delivery,
substantially  in the same form and  substance  as the letter  furnished  to the
Representatives  pursuant to Section  5(f)  hereof,  except that the  "specified
date" in the letter  furnished  pursuant to this  paragraph  shall be a date not
more than five days prior to such Date of Delivery.

(k) Additional Documents. At Closing Time and at each Date of Delivery,  counsel
for the Underwriters  shall have been furnished with such documents and opinions
as they may require for the purpose of enabling  them to pass upon the  issuance
and sale of the Securities as herein  contemplated,  or in order to evidence the
accuracy of any of the representations or warranties,  or the fulfillment of any
of the conditions,  herein contained; and all proceedings taken by the Fund, the
Adviser and the Sub-Adviser in connection with the organization and registration
of the Fund under the 1940 Act and the  issuance and sale of the  Securities  as
herein  contemplated  shall  be  satisfactory  in  form  and  substance  to  the
Representatives and counsel for the Underwriters.

(l) Termination of Agreement.  If any condition  specified in this Section shall
not have been  fulfilled when and as required to be fulfilled,  this  Agreement,
or, in the case of any condition to the purchase of Option Securities, on a Date
of Delivery  which is after the Closing  Time,  the  obligations  of the several
Underwriters  to purchase the relevant Option  Securities,  may be terminated by
the  Representatives  by notice  to the Fund at any time at or prior to  Closing
Time or such Date of Delivery, as the case may be, and such termination shall be
without  liability of any party to any other party except as provided in Section
4 and except that Sections 1, 6, 7, 8 and 14 shall survive any such  termination
and remain in full force and effect.

SECTION 6.        Indemnification.

(a)  Indemnification  of  Underwriters.  The Fund and the  Adviser,  jointly and
severally,  agree to  indemnify  and hold  harmless  each  Underwriter  and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, and any director,  officer, employee
or affiliate thereof as follows:

     (i)  against  any  and all  loss,  liability,  claim,  damage  and  expense
     whatsoever,  as  incurred,  arising out of any untrue  statement or alleged
     untrue statement of a material fact contained in the Registration Statement
     (or any amendment  thereto),  including the Rule 430A  Information  and the
     Rule 434  Information,  if applicable,  or the omission or alleged omission
     therefrom of a material fact required to be stated  therein or necessary to
     make the  statements  therein not  misleading  or arising out of any untrue
     statement or alleged  untrue  statement of a material  fact included in any
     preliminary  prospectus or the  Prospectus  (or any amendment or supplement
     thereto),  or the omission or alleged omission therefrom of a material fact
     necessary  in order to make the  statements  therein,  in the  light of the
     circumstances under which they were made, not misleading;

     (ii)  against  any and all  loss,  liability,  claim,  damage  and  expense
     whatsoever,  as  incurred,  to the extent of the  aggregate  amount paid in
     settlement of any  litigation,  or any  investigation  or proceeding by any
     governmental  agency  or body,  commenced  or  threatened,  or of any claim
     whatsoever  based upon any such untrue  statement or omission,  or any such
     alleged  untrue  statement or omission;  provided  that (subject to Section
     6(e) below) any such settlement is effected with the written consent of the
     Fund; and

     (iii) against any and all expense  whatsoever,  as incurred  (including the
     fees and  disbursements  of counsel  chosen by Merrill  Lynch),  reasonably
     incurred in  investigating,  preparing or defending against any litigation,
     or any  investigation  or  proceeding by any  governmental  agency or body,
     commenced or threatened, or any claim whatsoever based upon any such untrue
     statement or omission, or any such alleged untrue statement or omission, to
     the  extent  that any such  expense  is not paid  under (i) or (ii)  above;

     provided,  however,  that this indemnity  agreement  shall not apply to any
     loss, liability,  claim, damage or expense to the extent arising out of any
     untrue  statement or omission or alleged untrue  statement or omission made
     in reliance upon and in conformity  with written  information  furnished to
     the Fund or the Adviser by any Underwriter  through Merrill Lynch expressly
     for use in the Registration Statement (or any amendment thereto), including
     the Rule 430A Information and the Rule 434 Information,  if applicable,  or
     any  preliminary   prospectus  or  the  Prospectus  (or  any  amendment  or
     supplement thereto).

(b)  Indemnification of Fund, Adviser,  Trustees and Officers.  Each Underwriter
severally agrees to indemnify and hold harmless the Fund and the Adviser,  their
respective  trustees,  each of the Fund's  officers who signed the  Registration
Statement,  and each person, if any, who controls the Fund or the Adviser within
the  meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against
any  and all  loss,  liability,  claim,  damage  and  expense  described  in the
indemnity  contained in subsection  (a) of this Section,  as incurred,  but only
with respect to untrue statements or omissions,  or alleged untrue statements or
omissions,  made  in the  Registration  Statement  (or any  amendment  thereto),
including the Rule 430A Information and the Rule 434 Information, if applicable,
or any preliminary  prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written  information  furnished
to the Fund or the Adviser by such  Underwriter  through Merrill Lynch expressly
for  use in the  Registration  Statement  (or  any  amendment  thereto)  or such
preliminary  prospectus  or the  Prospectus  (or  any  amendment  or  supplement
thereto).

(c)  Indemnification  for  Marketing  Materials.  In addition  to the  foregoing
indemnification,  the Fund and the Adviser also, jointly and severally, agree to
indemnify  and hold  harmless  each  Underwriter  and each  person,  if any, who
controls  any  Underwriter  within the  meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss,  liability,  claim, damage
and expense described in the indemnity  contained in Section 6(a), as limited by
the proviso set forth therein, with respect to any sales material.

(d) Actions against Parties;  Notification.  Each  indemnified  party shall give
notice as promptly as reasonably  practicable to each indemnifying  party of any
action  commenced  against  it in  respect  of  which  indemnity  may be  sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying  party  from  any  liability  hereunder  to  the  extent  it is not
materially  prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement.  In the case of parties  indemnified  pursuant to Section 6(a) above,
counsel to the indemnified  parties shall be selected by Merrill Lynch,  and, in
the case of parties indemnified  pursuant to Section 6(b) above,  counsel to the
indemnified  parties  shall  be  selected  by  the  Fund  and  the  Adviser.  An
indemnifying party may participate at its own expense in the defense of any such
action;  provided,  however,  that counsel to the  indemnifying  party shall not
(except  with the  consent  of the  indemnified  party)  also be  counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and  expenses  of more than one  counsel  (in  addition  to any  local  counsel)
separate from their own counsel for all  indemnified  parties in connection with
any  one  action  or  separate  but  similar  or  related  actions  in the  same
jurisdiction  arising out of the same general  allegations or circumstances.  No
indemnifying  party shall,  without the prior written consent of the indemnified
parties,  settle or  compromise  or  consent to the entry of any  judgment  with
respect  to  any  litigation,   or  any   investigation  or  proceeding  by  any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which  indemnification  or  contribution  could be sought  under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional  release of each indemnified  party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.

(e)  Settlement  without  Consent  if Failure  to  Reimburse.  If at any time an
indemnified  party shall have requested an  indemnifying  party to reimburse the
indemnified  party for fees and  expenses of counsel,  such  indemnifying  party
agrees that it shall be liable for any settlement of the nature  contemplated by
Section 6(a)(ii)  effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such  indemnifying  party of the
aforesaid  request,  (ii) such indemnifying  party shall have received notice of
the terms of such  settlement  at least 30 days prior to such  settlement  being
entered into and (iii) such  indemnifying  party shall not have  reimbursed such
indemnified  party in  accordance  with such  request  prior to the date of such
settlement.

SECTION 7.        Contribution.

If the  indemnification  provided  for in  Section  6 hereof  is for any  reason
unavailable to or insufficient to hold harmless an indemnified  party in respect
of any losses,  liabilities,  claims,  damages or expenses  referred to therein,
then each  indemnifying  party shall  contribute to the aggregate amount of such
losses,  liabilities,  claims, damages and expenses incurred by such indemnified
party,  as incurred,  (i) in such  proportion as is  appropriate  to reflect the
relative  benefits  received by the Fund and the Adviser on the one hand and the
Underwriters  on the other hand from the offering of the Securities  pursuant to
this Agreement or (ii) if the allocation provided by clause (i) is not permitted
by applicable  law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Fund and the  Adviser on the one hand and of the  Underwriters  on the other
hand in  connection  with the  statements  or omissions  which  resulted in such
losses, liabilities,  claims, damages or expenses, as well as any other relevant
equitable considerations.

     The relative  benefits received by the Fund and the Adviser on the one hand
and the  Underwriters  on the other hand in connection  with the offering of the
Securities  pursuant  to  this  Agreement  shall  be  deemed  to be in the  same
respective  proportions  as the  total net  proceeds  from the  offering  of the
Securities  pursuant to this Agreement (before deducting  expenses)  received by
the  Fund and the  total  underwriting  discount  received  by the  Underwriters
(whether from the Fund or otherwise),  in each case as set forth on the cover of
the Prospectus or, if Rule 434 is used, the  corresponding  location on the Term
Sheet,  bear to the aggregate initial public offering price of the Securities as
set forth on such cover.

     The  relative  fault of the Fund  and the  Adviser  on the one hand and the
Underwriters  on the other hand shall be determined by reference to, among other
things,  whether any such untrue or alleged untrue  statement of a material fact
or omission or alleged  omission to state a material fact relates to information
supplied  by the Fund or the  Adviser or by the  Underwriters  and the  parties'
relative intent, knowledge,  access to information and opportunity to correct or
prevent such statement or omission.

     The Fund, the Adviser and the Underwriters  agree that it would not be just
and equitable if contribution  pursuant to this Section 7 were determined by pro
rata allocation  (even if the  Underwriters  were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable  considerations  referred  to above in this  Section 7. The  aggregate
amount of losses,  liabilities,  claims,  damages  and  expenses  incurred by an
indemnified  party and  referred  to above in this  Section 7 shall be deemed to
include any legal or other  expenses  reasonably  incurred  by such  indemnified
party in investigating,  preparing or defending  against any litigation,  or any
investigation  or proceeding by any  governmental  agency or body,  commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.

     Notwithstanding  the provisions of this Section 7, no Underwriter  shall be
required  to  contribute  any  amount in excess of the amount by which the total
price at which the Securities  underwritten  by it and distributed to the public
were  offered  to the  public  exceeds  the  amount of any  damages  which  such
Underwriter  has otherwise  been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.

     No person  guilty of  fraudulent  misrepresentation  (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

     For  purposes  of this  Section 7, each  person,  if any,  who  controls an
Underwriter  within  the  meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each trustee of the Fund and each  director of the Adviser,  respectively,  each
officer of the Fund who signed the Registration  Statement,  and each person, if
any, who  controls the Fund or the Adviser,  within the meaning of Section 15 of
the  1933  Act or  Section  20 of the 1934 Act  shall  have the same  rights  to
contribution  as the  Fund  and the  Adviser,  respectively.  The  Underwriters'
respective  obligations to contribute  pursuant to this Section 7 are several in
proportion  to the  number  of  Initial  Securities  set  forth  opposite  their
respective names in Schedule A hereto and not joint.

SECTION 8.     Representations, Warranties and Agreements to Survive Delivery.

     All representations,  warranties and agreements contained in this Agreement
or in  certificates  of  officers of the Fund,  the  Adviser or the  Sub-Adviser
submitted pursuant hereto,  shall remain operative and in full force and effect,
regardless  of any  investigation  made by or on  behalf of any  Underwriter  or
controlling  person,  or by or on  behalf  of  the  Fund,  the  Adviser  or  the
Sub-Adviser, and shall survive delivery of the Securities to the Underwriters.

SECTION 9.        Termination of Agreement.

(a) Termination;  General. The Representatives may terminate this Agreement,  by
notice to the  Fund,  at any time at or prior to  Closing  Time (i) if there has
been,  since the time of  execution of this  Agreement  or since the  respective
dates as of which  information is given in the Prospectus,  any material adverse
change in the condition,  financial or otherwise,  or in the earnings,  business
affairs or  business  prospects  of the Fund,  the  Adviser or the  Sub-Adviser,
whether or not arising in the ordinary course of business,  or (ii) if there has
occurred  any material  adverse  change in the  financial  markets in the United
States or the international  financial  markets,  any outbreak of hostilities or
escalation  thereof or other  calamity  or crisis or any  change or  development
involving a prospective change in national or international political, financial
or economic conditions,  in each case the effect of which is such as to make it,
in the judgment of the  Representatives,  impracticable or inadvisable to market
the Securities or to enforce contracts for the sale of the Securities,  or (iii)
if trading in the Common  Shares of the Fund has been  suspended  or  materially
limited by the  Commission or the AMEX, or if trading  generally on the New York
Stock Exchange or the American Stock Exchange or in the Nasdaq  National  Market
has been  suspended  or  materially  limited,  or minimum or maximum  prices for
trading have been fixed, or maximum ranges for prices have been required, by any
of said exchanges or by such system or by order of the  Commission,  the NASD or
any other  governmental  authority,  or a material  disruption  has  occurred in
commercial banking or securities  settlement or clearance services in the United
States,  or (iv) if a banking  moratorium has been declared by either Federal or
New York authorities.

(b) Liabilities.  If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof,  and provided further that Sections 1, 6, 7, 8 and
14 shall survive such termination and remain in full force and effect.

SECTION 10.       Default by One or More of the Underwriters.

     If one or more of the Underwriters  shall fail at Closing Time or a Date of
Delivery to purchase the  Securities  which it or they are obligated to purchase
under this Agreement (the "Defaulted  Securities"),  the  Representatives  shall
have the right, within 24 hours thereafter, to make arrangements for one or more
of the non-defaulting Underwriters,  or any other underwriters, to purchase all,
but not less than all, of the  Defaulted  Securities  in such  amounts as may be
agreed  upon  and  upon  the  terms   herein  set  forth;   if,   however,   the
Representatives  shall not have completed such arrangements  within such 24-hour
period, then:

(a) if the number of Defaulted  Securities  does not exceed 10% of the number of
Securities to be purchased on such date, each of the non-defaulting Underwriters
shall be  obligated,  severally  and not  jointly,  to purchase  the full amount
thereof  in the  proportions  that  their  respective  underwriting  obligations
hereunder  bear  to  the   underwriting   obligations   of  all   non-defaulting
Underwriters, or

(b) if the  number  of  Defaulted  Securities  exceeds  10%  of  the  number  of
Securities to be purchased on such date,  this Agreement or, with respect to any
Date of Delivery  which occurs after the Closing  Time,  the  obligation  of the
Underwriters  to purchase  and of the Fund to sell the Option  Securities  to be
purchased and sold on such Date of Delivery shall terminate without liability on
the part of any non-defaulting Underwriter.

No  action  taken   pursuant  to  this  Section  shall  relieve  any  defaulting
Underwriter from liability in respect of its default.

     In the event of any such default which does not result in a termination  of
this  Agreement or, in the case of a Date of Delivery which is after the Closing
Time,  which  does  not  result  in a  termination  of  the  obligation  of  the
Underwriters to purchase and the Fund to sell the relevant Option Securities, as
the case may be, either the  Representatives or the Fund shall have the right to
postpone Closing Time or the relevant Date of Delivery,  as the case may be, for
a period not exceeding seven days in order to effect any required changes in the
Registration  Statement or Prospectus or in any other documents or arrangements.
As used herein,  the term  "Underwriter"  includes any person substituted for an
Underwriter under this Section 10.

SECTION 11.       Tax Disclosure.

     Notwithstanding   any  other   provision  of  this   Agreement,   from  the
commencement  of  discussions  with  respect  to the  transactions  contemplated
hereby, the Fund (and each employee,  representative or other agent of the Fund)
may disclose to any and all persons,  without  limitation  of any kind,  the tax
treatment and tax structure (as such terms are used in Sections  6011,  6111 and
6112 of the U.S. Code and the Treasury  Regulations  promulgated  thereunder) of
the  transactions  contemplated  by this Agreement and all materials of any kind
(including  opinions or other tax analyses)  that are provided  relating to such
tax treatment and tax structure.

SECTION 12.       Notices.

     All  notices  and other  communications  hereunder  shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication.  Notices to the Underwriters shall be directed to the
Representatives, Merrill Lynch & Co., North Tower, 4 World Financial Center, New
York, New York 10080,  attention of Equity Capital  Markets;  and notices to the
Fund or the  Advisers  shall be  directed,  as  appropriate,  to the  office  of
Evergreen  Investment  Management  Company,  LLC,  200 Berkley  Street,  MA9000,
Boston, Massachusetts 02116, attention of Michael H. Koonce.

SECTION 13.       Parties.

     This  Agreement  shall both inure to the benefit of and be binding upon the
Underwriters,  the Fund,  the  Adviser,  the  Sub-Adviser  and their  respective
partners and  successors.  Nothing  expressed or mentioned in this  Agreement is
intended or shall be construed to give any person,  firm or  corporation,  other
than the Underwriters, the Fund, the Adviser and their respective successors and
the controlling  persons and officers and trustees referred to in Sections 6 and
7 and their  heirs  and legal  representatives,  any legal or  equitable  right,
remedy or claim under or in respect of this  Agreement or any  provision  herein
contained.  This Agreement and all conditions and provisions hereof are intended
to be for the sole and  exclusive  benefit of the  Underwriters,  the Fund,  the
Adviser, the Sub-Adviser and their respective partners and successors,  and said
controlling  persons and  officers,  trustees and  directors and their heirs and
legal  representatives,  and  for  the  benefit  of no  other  person,  firm  or
corporation.  No purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.

SECTION 14.       GOVERNING LAW AND TIME.

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK  APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID
STATE. UNLESS OTHERWISE EXPLICITLY PROVIDED, SPECIFIED TIMES OF DAY REFER TO NEW
YORK CITY TIME.

SECTION 15.       Effect of Headings.

     The Article and Section  headings  herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.


<PAGE>



     If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart  hereof,  whereupon this  instrument,
along  with  all  counterparts,  will  become  a  binding  agreement  among  the
Underwriters, the Fund and the Adviser in accordance with its terms.



                              Very truly yours,


                              EVERGREEN MANAGED INCOME FUND


                              By:
                                     ----------------------------
                                     Name:
                                     Title:


                              EVERGREEN INVESTMENT MANAGEMENT COMPANY, LLC


                              By:
                                     -----------------------------
                                     Name:
                                     Title:


                              FIRST INTERNATIONAL ADVISORS, LLC,
                              d/b/a EVERGREEN INTERNATIONAL ADVISORS


                              By:
                                     ------------------------------
                                     Name:
                                     Title:



CONFIRMED AND ACCEPTED,
     as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
                     INCORPORATED
WACHOVIA SECURITIES, INC.
A.G. Edwards & Sons, Inc.
Prudential Securities Incorporated
UBS Warburg LLC

By:  Merrill Lynch, Pierce, Fenner & Smith Incorporated



By:
     ------------------------------------------------
     Authorized Signatory

For itself and as
Representative of the
other Underwriters named
in Schedule A hereto.





<PAGE>

<TABLE>
<CAPTION>

<S>                                                                                       <C>

                           SCHEDULE A

                                                                                               Number of
                  Name of Underwriter                                                      Initial Securities
                  -------------------
Merrill Lynch, Pierce, Fenner & Smith
- -------------------------------------------------------------------------------
             Incorporated
             .............................................................
Wachovia Securities, Inc.
...........................................................................
A.G. Edwards & Sons, Inc.
...........................................................................
Prudential Securities Incorporated
..........................................................................
UBS Warburg LLC
..........................................................................

             Total.......................................................

</TABLE>


<PAGE>



                                           SCHEDULE B

                                  Evergreen Managed Income Fund
                            [ ] Common Shares of Beneficial Interest
                                         (No Par Value)



1. The initial public offering price per share for the Securities, determined as
provided in said Section 2, shall be $20.00.

2. The  purchase  price per share for the  Securities  to be paid by the several
Underwriters  shall be  $19.10,  being an  amount  equal to the  initial  public
offering  price set forth above less $.90 per share;  provided that the purchase
price per share for any Option  Securities  purchased  upon the  exercise of the
over-allotment  option  described  in Section 2(b) shall be reduced by an amount
per share  equal to any  dividends  or  distributions  declared  by the Fund and
payable on the Initial Securities but not payable on the Option Securities.





<PAGE>


                                                                    Exhibit A

                           FORM OF OPINION OF FUND'S
                      COUNSEL TO BE DELIVERED PURSUANT TO
                                 SECTION 5(b)



(A)      With respect to the Fund:

     (i) The Fund has been duly organized and is validly existing as a statutory
     trust in good standing under the laws of the State of Delaware.

     (ii) The Fund has the power and  authority  to own,  lease and  operate its
     properties  and to conduct its business as described in the  Prospectus and
     to enter into and perform its obligations under the Purchase Agreement.

     (iii) The Fund is duly  qualified as a foreign  trust to transact  business
     and  is  in  good  standing  in  each  other  jurisdiction  in  which  such
     qualification is required, whether by reason of the ownership or leasing of
     property or the conduct of business, except where the failure so to qualify
     or to be in good standing would not result in a Material Adverse Effect.

     (iv) To the best of our knowledge, the Fund does not have any subsidiaries.

     (v) The authorized, issued and outstanding shares of beneficial interest of
     the Fund is as set forth in the Prospectus  under the caption  "Description
     of  Shares--Common  Shares"  (except  for  subsequent  issuances,  if  any,
     pursuant to the Purchase  Agreement);  all issued and outstanding shares of
     beneficial  interest  of the Fund  have been duly  authorized  and  validly
     issued and are fully paid and non-assessable, except as provided for in the
     Fund's declaration of trust, and have been offered and sold or exchanged by
     the  Fund in  compliance  with  all  applicable  laws  (including,  without
     limitation,  federal and state securities  laws); the Common Shares conform
     as to legal matters to all  statements  relating  thereto  contained in the
     Prospectus  and such  description  conforms  to the rights set forth in the
     instruments  defining  the  same;  and none of the  outstanding  shares  of
     beneficial  interest of the Fund was issued in violation of the  preemptive
     or other similar rights of any securityholder of the Fund.

     (vi) The Securities to be purchased by the Underwriters  from the Fund have
     been duly authorized for issuance and sale to the Underwriters  pursuant to
     the Purchase  Agreement and, when issued and delivered by the Fund pursuant
     to the Purchase Agreement against payment of the consideration set forth in
     the  Purchase  Agreement,  will  be  validly  issued  and  fully  paid  and
     non-assessable,  except as provided for in the Fund's declaration of trust,
     and no holder of the Securities is or will be subject to personal liability
     by reason of being such a holder.

     (vii) The issuance of the  Securities is not subject to preemptive or other
     similar rights of any securityholder of the Fund.

     (viii)  The  Purchase  Agreement  has been duly  authorized,  executed  and
     delivered by the Fund.

     (ix) The  Registration  Statement,  including any Rule 462(b)  Registration
     Statement, has been declared effective under the 1933 Act and the 1940 Act;
     any  required  filing of the  Prospectus  pursuant  to Rule  497(c) or Rule
     497(h) has been made in the manner and within the time  period  required by
     Rule 497; and, to the best of our knowledge,  no stop order  suspending the
     effectiveness of the Registration Statement or any Rule 462(b) Registration
     Statement  has been  issued  under  the 1933 Act,  and,  to the best of our
     knowledge, no order of suspension or revocation of registration pursuant to
     Section 8(e) of the 1940 Act has been issued,  and no  proceedings  for any
     such  purpose  have been  instituted  or are pending or  threatened  by the
     Commission.

     (x) The  Registration  Statement,  including  any Rule 462(b)  Registration
     Statement,  the Rule  430A  Information  and the Rule 434  Information,  as
     applicable,  the  Prospectus  and  each  amendment  or  supplement  to  the
     Registration  Statement and Prospectus as of their respective  effective or
     issue dates (other than the financial  statements and supporting  schedules
     included  therein  or  omitted  therefrom,  as to which we need  express no
     opinion),  and the  notification  on Form N-8A  complied  as to form in all
     material  respects with the  requirements of the 1933 Act, the 1940 Act and
     the Rules and Regulations.

     (xi) If Rule 434 has been relied upon, the  Prospectus was not  "materially
     different" as such term is used in Rule 434, from the  prospectus  included
     in the Registration Statement at the time it became effective.

     (xii) The form of certificate  used to evidence the Common Shares  complies
     in all material respects with all applicable statutory  requirements,  with
     any applicable  requirements  of the declaration of trust and bylaws of the
     Fund and the requirements of the American Stock Exchange.

     (xiii) To the best of our knowledge, there is not pending or threatened any
     action, suit, proceeding, inquiry or investigation,  to which the Fund is a
     party,  or to which the property of the Fund is subject,  before or brought
     by any court or  governmental  agency or body,  domestic or foreign,  which
     might  reasonably be expected to result in a Material  Adverse  Effect,  or
     which might  reasonably be expected to materially and adversely  affect the
     properties or assets of the Fund or the  consummation  of the  transactions
     contemplated  in the Purchase  Agreement or the  performance by the Fund of
     its obligations thereunder.

     (xiv) The information in the Prospectus  under  "Description of Shares" and
     "Tax   Matters"   and  in  the   Registration   Statement   under  Item  29
     (Indemnification),  to the  extent  that  it  constitutes  matters  of law,
     summaries of legal matters,  the Fund's  declaration of trust and bylaws or
     legal  proceedings,  or legal  conclusions,  has been reviewed by us and is
     correct in all material respects.

     (xv) Each of the Management Agreement,  the Administration  Agreement,  the
     Custodian  Agreement,  the  Transfer  and  Dividend  Disbursing  Agency and
     Registrar  Agreement  and the  Purchase  Agreement  comply in all  material
     respects with all applicable  provisions of the 1940 Act, Advisers Act, the
     Rules and Regulations and the Advisers Act Rules and Regulations.

     (xvi) The Fund is duly registered with the Commission under the 1940 Act as
     a closed-end diversified management investment company; and, to the best of
     our  knowledge,  no order of suspension or revocation of such  registration
     has been issued or  proceedings  therefor  initiated or  threatened  by the
     Commission.

     (xvii) To the best of our  knowledge,  no person is serving as an  officer,
     trustee or  investment  adviser of the Fund except in  accordance  with the
     1940 Act and the Rules and Regulations and the Investment  Advisers Act and
     the  Advisers  Act  Rules  and  Regulations.  Except  as  disclosed  in the
     Registration  Statement and  Prospectus  (or any amendment or supplement to
     either of them), to the best of our knowledge, no trustee of the Fund is an
     "interested  person"  (as  defined  in the  1940  Act)  of the  Fund  or an
     "affiliated person" (as defined in the 1940 Act) of an Underwriter.

     (xviii)  There are no  statutes  or  regulations  that are  required  to be
     described in the Prospectus that are not described as required.

     (xix) All descriptions in the Registration Statement of contracts and other
     documents  to  which  the  Fund is a party  are  accurate  in all  material
     respects. To the best of our knowledge, there are no franchises, contracts,
     indentures,  mortgages, loan agreements, notes, leases or other instruments
     required to be described or referred to in the Registration Statement or to
     be filed as  exhibits  thereto  other than those  described  or referred to
     therein or filed or incorporated by reference as exhibits thereto,  and the
     descriptions  thereof or  references  thereto are  correct in all  material
     respects.

     (xx) To the  best of our  knowledge,  the Fund is not in  violation  of its
     declaration of trust or bylaws and no default by the Fund exists in the due
     performance or observance of any material obligation,  agreement,  covenant
     or  condition  contained  in  any  contract,   indenture,   mortgage,  loan
     agreement,  note,  lease or other agreement or instrument that is described
     or referred to in the Registration  Statement or the Prospectus or filed or
     incorporated by reference as an exhibit to the Registration Statement.

     (xxi) No filing with, or authorization,  approval, consent, license, order,
     registration,  qualification  or  decree  of,  any  court  or  governmental
     authority or agency  (other than under the 1933 Act, the 1934 Act, the 1940
     Act and the Rules and Regulations,  which have been obtained,  or as may be
     required under the securities or blue sky laws of the various states, as to
     which we need express no opinion) is  necessary  or required in  connection
     with  the  due  authorization,  execution  and  delivery  of  the  Purchase
     Agreement or for the  offering,  issuance or sale of the  Securities or the
     consummation of the transactions contemplated by this Agreement.

     (xxii) The execution,  delivery and  performance of the Purchase  Agreement
     and the  consummation  of the  transactions  contemplated  in the  Purchase
     Agreement and in the  Registration  Statement  (including  the issuance and
     sale of the  Securities  and the use of the  proceeds  from the sale of the
     Securities  as  described  in the  Prospectus  under  the  caption  "Use of
     Proceeds")  and  compliance  by the Fund  with its  obligations  under  the
     Purchase  Agreement do not and will not, whether with or without the giving
     of notice or lapse of time or both,  conflict  with or  constitute a breach
     of, or default or Repayment  Event (as defined in Section  1(a)(xii) of the
     Purchase  Agreement)  under or result in the creation or  imposition of any
     lien,  charge  or  encumbrance  upon any  property  or  assets  of the Fund
     pursuant  to any  contract,  indenture,  mortgage,  deed of trust,  loan or
     credit agreement,  note, lease or any other agreement or instrument,  known
     to us,  to  which  the Fund is a party or by which it or any of them may be
     bound,  or to which any of the  property  or assets of the Fund is subject,
     nor will such  action  result in any  violation  of the  provisions  of the
     charter  or bylaws of the  Fund,  or any  applicable  law,  statute,  rule,
     regulation,   judgment,  order,  writ  or  decree,  known  to  us,  of  any
     government,  government  instrumentality  or court,  domestic  or  foreign,
     having  jurisdiction  over the  Fund or any of its  properties,  assets  or
     operations.

     (xxiii)   The   Purchase   Agreement,   the   Management   Agreement,   the
     Administration  Agreement,  the  Custodian  Agreement  and the Transfer and
     Dividend  Disbursing  Agency and  Registrar  Agreement  have each been duly
     authorized  by all requisite  action on the part of the Fund,  executed and
     delivered  by the  Fund,  as of  the  dates  noted  therein.  Assuming  due
     authorization,  execution  and delivery by the other  parties  thereto with
     respect  to the  Administration  Agreement,  Custodian  Agreement  and  the
     Transfer and Dividend  Disbursing Agency and Registrar  Agreement,  each of
     the  Management  Agreement,  the  Administration  Agreement,  the Custodian
     Agreement  and the Transfer and Dividend  Disbursing  Agency and  Registrar
     Agreement   constitutes  a  valid  and  binding   agreement  of  the  Fund,
     enforceable in accordance with its terms, except as affected by bankruptcy,
     insolvency,  fraudulent  conveyance,  reorganization,  moratorium and other
     similar laws relating to or affecting creditors' rights generally,  general
     equitable  principles  (whether  considered in a proceeding in equity or at
     law) and an implied covenant of good faith and fair dealing.



<PAGE>



                           FORM OF OPINION OF ADVISER'S
                        COUNSEL TO BE DELIVERED PURSUANT TO
                                   SECTION 5(b)

(B)      With respect to the Adviser:

     (i) The Adviser  has been duly  organized  and is validly  existing as a
     limited  liability  company in good standing under the laws of the State of
     Delaware.

     (ii) The Adviser has full power and  authority  to own,  lease and operate
     its  properties  and to conduct its business as described in the Prospectus
     and to enter into and perform its obligations under the Purchase Agreement.

     (iii)  The  Adviser is duly  qualified  as a foreign  company to  transact
     business and is in good standing in each other  jurisdiction  in which such
     qualification is required, whether by reason of the ownership or leasing of
     property or the conduct of business, except where the failure to so qualify
     would not result in a Material Adverse Effect.

     (iv) The Adviser is duly registered with the Commission as an investment
     adviser  under the Advisers Act and is not  prohibited by the Advisers Act,
     the  Advisers  Act  Rules  and  Regulations,  the 1940 Act or the Rules and
     Regulations  from acting  under the  Management  Agreement  for the Fund as
     contemplated by the Prospectus.

     (v)  The  Purchase  Agreement,   the  Management   Agreement  and  the
     Additional  Compensation Agreement have been duly authorized,  executed and
     delivered by the Adviser, and the Management Agreement  constitutes a valid
     and binding  obligation of the Adviser,  enforceable in accordance with its
     terms, except as affected by bankruptcy, insolvency, fraudulent conveyance,
     reorganization,  moratorium and other similar laws relating to or affecting
     creditors'  rights  generally  and general  equitable  principles  (whether
     considered in a proceeding in equity or at law).

     (vi) To the best of our knowledge, there is not pending or threatened any
     action, suit, proceeding, inquiry or investigation, to which the Adviser is
     a party,  or to which the  property of the  Adviser is  subject,  before or
     brought by any court or governmental  agency or body,  domestic or foreign,
     which might reasonably be expected to result in any material adverse change
     in the condition, financial or otherwise, in the earnings, business affairs
     or business  prospects of the Adviser,  materially and adversely affect the
     properties  or assets of the  Adviser  or  materially  impair or  adversely
     affect the ability of the Adviser to function as an  investment  adviser or
     perform its obligations under the Management Agreement or which is required
     to be disclosed in the Registration Statement or the Prospectus.

     (vii) To the best of our  knowledge,  there are no  franchises,  contracts,
     indentures,  mortgages, loan agreements, notes, leases or other instruments
     required to be described or referred to in the Registration Statement or to
     be filed as  exhibits  thereto  other than those  described  or referred to
     therein or filed or incorporated by reference as exhibits thereto,  and the
     descriptions  thereof or  references  thereto are  correct in all  material
     respects.

     (viii) To the best of our knowledge, the Adviser is not in violation of its
     articles   of   organization,   operating   agreement,   bylaws   or  other
     organizational  documents  and no default by the Adviser  exists in the due
     performance or observance of any material obligation,  agreement,  covenant
     or  condition  contained  in  any  contract,   indenture,   mortgage,  loan
     agreement,  note,  lease or other agreement or instrument that is described
     or referred to in the Registration  Statement or the Prospectus or filed or
     incorporated by reference as an exhibit to the Registration Statement.

     (ix) No filing  with,  or  authorization,  approval,  consent,  license,
     order, registration,  qualification or decree of, any court or governmental
     authority  or agency,  domestic or foreign  (other than under the 1933 Act,
     the 1940 Act and the Rules and Regulations, which have been obtained, or as
     may be  required  under  the  securities  or blue sky  laws of the  various
     states, as to which we need express no opinion) is necessary or required in
     connection  with  the due  authorization,  execution  and  delivery  of the
     Purchase Agreement.

     (x) The execution,  delivery and performance of the Purchase Agreement
     and the  consummation  of the  transactions  contemplated  in the  Purchase
     Agreement and in the  Registration  Statement and compliance by the Adviser
     with their  obligations  under the Purchase  Agreement do not and will not,
     whether  with or  without  the  giving  of notice or lapse of time or both,
     conflict with or constitute a breach of, or default or Repayment  Event (as
     defined in Section 1(a)(xii) of the Purchase  Agreement) under or result in
     the creation or  imposition  of any lien,  charge or  encumbrance  upon any
     property or assets of the  Adviser  pursuant  to any  contract,  indenture,
     mortgage, deed of trust, loan or credit agreement, note, lease or any other
     agreement or instrument, known to us, to which the Adviser is a party or by
     which it or any of them may be bound,  or to which any of the  property  or
     assets of the Adviser is subject  (except for such  conflicts,  breaches or
     defaults or liens,  charges or encumbrances  that would not have a Material
     Adverse  Effect),  nor will  such  action  result in any  violation  of the
     provisions of the charter or bylaws of the Adviser,  or any applicable law,
     statute, rule, regulation, judgment, order, writ or decree, known to us, of
     any government,  government  instrumentality or court, domestic or foreign,
     having  jurisdiction  over the Adviser or any of its properties,  assets or
     operations.

     In addition,  we have  participated in the preparation of the  Registration
     Statement and the Prospectus and  participated in discussions  with certain
     officers,  trustees and employees of the Fund, representatives of KPMG LLP,
     the  independent  accountants  who  examined  the  statement  of assets and
     liabilities  of the Fund  included  or  incorporated  by  reference  in the
     Registration Statement and the Prospectus, and you and your representatives
     and we have reviewed certain Fund records and documents.  While we have not
     independently  verified  and are not  passing  upon,  and do not assume any
     responsibility   for,  the  accuracy,   completeness  or  fairness  of  the
     information  contained in the  Registration  Statement and the  Prospectus,
     except to the  extent  necessary  to enable  us to give the  opinions  with
     respect to the Fund in paragraphs (A)(v),  (xiv) and (xix), on the basis of
     such participation and review, nothing has come to our attention that would
     lead us to believe that the  Registration  Statement  (except for financial
     statements,  supporting schedules and other financial data included therein
     or omitted  therefrom,  as to which we do not express any  belief),  at the
     time such  Registration  Statement  became  effective,  contained an untrue
     statement of a material  fact or omitted to state a material  fact required
     to be stated  therein  or  necessary  to make the  statements  therein  not
     misleading  or  that  the  Prospectus  (except  for  financial  statements,
     supporting  schedules and other financial data included  therein or omitted
     therefrom,  as to  which we do not  express  any  belief),  at the time the
     Prospectus  was  issued,  or at the Closing  Time,  included or includes an
     untrue statement of a material fact or omitted or omits to state a material
     fact necessary in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading.



<PAGE>



                               FORM OF OPINION OF SUB-ADVISER'S
                              COUNSEL TO BE DELIVERED PURSUANT TO
                                         SECTION 5(b)

(C)      With respect to the Sub-Adviser:

     (i) The Sub-Adviser has been duly organized and is validly  existing as
     a limited liability company in good standing under the laws of the State of
     Delaware.

     (ii) The  Sub-Adviser  has full  power and  authority  to own,  lease and
     operate its  properties  and to conduct its  business as  described  in the
     Prospectus and to enter into and perform its obligations under the Purchase
     Agreement.

     (iii) The  Sub-Adviser is duly qualified as a foreign company to transact
     business and is in good standing in each other  jurisdiction  in which such
     qualification is required, whether by reason of the ownership or leasing of
     property or the conduct of business, except where the failure to so qualify
     would not result in a Material Adverse Effect.

     (iv) The  Sub-Adviser  is duly  registered  with the  Commission  as an
     investment  adviser  under the  Advisers Act and is not  prohibited  by the
     Advisers Act, the Advisers Act Rules and  Regulations,  the 1940 Act or the
     Rules and Regulations from acting under the Sub-Advisory  Agreement for the
     Fund as contemplated by the Prospectus.

     (v)  The  Purchase  Agreement,  the  Sub-Advisory  Agreement  and the
     Additional  Compensation Agreement have been duly authorized,  executed and
     delivered by the Sub-Adviser,  and the Sub-Advisory Agreement constitutes a
     valid and binding obligation of the Sub-Adviser,  enforceable in accordance
     with its terms,  except as affected by bankruptcy,  insolvency,  fraudulent
     conveyance,  reorganization,  moratorium and other similar laws relating to
     or affecting  creditors' rights generally and general equitable  principles
     (whether considered in a proceeding in equity or at law).

     (vi) To the best of our  knowledge,  there is not pending or  threatened
     any  action,  suit,  proceeding,  inquiry  or  investigation,  to which the
     Sub-Adviser  is a party,  or to which the  property of the  Sub-Adviser  is
     subject,  before or  brought by any court or  governmental  agency or body,
     domestic or foreign,  which might  reasonably  be expected to result in any
     material  adverse change in the condition,  financial or otherwise,  in the
     earnings,  business  affairs  or  business  prospects  of the  Sub-Adviser,
     materially and adversely affect the properties or assets of the Sub-Adviser
     or materially  impair or adversely affect the ability of the Sub-Adviser to
     function  as an  investment  adviser or perform its  obligations  under the
     Sub-Advisory  Agreement  or  which  is  required  to be  disclosed  in  the
     Registration Statement or the Prospectus.

(vii)  To the  best  of our  knowledge,  there  are  no  franchises,  contracts,
indentures,  mortgages,  loan  agreements,  notes,  leases or other  instruments
required to be described or referred to in the  Registration  Statement or to be
filed as exhibits  thereto other than those  described or referred to therein or
filed or incorporated  by reference as exhibits  thereto,  and the  descriptions
thereof or references thereto are correct in all material respects.

(viii) To the best of our knowledge,  the Sub-Adviser is not in violation of its
articles of organization,  operating  agreement,  bylaws or other organizational
documents and no default by the  Sub-Adviser  exists in the due  performance  or
observance  of  any  material  obligation,   agreement,  covenant  or  condition
contained in any contract,  indenture,  mortgage, loan agreement, note, lease or
other  agreement  or  instrument  that  is  described  or  referred  to  in  the
Registration  Statement or the Prospectus or filed or  incorporated by reference
as an exhibit to the Registration Statement.

     (ix) No filing with, or authorization, approval, consent, license, order,
     registration,  qualification  or  decree  of,  any  court  or  governmental
     authority  or agency,  domestic or foreign  (other than under the 1933 Act,
     the 1940 Act and the Rules and Regulations, which have been obtained, or as
     may be  required  under  the  securities  or blue sky  laws of the  various
     states, as to which we need express no opinion) is necessary or required in
     connection  with  the due  authorization,  execution  and  delivery  of the
     Purchase Agreement.

     (x) The execution,  delivery and performance of the Purchase  Agreement
     and the  consummation  of the  transactions  contemplated  in the  Purchase
     Agreement  and  in  the  Registration   Statement  and  compliance  by  the
     Sub-Adviser with their obligations under the Purchase  Agreement do not and
     will not,  whether with or without the giving of notice or lapse of time or
     both,  conflict  with or  constitute  a breach of, or default or  Repayment
     Event (as defined in Section 1(a)(xii) of the Purchase  Agreement) under or
     result in the creation or  imposition  of any lien,  charge or  encumbrance
     upon any property or assets of the  Sub-Adviser  pursuant to any  contract,
     indenture,  mortgage, deed of trust, loan or credit agreement,  note, lease
     or any other agreement or instrument, known to us, to which the Sub-Adviser
     is a party or by which it or any of them may be  bound,  or to which any of
     the  property  or assets of the  Sub-Adviser  is subject  (except  for such
     conflicts,  breaches  or defaults or liens,  charges or  encumbrances  that
     would not have a Material Adverse  Effect),  nor will such action result in
     any  violation  of  the   provisions  of  the  charter  or  bylaws  of  the
     Sub-Adviser,  or any applicable law, statute, rule,  regulation,  judgment,
     order,  writ  or  decree,  known  to  us,  of  any  government,  government
     instrumentality or court, domestic or foreign, having jurisdiction over the
     Sub-Adviser or any of its properties, assets or operations.

     In addition,  we have  participated in the preparation of the  Registration
Statement  and the  Prospectus  and  participated  in  discussions  with certain
officers,  trustees and employees of the Fund,  representatives of KPMG LLP, the
independent  accountants who examined the statement of assets and liabilities of
the Fund included or incorporated by reference in the Registration Statement and
the Prospectus,  and you and your  representatives  and we have reviewed certain
Fund records and documents. While we have not independently verified and are not
passing  upon,  and  do  not  assume  any  responsibility   for,  the  accuracy,
completeness  or  fairness  of the  information  contained  in the  Registration
Statement  and the  Prospectus,  except to the extent  necessary to enable us to
give the  opinions  with  respect to the Fund in  paragraphs  (A)(v),  (xiv) and
(xix), on the basis of such  participation  and review,  nothing has come to our
attention that would lead us to believe that the Registration  Statement (except
for financial statements, supporting schedules and other financial data included
therein or omitted therefrom,  as to which we do not express any belief), at the
time such Registration Statement became effective, contained an untrue statement
of a material  fact or omitted to state a material  fact  required  to be stated
therein or necessary to make the  statements  therein not misleading or that the
Prospectus  (except for  financial  statements,  supporting  schedules and other
financial  data  included  therein or omitted  therefrom,  as to which we do not
express any belief),  at the time the Prospectus  was issued,  or at the Closing
Time,  included or includes an untrue statement of a material fact or omitted or
omits to  state a  material  fact  necessary  in  order  to make the  statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2I
<SEQUENCE>9
<FILENAME>defercompplan.txt
<TEXT>

                                                 THE EVERGREEN FUNDS

                                             DEFERRED COMPENSATION PLAN

          This Deferred Compensation Plan, effective as of September 18, 1997,
     sets forth the terms whereby a Trustee of the Evergreen Funds, entitled to
     compensation payable by the Evergreen Funds, may defer the receipt of his
     or her compensation.

1. . DEFINITION OF TERMS AND CONDITIONS

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

          1.1 Definitions. Unless a different meaning is plainly implied by the
     context, the following terms as used in this Plan shall have the meanings
     specified below:

          (1) "Beneficiary" shall mean such person or persons designated
     pursuant to Section 4.3 hereof to receive benefits after the death of the
     Trustee.

          (2) "Board of Trustees" shall mean the Board of Trustees or the Board
     of Directors of an Evergreen Fund. -------------------

          (3) "Code" shall mean the Internal Revenue Code of 1986, as amended
     from time to time, or any successor statute.

          (4) "Compensation" shall mean the amount of trustees' fees paid by an
     Evergreen Fund to the Trustee during a Deferral Year prior to reduction for
     Compensation Deferrals made under this Plan.

          (5) "Compensation Deferral" shall mean the amount or amounts of the
     Trustee's Compensation deferred under the provisions of Section 3 of this
     Plan.

          (6) "Deferral Account" shall mean the account maintained to reflect
     the Trustee's Compensation Deferrals made pursuant to Section 3 hereof and
     any other credits or debits thereto.

          (7) "Deferral Year" shall mean each calendar year during which the
     Trustee makes, or is entitled to make, Compensation Deferrals under Section
     3 hereof.

          (8) "Evergreen Funds" shall mean any and all of the registered
     investment ----------------- companies currently or subsequently advised by
     Evergreen Investment Management Company or any of its affiliates.

          (9) "Valuation Date" shall mean the last business day of each calendar
     year and ---------------- any other day upon which an Evergreen Fund makes
     a valuation of the Deferred Account.

          1.2 Plurals and Gender. Where appearing in this Plan the singular
     shall include the plural and the masculine shall include the feminine, and
     vice versa, unless the context clearly indicates a different meaning.

          1.3 Trustees and Directors. Where appearing in this Plan, "Trustee"
     shall also refer to "Director" and "Board of Trustees" shall also refer to
     "Board of Directors."

          1.4 Headings. The headings and sub-headings in this Plan are inserted
     for the convenience of reference only -------- and are to be ignored in any
     construction of the provisions hereof.

2. . PERIOD DURING WHICH COMPENSATION DEFERRALS ARE PERMITTED

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

          2.1 Commencement of Compensation Deferrals. The Trustee may elect, on
     a form provided by, and submitted to, the Secretary of an Evergreen Fund,
     to commence Compensation Deferrals under Section 3 hereof for the period
     beginning on the date such form is submitted to the Secretary of the
     Evergreen Fund.

          2.2 Termination of Deferrals. The Trustee shall not be eligible to
     make Compensation Deferrals after the earlier of
     the following dates:

          (1) The date on which he ceases to serve as a Trustee of the Evergreen
     Fund; or

          (2) The effective date of the termination of this Plan.

3. . COMPENSATION DEFERRALS

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

3.1      Compensation Deferral Elections.
         -------------------------------



<PAGE>

          (1) Except as provided below, an executed deferral election on the
     form described in Section 2.1 hereof, must be filed with the Secretary of
     an Evergreen Fund prior to the first day of the Deferral Year to which it
     applies. The form shall set forth the amount of such Compensation Deferral
     (in whole percentage amounts). Such election shall continue in effect for
     all subsequent Deferral Years unless it is canceled or modified as provided
     below. Notwithstanding the foregoing, (i) any person who is elected to the
     Board during a fiscal year of an Evergreen Fund may elect before becoming a
     Trustee or within 30 days after becoming a Trustee to defer any unpaid
     portion of the retainer of such fiscal year and the fees for any future
     meetings during such fiscal year by filing an election form with the
     Secretary of the Evergreen Fund, and (ii) Trustees may elect to defer any
     unpaid portion of the retainer for the fiscal year in which Deferred
     Compensation Plans or agreements are first authorized by the Board and any
     unpaid fees for any future meetings during such fiscal year by submitting
     an election form to the Secretary of an Evergreen Fund within 30 days of
     such authorization.

          (2) Compensation Deferrals shall be withheld from each payment of
     Compensation by an Evergreen Fund to the Trustee based upon the percentage
     amount elected by the Trustee under Section 3.1 (a) hereof.

          (3) The Trustee may cancel or modify the amount of his Compensation
     Deferrals on a prospective basis by submitting to the Secretary of an
     Evergreen Fund a revised Compensation Deferral election form. Subject to
     the provisions of Section 4.2 hereof, such change will be effective as of
     the first day of the Deferral Year following the date such revision is
     submitted to the Secretary of the Evergreen Fund.

3.2      Valuation of Deferral Account.

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

          (1) An Evergreen Fund shall establish a bookkeeping Deferral Account
     to which will be credited an amount equal to the Trustee's Compensation
     Deferrals under this Plan. Compensation Deferrals shall be allocated to the
     Deferral Account on the day such Compensation Deferrals are withheld from
     the Trustee's Compensation and shall be deemed invested pursuant to Section
     3.3, below, as of the same day. The Deferral Account shall be debited to
     reflect any distributions from such Account. Such debits shall be allocated
     to the Deferral Account as of the date such distributions are made.

          (2) As of each Valuation Date, income, gain and loss equivalents
     (determined as if the Deferral Account is invested in the manner set forth
     under Section 3.3, below) attributable to the period following the next
     preceding Valuation Date shall be credited to and/or deducted from the
     Trustee's Deferral Account.

3.3      Investment of Deferral Account Balance.
         --------------------------------------



<PAGE>




           (1) The Trustee may select from various options made
     available by the Evergreen Funds the investment media in which all or part
     of his Deferral Account shall be deemed to be invested.

          (a) The Trustee shall make an investment designation on a form
     provided by the Secretary of the Evergreen Funds (Attachment A) which shall
     remain effective until another valid designation has been made by the
     Trustee as herein provided. The Trustee may amend his investment
     designation daily by giving instructions to the Secretary of the Evergreen
     Funds.

          (b) Any changes to the investment media to be made available to the
     Trustee, and any limitation on the maximum or minimum percentages of the
     Trustee's Deferral Account that may be invested in any particular medium,
     shall be communicated from time-to- time to the Trustee by the Secretary of
     the Evergreen Funds.

          (2) Except as provided below, the Trustee's Deferral Account shall be
     deemed to be invested in accordance with his investment designations,
     provided such designations conform to the provisions of this Section. If:

          (a) the Trustee does not furnish the Secretary of the Evergreen Funds
     with complete, written investment instructions, or Funds with

          (b) the written investment instructions from the Trustee are unclear,

          then the Trustee's election to make Compensation Deferrals hereunder
     shall be held in abeyance and have no force and effect, and he shall be
     deemed to have selected the Evergreen Money Market Fund until such time as
     the Trustee shall provide the Secretary of the Evergreen Funds with
     complete investment instructions. In the event that any Evergreen Fund
     under which any portion of the Trustee's Deferral Account is deemed to be
     invested ceases to exist, such portion of the Deferral Account thereafter
     shall be held in the successor to such Evergreen Fund, subject to
     subsequent deemed investment elections.

          The amount of the earnings credited to a Trustee's Deferral Account
     shall be determined by using the Evergreen Fund(s) selected by the Trustee
     to measure the hypothetical performance of the Trustee's Deferral Account.
     The value of a Deferral Account, as of any date, will be equal to the value
     such account would have had if the amount credited to it had been invested
     and reinvested in shares of the Evergreen Fund(s) designated by the Trustee
     ("Designated Shares"). Trustees may change the designation of the Evergreen
     Fund(s) in which their compensation deferrals are deemed to be invested
     daily by giving instructions to the Secretary of the Evergreen Funds. In
     such a case, the Designated Shares of one Evergreen Fund will be exchanged
     for Designated Shares of another Evergreen Fund based on the net asset
     value per share of the respective Evergreen Funds. Each Deferral Account
     will be credited or changed with book adjustments representing all
     interest, dividends and other earnings and all gains and losses that would
     have been realized had the amounts credited to such account actually been
     invested in the Designated Shares. A participating Evergreen Fund's
     obligation to make payments with respect to a Deferral Account is and will
     remain a general obligation of the Evergreen Fund to be made pro rata from
     the general assets and property of each Evergreen Fund portfolio.

               The Secretary of the Evergreen Funds shall provide an annual
          statement to the Trustee showing such information as is appropriate,
          including the aggregate amount in the Deferral Account, as of a
          reasonably current date.

4. . DISTRIBUTIONS FROM DEFERRAL ACCOUNT

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

               4.1 In General. Distributions from the Trustee's Deferral Account
          may be paid in a lump sum or in installments as elected by the Trustee
          commencing on or as soon as practicable after a date specified by the
          Trustee, which may not be sooner than the earlier of the first
          business day of January following (a) a date five years following the
          deferral election, or (b) the year in which the Trustee ceases to be a
          member of the Board of Trustees of the Evergreen Funds.
          Notwithstanding the foregoing, in the event of the liquidation,
          dissolution or winding up of an Evergreen Fund or the distribution of
          all or substantially all of an Evergreen Fund's assets and property
          relating to one or more series of its shares to the shareholders of
          such series (for this purpose a sale, conveyance or transfer of an
          Evergreen Fund's assets to a trust, partnership, association or
          corporation in exchange for cash, shares or other securities with the
          transfer being made subject to, or with the assumption by the
          transferee of, the liabilities of the Evergreen Fund shall not be
          deemed a termination of the Evergreen Fund or such a distribution),
          all unpaid amounts in the Deferral Account as of the effective date
          thereof shall be paid in a lump sum on such effective date. In
          addition, upon application by a Trustee and determination by the
          Chairman of the Board of Trustees of the Evergreen Funds that the
          Trustee has suffered a severe and unanticipated financial hardship,
          the Secretary shall distribute to the Trustee, in a single lump sum,
          an amount equal to the lesser of the amount needed by the Trustee to
          meet the hardship plus applicable income taxes payable upon such
          distribution, or the balance of the Trustee's Deferral Account.

                    4.2 Death Prior to Complete Distribution of Deferral
               Account. Upon the death of the Trustee (whether prior to or after
               the commencement of the distribution of the amounts credited to
               his Deferral Account), the balance of such Account shall be
               distributed to his Beneficiary in a lump sum as soon as
               practicable after the Trustee's death.

                    4.3 Designation of Beneficiary. For purposes of Section 4.2
               hereof, the Trustee's Beneficiary shall be the person or persons
               so designated by the Trustee in a written instrument submitted to
               the Secretary of the Evergreen Funds (Attachment B). In the event
               the Trustee fails to properly designate a Beneficiary, his
               Beneficiary shall be the person or persons in the first of the
               following classes of successive preference Beneficiaries
               surviving at the death of the Trustee: the Trustee's (1)
               surviving spouse, or (2) estate.

5. . AMENDMENT AND TERMINATION

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

                    5.1 The Board of Trustees may at any time in its sole
               discretion amend or terminate this Plan; provided, however, that
               no such amendment or termination shall adversely affect the right
               of Trustees to receive amounts previously credited to their
               Deferral Accounts.

6. . MISCELLANEOUS

6.1      Rights of Creditors.

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

                    (1) This Plan is an unfunded and non-qualified deferred
               compensation arrangement. Neither the Trustee nor other persons
               shall have any interest in any specific asset or assets of an
               Evergreen Fund by reason of any Deferral Account hereunder, nor
               any rights to receive distribution of his Deferral Account except
               as and to the extent expressly provided hereunder. An Evergreen
               Fund shall not be required to purchase, hold or dispose of any
               investments pursuant to this Plan; however, if in order to cover
               its obligations hereunder the Evergreen Fund elects to purchase
               any investments the same shall continue for all purposes to be a
               part of the general assets and property of the Evergreen Fund,
               subject to the claims of its general creditors and no person
               other than the Evergreen Fund shall by virtue of the provisions
               of this Plan have any interest in such assets other than an
               interest as a general creditor.

                    (2) The rights of the Trustee and the Beneficiaries to the
               amounts held in the Deferral Account are unsecured and shall be
               subject to the creditors of the Evergreen Funds. With respect to
               the payment of amounts held under the Deferral Account, the
               Trustee and his Beneficiaries have the status of unsecured
               creditors of the Evergreen Funds. This Plan is executed on behalf
               of the Evergreen Fund by an officer of an Evergreen Fund as such
               and not individually. Any obligation of an Evergreen Fund
               hereunder shall be an unsecured obligation of the Evergreen Fund
               and not of any other person.

                    6.2 Agents. The Evergreen Funds may employ agents and
               provide for such clerical, legal, actuarial, accounting, advisory
               or other services as they deem necessary to perform their duties
               under this Plan. The Evergreen Funds shall bear the cost of such
               services and all other expenses they incur in connection with the
               administration of this Plan.

                    6.3 Incapacity. If an Evergreen Fund shall receive evidence
               satisfactory to it that the Trustee or any Beneficiary entitled
               to receive any benefit under this Plan is, at the time when such
               benefit becomes payable, a minor, or is physically or mentally
               incompetent to give a valid release therefor, and that another
               person or an institution is then maintaining or has custody of
               the Trustee or Beneficiary and that no guardian, committee or
               other representative of the estate of the Trustee or Beneficiary
               shall have been duly appointed, the Evergreen Fund may make
               payment of such benefit otherwise payable to the Trustee or
               Beneficiary to such other person or institution, including a
               custodian under a Uniform Gifts to Minors Act, or corresponding
               legislation (who shall be a guardian of the minor or a trust
               company), and the release of such other person or institution
               shall be a valid and complete discharge for the payment of such
               benefit.

                    6.4 No Guarantee of Trusteeship. Nothing contained in this
               Plan shall be construed as a guaranty or right of any Trustee to
               be continued as a Trustee of one or more of the Evergreen Funds
               (or of a right of a Trustee to any specific level of
               Compensation) or as a limitation of the right of any of the
               Evergreen Funds, by shareholder action or otherwise, to remove
               any of its trustees.

                    6.5 Counsel. The Evergreen Funds may consult with legal
               counsel with respect to the meaning or construction of this Plan,
               their obligations or duties hereunder or with respect to any
               action or proceeding or any question of law, and they shall be
               fully protected with respect to any action taken or omitted by
               them in good faith pursuant to the advice of legal counsel.

                    6.6 Spendthrift Provision. The Trustees' and Beneficiaries'
               interests in the Deferral Account shall not be subject to
               anticipation, alienation, sale, transfer, assignment, pledge,
               encumbrance, or charges and any attempt so to anticipate,
               alienate, sell, transfer, assign, pledge, encumber or charge the
               same shall be void; nor shall any portion of any such right
               hereunder be in any manner payable to any assignee, receiver or
               trustee, or be liable for such person's debts, contracts,
               liabilities, engagements or torts, or be subject to any legal
               process to levy upon or attach.

                    6.7 Notices. For purposes of this Plan, notices and all
               other communications provided for in this Plan shall be in
               writing and shall be deemed to have been duly given when
               delivered personally or mailed by United States registered or
               certified mail, return receipt requested, postage prepaid, or by
               nationally recognized overnight delivery service, addressed to
               the Trustee at the home address set forth in the Evergreen Funds'
               records and to an Evergreen Fund at its principal place of
               business, provided that all notices to an Evergreen Fund shall be
               directed to the attention of the Secretary of the Evergreen Fund
               or to such other address as either party may have furnished to
               the other in writing in accordance herewith, except that notice
               of charge of address shall be effective only upon receipt.

                    6.8 Interpretation of Plan. Interpretation of, and
               determinations related to, this Plan made by the Evergreen Funds
               in good faith, including any determinations of the amounts of the
               Deferral Account, shall be conclusive; and an Evergreen Fund
               shall not incur any liability to the Trustee for any such
               interpretation or determination so made or for any other action
               taken by it in connection with this Plan in good faith.

                    6.9 Successors and Assigns. This Plan shall be applicable
               to, and shall inure to the benefit of, the Evergreen Funds and
               their successors and assigns and to the Trustees and his heirs,
               executors, administrators and personal representatives.

<PAGE>

                                  ATTACHMENT A

                           DEFERRED COMPENSATION PLAN

                             DEFERRAL ELECTION FORM

TO:                    The Secretary of the Evergreen Funds

FROM:

DATE:

                    With respect to the Deferred Compensation Plan I hereby make
               the following elections:

               Deferral of Compensation

                    Starting with Compensation to be paid to me with respect to
               services provided by me to The Evergreen Funds after the date
               this election form is provided to The Evergreen Funds, and for
               all periods thereafter (unless subsequently amended by way of a
               new election form), I hereby elect that ___ percent (___%) of my
               Compensation (as defined under the Plan) be deferred and that
               each Fund establish a bookkeeping account credited with amounts
               equal to the amount so deferred (the "Deferral Account"). The
               Deferral Account shall be further credited with income
               equivalents as provided under the Plan. Each Compensation
               Deferral (as defined in the Plan) shall be deemed invested as of
               the end of the calendar quarter during which such Compensation
               Deferral is withheld from my Compensation.

                    I wish the Compensation Deferral to be invested in the Funds
               and percentages noted in Annex A to this Form.

                    I understand that the amounts held in the Deferral Account
               shall remain the general assets of The Evergreen Funds and that,
               with respect to the payment of such amounts, I am merely a
               general creditor of The Evergreen Funds. I may not sell,
               encumber, pledge, assign or otherwise alienate the amounts held
               under the Deferral Account.

Distributions from Deferral Account

           I hereby elect that distributions from my Deferral Account be paid:

               _____ in a lump sum or

                    _____ in quarterly  installments  for ____ years  (specify a
               number of years not to exceed five);


Commencing on the first business day of January following:

               _____ the year in which I cease to be a member of the
              Board of Trustees of the Funds, or

               _____ (a calendar year but not a year earlier than 2000).


                    I hereby agree that the terms of the Plan are incorporated
               herein and are made a part hereof. Dated as of the day and year
               first above written.

WITNESS:                                                      TRUSTEE:


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


                            RECEIVED:

                               THE EVERGREEN FUNDS

                            By:_____________________

                            Name: __________________


                           Title: __________________


                            Date: __________________





<PAGE>

                                                   ANNEX A

               I desire that my deferred Compensation be invested as follows:

[Names of Available Evergreen Funds                                 _____%
 as may be updated from time to time]







                                                   ----------------------
                                                   100% of Deferred
                                                   Compensation amount

<PAGE>

                                                 ATTACHMENT B


                                                 THE EVERGREEN FUNDS

                                             DEFERRED COMPENSATION PLAN

                                             DESIGNATION OF BENEFICIARY



                    You may designate one or more beneficiaries to receive any
               amount remaining in your Deferral Account at your death. If your
               Designated Beneficiary survives you, but dies before receiving
               the full amount of the Deferral Account to which he or she is
               entitled, the remainder will be paid to the Designated
               Beneficiary's estate, unless you specifically elect otherwise in
               your Designation of Beneficiary form.

                    You may indicate the names not only of one or more primary
               Designated Beneficiaries but also the names of secondary
               beneficiaries who would receive amounts in your Deferral Account
               in the event the primary beneficiary or beneficiaries are not
               alive at your death. In the case of each Designated Beneficiary,
               give his or her name, address, relationship to you, and the
               percentage of your Deferral Account he or she is to receive. You
               may change your Designated Beneficiaries at any time, without
               their consent, by filing a new Designation of Beneficiary form
               with the Secretary of the Funds.

                                              * * * * * * * * * * * * *


                    As a participant in the Evergreen Funds' Deferred
               Compensation Plan (the "Plan"), I hereby designate the person or
               persons listed below to receive any amount remaining in my
               Deferral Account in the event of my death. This designation of
               beneficiary shall become effective upon its delivery to the
               Secretary of the Funds prior to my death, and revokes any
               designation(s) of beneficiary previously made by me. I reserve
               the right to revoke this designation of beneficiary at any time
               without notice to any beneficiary.

 I hereby name the following as primary Designated Beneficiaries under the Plan:

Name                                Relationship     Percentage        Address

- ---------------------- ----------   ---------%       ---------------------------

Name                                Relationship     Percentage        Address

- ---------------------- ----------   ---------%       ---------------------------


Name                                Relationship     Percentage        Address

- ---------------------- ----------   ---------%       ---------------------------


Name                                Relationship     Percentage        Address

- ---------------------- -----------  ---------%       ---------------------------

                    In the event that one or more of my primary Designated
               Beneficiaries predeceases me, his or her share shall be allocated
               among the surviving primary Designated Beneficiaries. I name the
               following as secondary Designated Beneficiaries under the Plan,
               in the event that no primary Designated Beneficiary survives me:

<TABLE>

<S>                                      <C>            <C>             <C>


Name                                Relationship     Percentage        Address

- -----------------------             ----------       ---------%        ---------


Name                                Relationship     Percentage        Address

- -----------------------             ----------       ---------%        -----------------------------


Name                                Relationship     Percentage        Address

- -----------------------             ----------       ---------%        -----------------------------


Name                               Relationship      Percentage        Address

- ---------------------------         ----------       ---------%        ------------------------

</TABLE>

                    In the event that no primary Designated Beneficiary survives
               me and one or more of the secondary Designated Beneficiaries
               predeceases me, his or her share shall be allocated among the
               surviving secondary Designated Beneficiaries.

- ----------------                                        ------------------------
   (Witness) (Signature of Trustee)

Date:                                                    Date:








</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2J
<SEQUENCE>10
<FILENAME>custodianagree.txt
<TEXT>

                               CUSTODIAN AGREEMENT


         This Agreement is made as of May 16, 2003 by and between EVERGREEN
MANAGED INCOME FUND a statutory trust organized and existing under the laws of
Delaware (the "Fund"), and STATE STREET BANK and TRUST COMPANY, a Massachusetts
trust company (the "Custodian"),

                                   WITNESSETH:

         WHEREAS, the Fund is authorized to issue shares of common stock or
shares of beneficial interest in separate series ("Shares"), with each such
series representing interests in a separate portfolio of securities and other
assets; and

         WHEREAS, the Fund intends that this Agreement be applicable to one (1)
series, Evergreen Income Advantage Fund (such series together with any other
series of the Fund made subject to this Agreement in accordance with Section
18.5 or any other series subsequently established by the Fund, and made subject
to this Agreement in accordance with Section 18.5, be referred to herein as the
"Portfolio(s)").

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:


SECTION 1.        EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
                  -----------------------------------------------------

The Fund hereby employs the Custodian as a custodian of assets of the
Portfolios, including securities which the Fund, on behalf of the applicable
Portfolio, desires to be held in places within the United States ("domestic
securities") and securities it desires to be held outside the United States
("foreign securities"). The Custodian shall not be responsible for any property
of a Portfolio which is not received by it or which is delivered out in
accordance with Proper Instructions (as such term is defined in Section 7
hereof) including, without limitation, Portfolio property (i) held by brokers,
private bankers or other entities on behalf of the Portfolio (each a "Local
Agent"), (ii) held by Special Sub-Custodians (as such term is defined in Section
5 hereof), (iii) held by entities which have advanced monies to or on behalf of
the Portfolio and which have received Portfolio property as security for such
advance(s) (each a "Pledgee"), or (iv) delivered or otherwise removed from the
custody of the Custodian (a) in connection with any Free Trade (as such term is
hereinafter defined) or (b) pursuant to Special Instructions (as such term is
defined in Section 7 hereof). With respect to uncertificated shares (the
"Underlying Shares") of registered "investment companies" (as defined in Section
3(a)(1) of the Investment Company Act of 1940, as amended (the "1940 Act")),
whether in the same "group of investment companies" (as defined in Section
12(d)(1)(G)(ii) of the 1940 Act) or otherwise, including pursuant to Section
12(d)(1)(F) of the 1940 Act (hereinafter sometimes referred to as the
"Underlying Portfolios") the holding of confirmation statements that identify
the shares as being recorded in the Custodian's name on behalf of the Portfolios
will be deemed custody for purposes hereof.

Upon receipt of Proper Instructions, the Custodian shall on behalf of the
applicable Portfolio(s) from time to time employ one or more sub-custodians
located in the United States, but only in accordance with an applicable vote by
the Board of Trustees of the Fund (the "Board") on behalf of the applicable
Portfolio(s), and provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any actions or omissions
of any sub-custodian so employed than any such sub-custodian has to the
Custodian. The Custodian may employ as sub-custodian for the Fund's foreign
securities on behalf of the applicable Portfolio(s) the foreign banking
institutions and foreign securities depositories designated in Schedules A and B
hereto, but only in accordance with the applicable provisions of Sections 3 and
4 hereof.


SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS TO
           BE HELD IN THE UNITED STATES

         SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States, including all domestic securities owned by such
Portfolio other than (a) securities which are maintained pursuant to Section 2.8
in a clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury (each, a "U.S.
Securities System") and (b) Underlying Shares owned by the Fund which are
maintained pursuant to Section 2.10 hereof in an account with State Street Bank
and Trust Company or such other entity which may from time to time act as a
transfer agent for the Underlying Portfolios and with respect to which the
Custodian is provided with Proper Instructions (the "Underlying Transfer
Agent").

         SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian, in a
U.S. Securities System account of the Custodian or in an account at the
Underlying Transfer Agent, only upon receipt of Proper Instructions on behalf of
the applicable Portfolio, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:

          1)   Upon sale of such securities for the account of the Portfolio and
               receipt of payment therefor;

         2)       Upon the receipt of payment in connection with any repurchase
                  agreement related to such securities entered into by the
                  Portfolio;

         3)       In the case of a sale effected through a U.S. Securities
                  System, in accordance with the provisions of Section 2.8
                  hereof;

         4)       To the depository agent in connection with tender or other
                  similar offers for securities of the Portfolio;

         5)       To the issuer thereof or its agent when such securities are
                  called, redeemed, retired or otherwise become payable;
                  provided that, in any such case, the cash or other
                  consideration is to be delivered to the Custodian;

         6)       To the issuer thereof, or its agent, for transfer into the
                  name of the Portfolio or into the name of any nominee or
                  nominees of the Custodian or into the name or nominee name of
                  any agent appointed pursuant to Section 2.7 or into the name
                  or nominee name of any sub-custodian appointed pursuant to
                  Section 1; or for exchange for a different number of bonds,
                  certificates or other evidence representing the same aggregate
                  face amount or number of units; provided that, in any such
                  case, the new securities are to be delivered to the Custodian;

         7)       Upon the sale of such securities for the account of the
                  Portfolio, to the broker or its clearing agent, against a
                  receipt, for examination in accordance with "street delivery"
                  custom; provided that in any such case, the Custodian shall
                  have no responsibility or liability for any loss arising from
                  the delivery of such securities prior to receiving payment for
                  such securities except as may arise from the Custodian's own
                  negligence or willful misconduct;

         8)       For exchange or conversion pursuant to any plan of merger,
                  consolidation, recapitalization, reorganization or
                  readjustment of the securities of the issuer of such
                  securities, or pursuant to provisions for conversion contained
                  in such securities, or pursuant to any deposit agreement;
                  provided that, in any such case, the new securities and cash,
                  if any, are to be delivered to the Custodian;

         9)       In the case of warrants, rights or similar securities, the
                  surrender thereof in the exercise of such warrants, rights or
                  similar securities or the surrender of interim receipts or
                  temporary securities for definitive securities; provided that,
                  in any such case, the new securities and cash, if any, are to
                  be delivered to the Custodian;

         10)      For delivery in connection with any loans of securities made
                  by the Portfolio (a) against receipt of collateral as agreed
                  from time to time by the Fund on behalf of the Portfolio,
                  except that in connection with any loans for which collateral
                  is to be credited to the Custodian's account in the book-entry
                  system authorized by the U.S. Department of the Treasury, the
                  Custodian will not be held liable or responsible for the
                  delivery of securities owned by the Portfolio prior to the
                  receipt of such collateral or (b) to the lending agent, or the
                  lending agent's custodian, in accordance with written Proper
                  Instructions (which may not provide for the receipt by the
                  Custodian of collateral therefor) agreed upon from time to
                  time by the Custodian and the Fund;

         11)      For delivery as security in connection with any borrowing by
                  the Fund on behalf of a Portfolio requiring a pledge of assets
                  by the Fund on behalf of such Portfolio;

         12)      For delivery in accordance with the provisions of any
                  agreement among the Fund on behalf of the Portfolio, the
                  Custodian and a broker-dealer registered under the Securities
                  Exchange Act of 1934 (the "Exchange Act") and a member of The
                  National Association of Securities Dealers, Inc. (the "NASD"),
                  relating to compliance with the rules of The Options Clearing
                  Corporation and of any registered national securities
                  exchange, or of any similar organization or organizations,
                  regarding escrow or other arrangements in connection with
                  transactions by the Fund on behalf of a Portfolio;

         13)      For delivery in accordance with the provisions of any
                  agreement among the Fund on behalf of the Portfolio, the
                  Custodian, and a futures commission merchant registered under
                  the Commodity Exchange Act, relating to compliance with the
                  rules of the Commodity Futures Trading Commission (the "CFTC")
                  and/or any contract market, or any similar organization or
                  organizations, regarding account deposits in connection with
                  transactions by the Fund on behalf of a Portfolio;

         14)      Upon the sale or other delivery of such investments
                  (including, without limitation, to one or more (a) Special
                  Sub-Custodians or (b) additional custodians appointed by the
                  Fund, and communicated to the Custodian from time to time via
                  a writing duly executed by an authorized officer of the Fund,
                  for the purpose of engaging in repurchase agreement
                  transactions(s), each a "Repo Custodian"), and prior to
                  receipt of payment therefor, as set forth in written Proper
                  Instructions (such delivery in advance of payment, along with
                  payment in advance of delivery made in accordance with Section
                  2.6(7), as applicable, shall each be referred to herein as a
                  "Free Trade"), provided that such Proper Instructions shall
                  set forth (a) the securities of the Portfolio to be delivered
                  and (b) the person(s) to whom delivery of such securities
                  shall be made;

         15)      Upon receipt of instructions from the Fund's transfer agent
                  (the "Transfer Agent") for delivery to such Transfer Agent or
                  to the holders of Shares in connection with distributions in
                  kind, as may be described from time to time in the currently
                  effective prospectus and statement of additional information
                  of the Fund related to the Portfolio (the "Prospectus"), in
                  satisfaction of requests by holders of Shares for repurchase
                  or redemption;

         16)      In the case of a sale processed through the Underlying
                  Transfer Agent or Underlying Shares, in accordance with
                  Section 2.10 hereof; and

         17)      For any other purpose, but only upon receipt of Proper
                  Instructions from the Fund on behalf of the applicable
                  Portfolio specifying (a) the securities of the Portfolio to be
                  delivered and (b) the person(s) to whom delivery of such
                  securities shall be made.

         SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered management investment
companies having the same investment adviser as the Portfolio, or in the name or
nominee name of any agent appointed pursuant to Section 2.7 or in the name or
nominee name of any sub-custodian appointed pursuant to Section 1. All
securities accepted by the Custodian on behalf of the Portfolio under the terms
of this Agreement shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain securities in "street name",
the Custodian shall utilize its best efforts only to timely collect income due
the Fund on such securities and to notify the Fund on a best efforts basis only
of relevant corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.

         SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the 1940
Act. Funds held by the Custodian for a Portfolio may be deposited by it to its
credit as Custodian in the banking department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each such bank or
trust company and the funds to be deposited with each such bank or trust company
shall on behalf of each applicable Portfolio be approved by vote of a majority
of the Board. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that capacity.

         SECTION 2.5 COLLECTION OF INCOME. Except with respect to Portfolio
property released and delivered pursuant to Section 2.2(14) or purchased
pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments with
respect to registered domestic securities held hereunder to which each Portfolio
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other payments with
respect to bearer domestic securities if, on the date of payment by the issuer,
such securities are held by the Custodian or its agent thereof and shall credit
such income, as collected, to such Portfolio's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities held
hereunder. Income due each Portfolio on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of the
income to which the Portfolio is properly entitled.

         SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions
on behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:

         1)       Upon the purchase of domestic securities, options, futures
                  contracts or options on futures contracts for the account of
                  the Portfolio but only (a) against the delivery of such
                  securities or evidence of title to such options, futures
                  contracts or options on futures contracts to the Custodian (or
                  any bank, banking firm or trust company doing business in the
                  United States or abroad which is qualified under the 1940 Act
                  to act as a custodian and has been designated by the Custodian
                  as its agent for this purpose) registered in the name of the
                  Portfolio or in the name of a nominee of the Custodian
                  referred to in Section 2.3 hereof or in proper form for
                  transfer; (b) in the case of a purchase effected through a
                  U.S. Securities System, in accordance with the conditions set
                  forth in Section 2.8 hereof; (c) in the case of a purchase of
                  Underlying Shares, in accordance with the conditions set forth
                  in Section 2.10 hereof; (d) in the case of repurchase
                  agreements entered into between the Fund on behalf of the
                  Portfolio and the Custodian, or another bank, or a
                  broker-dealer which is a member of NASD, (i) against delivery
                  of the securities either in certificate form or through an
                  entry crediting the Custodian's account at the Federal Reserve
                  Bank with such securities or (ii) against delivery of the
                  receipt evidencing purchase by the Portfolio of securities
                  owned by the Custodian along with written evidence of the
                  agreement by the Custodian to repurchase such securities from
                  the Portfolio; or (e) for transfer to a time deposit account
                  of the Fund in any bank, whether domestic or foreign; such
                  transfer may be effected prior to receipt of a confirmation
                  from a broker and/or the applicable bank pursuant to Proper
                  Instructions from the Fund as defined herein;

         2)       In connection with conversion, exchange or surrender of
                  securities owned by the Portfolio as set forth in Section 2.2
                  hereof;

          3)   For the redemption or repurchase of Shares issued as set forth in
               Section 6 hereof;

         4)       For the payment of any expense or liability incurred by the
                  Portfolio, including but not limited to the following payments
                  for the account of the Portfolio: interest, taxes, management,
                  accounting, transfer agent and legal fees, and operating
                  expenses of the Fund whether or not such expenses are to be in
                  whole or part capitalized or treated as deferred expenses;

         5)       For the payment of any dividends on Shares declared pursuant
                  to the Fund's articles of incorporation or organization and
                  by-laws or agreement or declaration of trust, as applicable,
                  and Prospectus (collectively, the "Governing Documents");

         6)       For payment of the amount of dividends received in respect of
                  securities sold short;

         7)       Upon the purchase of domestic investments including, without
                  limitation, repurchase agreement transactions involving
                  delivery of Portfolio monies to Repo Custodian(s), and prior
                  to receipt of such investments, as set forth in written Proper
                  Instructions (such payment in advance of delivery, along with
                  delivery in advance of payment made in accordance with Section
                  2.2(14), as applicable, shall each be referred to herein as a
                  "Free Trade"), provided that such Proper Instructions shall
                  also set forth (a) the amount of such payment and (b) the
                  person(s) to whom such payment is made; and

         8)       For any other purpose, but only upon receipt of Proper
                  Instructions from the Fund on behalf of the Portfolio
                  specifying (a) the amount of such payment and (b) the
                  person(s) to whom such payment is to be made.

         SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder. The Underlying Transfer Agent shall not be deemed an
agent or subcustodian of the Custodian for purposes of this Section 2.7 or any
other provision of this Agreement.

         SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S.
Securities System subject to the following provisions:

         1)       The Custodian may keep securities of the Portfolio in a U.S.
                  Securities System provided that such securities are
                  represented in an account of the Custodian in the U.S.
                  Securities System (the "U.S. Securities System Account") which
                  account shall not include any assets of the Custodian other
                  than assets held as a fiduciary, custodian or otherwise for
                  customers;

         2)       The records of the Custodian with respect to securities of the
                  Portfolio which are maintained in a U.S. Securities System
                  shall identify by book-entry those securities belonging to the
                  Portfolio;

         3)       The Custodian shall pay for securities purchased for the
                  account of the Portfolio upon (a) receipt of advice from the
                  U.S. Securities System that such securities have been
                  transferred to the U.S. Securities System Account and (b) the
                  making of an entry on the records of the Custodian to reflect
                  such payment and transfer for the account of the Portfolio.
                  The Custodian shall transfer securities sold for the account
                  of the Portfolio upon (i) receipt of advice from the U.S.
                  Securities System that payment for such securities has been
                  transferred to the U.S. Securities System Account and (ii) the
                  making of an entry on the records of the Custodian to reflect
                  such transfer and payment for the account of the Portfolio.
                  Copies of all advices from the U.S. Securities System of
                  transfers of securities for the account of the Portfolio shall
                  identify the Portfolio, be maintained for the Portfolio by the
                  Custodian and be provided to the Fund at its request. Upon
                  request, the Custodian shall furnish the Fund confirmation of
                  each transfer to or from the account of the Portfolio in the
                  form of a written advice or notice and shall furnish to the
                  Fund copies of daily transaction sheets reflecting each day's
                  transactions in the U.S. Securities System for the account of
                  the Portfolio;

         4)       The Custodian shall provide the Fund with any report obtained
                  by the Custodian on the U.S. Securities System's accounting
                  system, internal accounting control and procedures for
                  safeguarding securities deposited in the U.S. Securities
                  System; and

         5)       Anything to the contrary in this Agreement notwithstanding,
                  the Custodian shall be liable to the Fund for the benefit of
                  the Portfolio for any loss or damage to the Portfolio
                  resulting from use of the U.S. Securities System by reason of
                  any negligence, misfeasance or misconduct of the Custodian or
                  any of its agents or of any of its or their employees or from
                  failure of the Custodian or any such agent to enforce
                  effectively such rights as it may have against the U.S.
                  Securities System; at the election of the Fund, it shall be
                  entitled to be subrogated to the rights of the Custodian with
                  respect to any claim against the U.S. Securities System or any
                  other person which the Custodian may have as a consequence of
                  any such loss or damage if and to the extent that the
                  Portfolio has not been made whole for any such loss or damage.

         SECTION 2.9 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions on behalf of each applicable Portfolio, establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (a) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the CFTC or any registered
contract market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Portfolio,
(b) for purposes of segregating cash or government securities in connection with
options purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (c) for the
purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release of the U.S.
Securities and Exchange Commission (the "SEC"), or interpretative opinion of the
staff of the SEC, relating to the maintenance of segregated accounts by
registered management investment companies, and (d) for any other purpose in
accordance with Proper Instructions.

         SECTION 2.10 DEPOSIT OF FUND ASSETS WITH THE UNDERLYING TRANSFER AGENT.
Underlying Shares shall be deposited and/or maintained in an account or accounts
maintained with the Underlying Transfer Agent. The Underlying Transfer Agent
shall be deemed to be acting as if it is a "securities depository" for purposes
of Rule 17f-4 under the 1940 Act. The Fund hereby directs the Custodian to
deposit and/or maintain such securities with the Underlying Transfer Agent,
subject to the following provisions:

                  1) The Custodian shall keep Underlying Shares owned by a
                  Portfolio with the Underlying Transfer Agent provided that
                  such securities are maintained in an account or accounts on
                  the books and records of the Underlying Transfer Agent in the
                  name of the Custodian as custodian for the Portfolio.

                  2) The records of the Custodian with respect to Underlying
                  Shares which are maintained with the Underlying Transfer Agent
                  shall identify by book-entry those Underlying Shares belonging
                  to each Portfolio;

                  3) The Custodian shall pay for Underlying Shares purchased for
                  the account of a Portfolio upon (a) receipt of advice from the
                  Portfolio's investment adviser that such Underlying Shares
                  have been purchased and will be transferred to the account of
                  the Custodian, on behalf of the Portfolio, on the books and
                  records of the Underlying Transfer Agent and (b) the making of
                  an entry on the records of the Custodian to reflect such
                  payment and transfer for the account of the Portfolio. The
                  Custodian shall receive confirmation from the Underlying
                  Transfer Agent of the purchase of such securities and the
                  transfer of such securities to the Custodian's account with
                  the Underlying Transfer Agent only after such payment is made.
                  The Custodian shall transfer Underlying Shares redeemed for
                  the account of a Portfolio (i) upon receipt of an advice from
                  the Portfolio's investment adviser that such securities have
                  been redeemed and that payment for such securities will be
                  transferred to the Custodian and (ii) the making of an entry
                  on the records of the Custodian to reflect such transfer and
                  payment for the account of the Portfolio. The Custodian will
                  receive confirmation from the Underlying Transfer Agent of the
                  redemption of such securities and payment therefor only after
                  such securities are redeemed. Copies of all advices from the
                  Portfolio's investment adviser of purchases and sales of
                  Underlying Shares for the account of the Portfolio shall
                  identify the Portfolio, be maintained for the Portfolio by the
                  Custodian, and be provided to the Portfolio's investment
                  adviser at its request; and

                  4) The Custodian shall be not be liable to the Fund or any
                  Portfolio for any loss or damage to the Fund or any Portfolio
                  resulting from maintenance of Underlying Shares with
                  Underlying Transfer Agent except for losses resulting directly
                  from the negligence, misfeasance or misconduct of the
                  Custodian or any of its agents or of any of its or their
                  employees.

         SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.

         SECTION 2.12 PROXIES. Except with respect to Portfolio property
released and delivered pursuant to Section 2.2(14), or purchased pursuant to
Section 2.6(7), the Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of the
Portfolio or a nominee of the Portfolio, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly deliver to the
Fund such proxies, all proxy soliciting materials and all notices relating to
such securities.

         SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Except
with respect to Portfolio property released and delivered pursuant to Section
2.2(14), or purchased pursuant to Section 2.6(7), and subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency of
calls and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options written by
the Fund on behalf of the Portfolio and the maturity of futures contracts
purchased or sold by the Fund on behalf of the Portfolio) received by the
Custodian from issuers of the securities being held for the Portfolio. With
respect to tender or exchange offers, the Custodian shall transmit promptly to
the Fund all written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or its agents)
making the tender or exchange offer. If the Fund desires to take action with
respect to any tender offer, exchange offer or any other similar transaction,
the Fund shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.


SECTION 3.        PROVISIONS RELATING TO RULES 17F-5 AND 17F-7

     SECTION  3.1.   DEFINITIONS.   As  used  throughout  this  Agreement,   the
capitalized terms set forth below shall have the indicated meanings:

"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment, economic and financial infrastructure
(including any Eligible Securities Depository operating in the country),
prevailing or developing custody and settlement practices, and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.

"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act; the term does not include any Eligible Securities Depository.

"Eligible Securities Depository" has the meaning set forth in section (b)(1) of
Rule 17f-7.

"Foreign Assets" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.

"Foreign Custody Manager" has the meaning set forth in section (a)(3) of Rule
17f-5.

"Rule 17f-5" means Rule 17f-5 promulgated under the 1940 Act.

"Rule 17f-7" means Rule 17f-7 promulgated under the 1940 Act.

         SECTION 3.2.      THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
                           ----------------------------------------

                  3.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by the Board, hereby delegates to the Custodian,
subject to Section (b) of Rule 17f-5, the responsibilities set forth in this
Section 3.2 with respect to Foreign Assets of the Portfolios held outside the
United States, and the Custodian hereby accepts such delegation as Foreign
Custody Manager with respect to the Portfolios.

                  3.2.2 COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Agreement, which list of countries may be amended
from time to time by the Fund with the agreement of the Foreign Custody Manager.
The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
Custodians selected by the Foreign Custody Manager to maintain the assets of the
Portfolios, which list of Eligible Foreign Custodians may be amended from time
to time in the sole discretion of the Foreign Custody Manager. The Foreign
Custody Manager will provide amended versions of Schedule A in accordance with
Section 3.2.5 hereof.

Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund, on behalf of the applicable
Portfolio(s), of the applicable account opening requirements for such country,
the Foreign Custody Manager shall be deemed to have been delegated by the Board
on behalf of such Portfolio(s) responsibility as Foreign Custody Manager with
respect to that country and to have accepted such delegation. Execution of this
Agreement by the Fund shall be deemed to be a Proper Instruction to open an
account, or to place or maintain Foreign Assets, in each country listed on
Schedule A. Following the receipt of Proper Instructions directing the Foreign
Custody Manager to close the account of a Portfolio with the Eligible Foreign
Custodian selected by the Foreign Custody Manager in a designated country, the
delegation by the Board on behalf of such Portfolio to the Custodian as Foreign
Custody Manager for that country shall be deemed to have been withdrawn and the
Custodian shall immediately cease to be the Foreign Custody Manager with respect
to such Portfolio with respect to that country.

The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period to which the parties agree in writing)
after receipt of any such notice by the Fund, the Custodian shall have no
further responsibility in its capacity as Foreign Custody Manager to the Fund
with respect to the country as to which the Custodian's acceptance of delegation
is withdrawn.



<PAGE>



                  3.2.3    SCOPE OF DELEGATED RESPONSIBILITIES:

         (a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions
of this Section 3.2, the Foreign Custody Manager may place and maintain the
Foreign Assets in the care of the Eligible Foreign Custodian selected by the
Foreign Custody Manager in each country listed on Schedule A, as amended from
time to time. In performing its delegated responsibilities as Foreign Custody
Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian,
the Foreign Custody Manager shall determine that the Foreign Assets will be
subject to reasonable care, based on the standards applicable to custodians in
the country in which the Foreign Assets will be held by that Eligible Foreign
Custodian, after considering all factors relevant to the safekeeping of such
assets, including, without limitation the factors specified in Rule 17f-5(c)(1).

         (b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody
Manager shall determine that the contract governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).

         (c) MONITORING. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor (i) the appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (ii) the contract governing the custody
arrangements established by the Foreign Custody Manager with the Eligible
Foreign Custodian. In the event the Foreign Custody Manager determines that the
custody arrangements with an Eligible Foreign Custodian it has selected are no
longer appropriate, the Foreign Custody Manager shall notify the Board in
accordance with Section 3.2.5 hereunder.

                  3.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3.2, the Board shall be deemed to have considered and
determined to accept such Country Risk as is incurred by placing and maintaining
the Foreign Assets in each country for which the Custodian is serving as Foreign
Custody Manager of the Portfolios.

                  3.2.5 REPORTING REQUIREMENTS. The Foreign Custody Manager
shall report the withdrawal of the Foreign Assets from an Eligible Foreign
Custodian and the placement of such Foreign Assets with another Eligible Foreign
Custodian by providing to the Board an amended Schedule A at the end of the
calendar quarter in which an amendment to such Schedule has occurred. The
Foreign Custody Manager shall make written reports notifying the Board of any
other material change in the foreign custody arrangements of the Portfolios
described in this Section 3.2 after the occurrence of the material change.

                  3.2.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A
PORTFOLIO. In performing the responsibilities delegated to it, the Foreign
Custody Manager agrees to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would exercise.

                  3.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board has determined that it is reasonable for the Board to rely on the
Custodian to perform the responsibilities delegated pursuant to this Agreement
to the Custodian as the Foreign Custody Manager of the Portfolios.

                  3.2.8 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS
FOREIGN CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign
Custody Manager of the Portfolios shall be effective as of the date hereof and
shall remain in effect until terminated at any time, without penalty, by written
notice from the terminating party to the non-terminating party. Termination will
become effective thirty (30) days after receipt by the non-terminating party of
such notice. The provisions of Section 3.2.2 hereof shall govern the delegation
to and termination of the Custodian as Foreign Custody Manager of the Portfolios
with respect to designated countries.

         SECTION 3.3       ELIGIBLE SECURITIES DEPOSITORIES.

                  3.3.1 ANALYSIS AND MONITORING. The Custodian shall (a) provide
the Fund (or its duly-authorized investment manager or investment adviser) with
an analysis of the custody risks associated with maintaining assets with the
Eligible Securities Depositories set forth on Schedule B hereto in accordance
with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a
continuing basis, and promptly notify the Fund (or its duly-authorized
investment manager or investment adviser) of any material change in such risks,
in accordance with section (a)(1)(i)(B) of Rule 17f-7.

                  3.3.2 STANDARD OF CARE. The Custodian agrees to exercise
reasonable care, prudence and diligence in performing the duties set forth in
Section 3.3.1.


SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS TO
           BE HELD OUTSIDE THE UNITED STATES

     SECTION 4.1 DEFINITIONS. As used throughout this Agreement, the capitalized
terms set forth below shall have the indicated meanings:

"Foreign Securities System" means an Eligible Securities Depository listed on
Schedule B hereto.

"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.

         SECTION 4.2. HOLDING SECURITIES. The Custodian shall identify on its
books as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.

         SECTION 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country through
arrangements implemented by the Custodian or a Foreign Sub-Custodian, as
applicable, in such country.

         SECTION 4.4.      TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.

                  4.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities
System account, only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:

         (i)      Upon the sale of such foreign securities for the Portfolio in
                  accordance with commercially reasonable market practice in the
                  country where such foreign securities are held or traded,
                  including, without limitation: (A) delivery against
                  expectation of receiving later payment; or (B) in the case of
                  a sale effected through a Foreign Securities System, in
                  accordance with the rules governing the operation of the
                  Foreign Securities System;

         (ii)     In connection with any repurchase agreement related to foreign
                  securities;

         (iii)    To the depository agent in connection with tender or other
                  similar offers for foreign securities of the Portfolios;

         (iv)     To the issuer thereof or its agent when such foreign
                  securities are called, redeemed, retired or otherwise become
                  payable;

         (v)      To the issuer thereof, or its agent, for transfer into the
                  name of the Custodian (or the name of the respective Foreign
                  Sub-Custodian or of any nominee of the Custodian or such
                  Foreign Sub-Custodian) or for exchange for a different number
                  of bonds, certificates or other evidence representing the same
                  aggregate face amount or number of units;

         (vi)     To brokers, clearing banks or other clearing agents for
                  examination or trade execution in accordance with market
                  custom; provided that in any such case, the Foreign
                  Sub-Custodian shall have no responsibility or liability for
                  any loss arising from the delivery of such foreign securities
                  prior to receiving payment for such foreign securities except
                  as may arise from the Foreign Sub-Custodian's own negligence
                  or willful misconduct;

         (vii)    For exchange or conversion pursuant to any plan of merger,
                  consolidation, recapitalization, reorganization or
                  readjustment of the securities of the issuer of such
                  securities, or pursuant to provisions for conversion contained
                  in such securities, or pursuant to any deposit agreement;

         (viii)   In the case of warrants, rights or similar foreign securities,
                  the surrender thereof in the exercise of such warrants, rights
                  or similar securities or the surrender of interim receipts or
                  temporary securities for definitive securities;

         (ix)     For delivery as security in connection with any borrowing by
                  the Fund on behalf of a Portfolio requiring a pledge of assets
                  by the Fund on behalf of such Portfolio;

(x)               In connection with trading in options and futures contracts,
                  including delivery as original margin and variation margin;

         (xi)     Upon the sale or other delivery of such foreign securities
                  (including, without limitation, to one or more Special
                  Sub-Custodians or Repo Custodians) as a Free Trade, provided
                  that applicable Proper Instructions shall set forth (A) the
                  foreign securities to be delivered and (B) the person(s) to
                  whom delivery shall be made;

         (xii)    In connection with the lending of foreign securities; and

         (xiii)   For any other purpose, but only upon receipt of Proper
                  Instructions specifying (A) the foreign securities to be
                  delivered and (B) the person or persons to whom delivery of
                  such securities shall be made.

                 4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out, or direct the respective Foreign
Sub-Custodian or the respective Foreign Securities System to pay out, monies of
a Portfolio in the following cases only:

         (i)      Upon the purchase of foreign securities for the Portfolio,
                  unless otherwise directed by Proper Instructions, by (A)
                  delivering money to the seller thereof or to a dealer therefor
                  (or an agent for such seller or dealer) against expectation of
                  receiving later delivery of such foreign securities; or (B) in
                  the case of a purchase effected through a Foreign Securities
                  System, in accordance with the rules governing the operation
                  of such Foreign Securities System;

         (ii)     In connection with the conversion, exchange or surrender of
                  foreign securities of the Portfolio;

         (iii)    For the payment of any expense or liability of the Portfolio,
                  including but not limited to the following payments: interest,
                  taxes, investment advisory fees, transfer agency fees, fees
                  under this Agreement, legal fees, accounting fees, and other
                  operating expenses;

         (iv)     For the purchase or sale of foreign exchange or foreign
                  exchange contracts for the Portfolio, including transactions
                  executed with or through the Custodian or its Foreign
                  Sub-Custodians;

(v)               In connection with trading in options and futures contracts,
                  including delivery as original margin and variation margin;

         (vi)     Upon the purchase of foreign investments including, without
                  limitation, repurchase agreement transactions involving
                  delivery of Portfolio monies to Repo Custodian(s), as a Free
                  Trade, provided that applicable Proper Instructions shall set
                  forth (A) the amount of such payment and (B) the person(s) to
                  whom payment shall be made;

         (vii)    For payment of part or all of the dividends received in
                  respect of securities sold short;

         (viii)   In connection with the borrowing or lending of foreign
                  securities; and

         (ix)     For any other purpose, but only upon receipt of Proper
                  Instructions specifying (A) the amount of such payment and (B)
                  the person(s) to whom such payment is to be made.

                  4.4.3. MARKET CONDITIONS. Notwithstanding any provision of
this Agreement to the contrary, settlement and payment for Foreign Assets
received for the account of the Portfolios and delivery of Foreign Assets
maintained for the account of the Portfolios may be effected in accordance with
the customary established securities trading or processing practices and
procedures in the country or market in which the transaction occurs, including,
without limitation, delivering Foreign Assets to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) with the expectation
of receiving later payment for such Foreign Assets from such purchaser or
dealer.

The Custodian shall provide to the Board the information with respect to custody
and settlement practices in countries in which the Custodian employs a Foreign
Sub-Custodian described on Schedule C hereto at the time or times set forth on
such Schedule. The Custodian may revise Schedule C from time to time, provided
that no such revision shall result in the Board being provided with
substantively less information than had been previously provided hereunder.

         SECTION 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Sub-Custodian (other than bearer
securities) shall be registered in the name of the applicable Portfolio or in
the name of the Custodian or in the name of any Foreign Sub-Custodian or in the
name of any nominee of the foregoing, and the Fund on behalf of such Portfolio
agrees to hold any such nominee harmless from any liability as a holder of
record of such foreign securities. The Custodian or a Foreign Sub-Custodian
shall not be obligated to accept securities on behalf of a Portfolio under the
terms of this Agreement unless the form of such securities and the manner in
which they are delivered are in accordance with reasonable market practice.

         SECTION 4.6 BANK ACCOUNTS. The Custodian shall identify on its books as
belonging to the Fund cash (including cash denominated in foreign currencies)
deposited with the Custodian. Where the Custodian is unable to maintain, or
market practice does not facilitate the maintenance of, cash on the books of the
Custodian, a bank account or bank accounts shall be opened and maintained
outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian.
All accounts referred to in this Section shall be subject only to draft or order
by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant
to the terms of this Agreement to hold cash received by or from or for the
account of the Portfolio. Cash maintained on the books of the Custodian
(including its branches, subsidiaries and affiliates), regardless of currency
denomination, is maintained in bank accounts established under, and subject to
the laws of, The Commonwealth of Massachusetts.

         SECTION 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable
commercial efforts to collect all income and other payments with respect to the
Foreign Assets held hereunder to which the Portfolios shall be entitled and
shall credit such income, as collected, to the applicable Portfolio. In the
event that extraordinary measures are required to collect such income, the Fund
and the Custodian shall consult as to such measures and as to the compensation
and expenses of the Custodian relating to such measures.

         SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities
held pursuant to this Section 4, the Custodian shall use reasonable commercial
efforts to facilitate the exercise of voting and other shareholder rights,
subject always to the laws, regulations and practical constraints that may exist
in the country where such securities are issued. The Fund acknowledges that
local conditions, including lack of regulation, onerous procedural obligations,
lack of notice and other factors may have the effect of severely limiting the
ability of the Fund to exercise shareholder rights.

         SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The
Custodian shall transmit promptly to the Fund written information with respect
to materials received by the Custodian via the Foreign Sub-Custodians from
issuers of the foreign securities being held for the account of the Portfolios
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith). With respect to
tender or exchange offers, the Custodian shall transmit promptly to the Fund
written information with respect to materials so received by the Custodian from
issuers of the foreign securities whose tender or exchange is sought or from the
party (or its agents) making the tender or exchange offer. The Custodian shall
not be liable for any untimely exercise of any tender, exchange or other right
or power in connection with foreign securities or other property of the
Portfolios at any time held by it unless (i) the Custodian or the respective
Foreign Sub-Custodian is in actual possession of such foreign securities or
property and (ii) the Custodian receives Proper Instructions with regard to the
exercise of any such right or power, and both (i) and (ii) occur at least three
business days prior to the date on which the Custodian is to take action to
exercise such right or power.

         SECTION 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement
pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the
extent possible, require the Foreign Sub-Custodian to exercise reasonable care
in the performance of its duties, and to indemnify, and hold harmless, the
Custodian from and against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the Foreign Sub-Custodian's performance of
such obligations. At the Fund's election, the Portfolios shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims against a
Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Portfolios have not been made
whole for any such loss, damage, cost, expense, liability or claim.

         SECTION 4.11 TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund, the
Portfolios or the Custodian as custodian of the Portfolios by the tax law of the
United States or of any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations imposed on
the Fund with respect to the Portfolios or the Custodian as custodian of the
Portfolios by the tax law of countries other than those mentioned in the above
sentence, including responsibility for withholding and other taxes, assessments
or other governmental charges, certifications and governmental reporting. The
sole responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.

         SECTION 4.12. LIABILITY OF CUSTODIAN. The Custodian shall be liable for
the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth
with respect to sub-custodians generally in this Agreement and, regardless of
whether assets are maintained in the custody of a Foreign Sub-Custodian or a
Foreign Securities System, the Custodian shall not be liable for any loss,
damage, cost, expense, liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism, or any other
loss where the Sub-Custodian has otherwise acted with reasonable care.


SECTION 5.        SPECIAL SUB-CUSTODIANS

Upon receipt of Special Instructions (as such term is defined in Section 7
hereof), the Custodian shall, on behalf of one or more Portfolios, appoint one
or more banks, trust companies or other entities designated in such Special
Instructions to act as a sub-custodian for the purposes of effecting such
transaction as may be designated by a Fund in Special Instructions. Each such
designated sub-custodian is referred to herein as a "Special Sub-Custodian."
Each such duly appointed Special Sub-Custodian shall be listed on Schedule D
hereto, as it may be amended from time to time by the Fund, with the
acknowledgment of the Custodian. In connection with the appointment of any
Special Sub-Custodian, and in accordance with Special Instructions, the
Custodian shall enter into a sub-custodian agreement with the Fund and the
Special Sub-Custodian in form and substance approved by the Fund, provided that
such agreement shall in all events comply with the provisions of the 1940 Act
and the rules and regulations thereunder and the terms and provisions of this
Agreement.


SECTION 6.        PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
                  ----------------------------------------------------------

The Custodian shall receive from the distributor of the Shares or from the
Transfer Agent and deposit into the account of the appropriate Portfolio such
payments as are received for Shares thereof issued or sold from time to time by
the Fund. The Custodian will provide timely notification to the Fund on behalf
of each such Portfolio and the Transfer Agent of any receipt by it of payments
for Shares of such Portfolio.

From such funds as may be available for the purpose, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian
by a holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Fund and the Custodian.


SECTION 7.        PROPER INSTRUCTIONS AND SPECIAL INSTRUCTIONS

"Proper Instructions," as such term is used throughout this Agreement, means a
writing signed or initialed by one or more person or persons as the Board shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved; the Fund shall cause all oral instructions to be confirmed
in writing. Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Fund and the
Custodian agree to security procedures including, but not limited to, the
security procedures selected by the Fund via the form of Funds Transfer Addendum
hereto. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.9 hereof.

"Special Instructions," as such term is used throughout this Agreement, means
Proper Instructions countersigned or confirmed in writing by the Treasurer or
any Assistant Treasurer of the Fund or any other person designated in writing by
the Treasurer of the Fund, which countersignature or confirmation shall be (a)
included on the same instrument containing the Proper Instructions or on a
separate instrument clearly relating thereto and (b) delivered by hand, by
facsimile transmission, or in such other manner as the Fund and the Custodian
agree in writing.

Concurrently with the execution of this Agreement, and from time to time
thereafter, as appropriate, the Fund shall deliver to the Custodian, duly
certified by the Fund's Treasurer or Assistant Treasurer, a certificate setting
forth: (i) the names, titles, signatures and scope of authority of all persons
authorized to give Proper Instructions or any other notice, request, direction,
instruction, certificate or instrument on behalf of the Fund and (ii) the names,
titles and signatures of those persons authorized to give Special Instructions.
Such certificate may be accepted and relied upon by the Custodian as conclusive
evidence of the facts set forth therein and shall be considered to be in full
force and effect until receipt by the Custodian of a similar certificate to the
contrary.


SECTION 8.        EVIDENCE OF AUTHORITY

The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Fund as conclusive evidence (a) of
the authority of any person to act in accordance with such resolution or (b) of
any determination or of any action by the Board as described in such resolution,
and such resolution may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.


SECTION 9.        ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY

The Custodian may in its discretion, without express authority from the Fund on
behalf of each applicable Portfolio:

         1)       Make payments to itself or others for minor expenses of
                  handling securities or other similar items relating to its
                  duties under this Agreement; provided that all such payments
                  shall be accounted for to the Fund on behalf of the Portfolio;

         2)       Surrender securities in temporary form for securities in
                  definitive form;

         3)       Endorse for collection, in the name of the Portfolio, checks,
                  drafts and other negotiable instruments; and

         4)       In general, attend to all non-discretionary details in
                  connection with the sale, exchange, substitution, purchase,
                  transfer and other dealings with the securities and property
                  of the Portfolio except as otherwise directed by the Board.


SECTION 10.  DUTIES  OF  CUSTODIAN  WITH  RESPECT  TO THE BOOKS OF  ACCOUNT  AND
             CALCULATION OF NET ASSET VALUE AND NET INCOME

The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board to keep the books of account of each
Portfolio and/or compute the net asset value per Share of the outstanding Shares
or, if directed in writing to do so by the Fund on behalf of a Portfolio, shall
itself keep such books of account and/or compute such net asset value per Share.
If so directed, the Custodian shall also calculate daily the net income of the
Portfolio as described in the Prospectus and shall advise the Fund and the
Transfer Agent daily of the total amounts of such net income and, if instructed
in writing by an officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various components.
The Fund acknowledges and agrees that, with respect to investments maintained
with the Underlying Transfer Agent, the Underlying Transfer Agent is the sole
source of information on the number of shares of a fund held by it on behalf of
a Portfolio and that the Custodian has the right to rely on holdings information
furnished by the Underlying Transfer Agent to the Custodian in performing its
duties under this Agreement, including without limitation, the duties set forth
in this Section 10 and in Section 11 hereof; provided, however, that the
Custodian shall be obligated to reconcile information as to purchases and sales
of Underlying Shares contained in trade instructions and confirmations received
by the Custodian and to report promptly any discrepancies to the Underlying
Transfer Agent. The calculations of the net asset value per Share and the daily
income of each Portfolio shall be made at the time or times described from time
to time in the Prospectus. The Fund acknowledges that, in keeping the books of
account of the Portfolio and/or making the calculations described herein with
respect to Portfolio property released and delivered pursuant to Section
2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is
authorized and instructed to rely upon information provided to it by the Fund,
the Fund's counterparty(ies), or the agents of either of them.


SECTION 11.       RECORDS

The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Agreement in such
manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations. The Fund acknowledges that, in creating and maintaining the
records as set forth herein with respect to Portfolio property released and
delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7)
hereof, the Custodian is authorized and instructed to rely upon information
provided to it by the Fund, the Fund's counterparty(ies), or the agents of
either of them.


SECTION 12.       OPINION OF FUND'S INDEPENDENT ACCOUNTANT

The Custodian shall take all reasonable action, as the Fund with respect to a
Portfolio may from time to time request, to obtain from year to year favorable
opinions from the Fund's independent accountants with respect to its activities
hereunder in connection with the preparation of the Fund's Form N-2, and Form
N-SAR or other annual reports to the SEC and with respect to any other
requirements thereof.


SECTION 13.       REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS

The Custodian shall provide the Fund, on behalf of each of the Portfolios at
such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a U.S. Securities
System or a Foreign Securities System, relating to the services provided by the
Custodian under this Agreement; such reports, shall be of sufficient scope and
in sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so state.


SECTION 14.       COMPENSATION OF CUSTODIAN

The Custodian shall be entitled to reasonable compensation for its services and
expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.


SECTION 15.       RESPONSIBILITY OF CUSTODIAN

So long as and to the extent that it is in the exercise of reasonable care, the
Custodian shall not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered by it pursuant
to this Agreement and shall be held harmless in acting upon any notice, request,
consent, certificate or other instrument reasonably believed by it to be genuine
and to be signed by the proper party or parties, including any futures
commission merchant acting pursuant to the terms of a three-party futures or
options agreement. The Custodian shall be held to the exercise of reasonable
care in carrying out the provisions of this Agreement, but shall be kept
indemnified by and shall be without liability to the Fund for any action taken
or omitted by it in good faith without negligence, including, without
limitation, acting in accordance with any Proper Instruction. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall be
without liability to the Fund and the Portfolios for any loss, liability, claim
or expense resulting from or caused by anything which is part of Country Risk
(as defined in Section 3 hereof), including without limitation nationalization,
expropriation, currency restrictions, or acts of war, revolution, riots or
terrorism.

Except as may arise from the Custodian's own negligence or willful misconduct or
the negligence or willful misconduct of a sub-custodian or agent, the Custodian
shall be without liability to the Fund for any loss, liability, claim or expense
resulting from or caused by; (i) events or circumstances beyond the reasonable
control of the Custodian or any sub-custodian or Securities System or any agent
or nominee of any of the foregoing, including, without limitation, the
interruption, suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological failures or
interruptions, computer viruses or communications disruptions, work stoppages,
natural disasters, or other similar events or acts; (ii) errors by the Fund or
its duly authorized investment manager or investment adviser in their
instructions to the Custodian provided such instructions have been in accordance
with this Agreement; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any act or omission of a Special Sub-Custodian
including, without limitation, reliance on reports prepared by a Special
Sub-Custodian; (v) any delay or failure of any broker, agent or intermediary,
central bank or other commercially prevalent payment or clearing system to
deliver to the Custodian's sub-custodian or agent securities purchased or in the
remittance or payment made in connection with securities sold; (vi) any delay or
failure of any company, corporation, or other body in charge of registering or
transferring securities in the name of the Custodian, the Fund, the Custodian's
sub-custodians, nominees or agents or any consequential losses arising out of
such delay or failure to transfer such securities including non-receipt of
bonus, dividends and rights and other accretions or benefits; (vii) delays or
inability to perform its duties due to any disorder in market infrastructure
with respect to any particular security or Securities System; and (viii) any
provision of any present or future law or regulation or order of the United
States of America, or any state thereof, or any other country, or political
subdivision thereof or of any court of competent jurisdiction.

The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as such term is defined in Section 4 hereof) to the same extent
as set forth with respect to sub-custodians generally in this Agreement.

If the Fund on behalf of a Portfolio requires the Custodian to take any action
with respect to securities, which action involves the payment of money or which
action may, in the opinion of the Custodian, result in the Custodian or its
nominee assigned to the Fund or the Portfolio being liable for the payment of
money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.

If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to
advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.

Except as may arise from the Custodian's own negligence or willful misconduct,
the Fund shall indemnify and hold the Custodian harmless from and against any
and all costs, expenses, losses, damages, charges, counsel fees, payments and
liabilities which may be asserted against the Custodian (a) acting in accordance
with any Proper Instruction or Special Instruction including, without
limitation, any Proper Instruction with respect to Free Trades including, but
not limited to, cost, expense, loss, damage, liability, tax, charge, assessment
or claim resulting from (i) the failure of the Fund to receive income with
respect to purchased investments, (ii) the failure of the Fund to recover
amounts invested on maturity of purchased investments, (iii) the failure of the
Custodian to respond to or be aware of notices or other corporate communications
with respect to purchased investments, or (iv) the Custodian's reliance upon
information provided by the Fund, the Fund's counterparty(ies) or the agents of
either of them with respect to Fund property released, delivered or purchased
pursuant to either of Section 2.2(14) or Section 2.6(7) hereof; (b) for the acts
or omissions of any Special Sub-Custodian; or (c) for the acts or omissions of
any Local Agent or Pledgee.

In no event shall the Custodian be liable for indirect, special or consequential
damages.


SECTION 16.       EFFECTIVE PERIOD, TERMINATION AND AMENDMENT

This Agreement shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than sixty (60) days
after the date of such delivery or mailing; provided, however, that the Fund
shall not amend or terminate this Agreement in contravention of any applicable
federal or state regulations, or any provision of the Fund's Governing
Documents, and further provided, that the Fund on behalf of one or more of the
Portfolios may at any time by action of its Board (i) substitute another bank or
trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.

Upon termination of the Agreement, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.




<PAGE>



SECTION 17.       SUCCESSOR CUSTODIAN

If a successor custodian for one or more Portfolios shall be appointed by the
Board, the Custodian shall, upon termination and receipt of Proper Instructions,
deliver to such successor custodian at the office of the Custodian, duly
endorsed and in the form for transfer, all securities of each applicable
Portfolio then held by it hereunder and shall transfer to an account of the
successor custodian all of the securities of each such Portfolio held in a
Securities System or at the Underlying Transfer Agent.

If no such successor custodian shall be appointed, the Custodian shall, in like
manner, upon receipt of Proper Instructions, deliver at the office of the
Custodian and transfer such securities, funds and other properties in accordance
with such resolution.

In the event that no Proper Instructions designating a successor custodian or
alternative arrangements shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the Custodian shall
have the right to deliver to a bank or trust company, which is a "bank" as
defined in the 1940 Act, doing business in Boston, Massachusetts or New York,
New York, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Custodian on
behalf of each applicable Portfolio and all instruments held by the Custodian
relative thereto and all other property held by it under this Agreement on
behalf of each applicable Portfolio, and to transfer to an account of such
successor custodian all of the securities of each such Portfolio held in any
Securities System or at the Underlying Transfer Agent. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Agreement.

In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to provide Proper Instructions as aforesaid, the Custodian
shall be entitled to fair compensation for its services during such period as
the Custodian retains possession of such securities, funds and other properties
and the provisions of this Agreement relating to the duties and obligations of
the Custodian shall remain in full force and effect.


SECTION 18.  GENERAL

         SECTION 18.1 MASSACHUSETTS LAW TO APPLY. This Agreement shall be
construed and the provisions thereof interpreted under and in accordance with
laws of The Commonwealth of Massachusetts.

         SECTION 18.2 PRIOR AGREEMENTS. This Agreement supersedes and
terminates, as of the date hereof, all prior Agreements between the Fund on
behalf of each of the Portfolios and the Custodian relating to the custody of
the Fund's assets.

         SECTION 18.3 ASSIGNMENT. This Agreement may not be assigned by either
party without the written consent of the other.

         SECTION 18.4 INTERPRETIVE AND ADDITIONAL PROVISIONS. In connection with
the operation of this Agreement, the Custodian and the Fund on behalf of each of
the Portfolios, may from time to time agree on such provisions interpretive of
or in addition to the provisions of this Agreement as may in their joint opinion
be consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Fund's Governing Documents. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of this
Agreement.

         SECTION 18.5 ADDITIONAL FUNDS. In the event that the Fund establishes
one or more series of Shares in addition to Evergreen Income Advantage Fund with
respect to which it desires to have the Custodian render services as custodian
under the terms hereof or otherwise desires the Custodian to render services as
custodian under the terms hereof to any other of its present series, if any, it
shall so notify the Custodian in writing, and if the Custodian agrees in writing
to provide such services, such series of Shares shall become a Portfolio
hereunder.

         SECTION 18.6 NOTICES. Any notice, instruction or other instrument
required to be given hereunder may be delivered in person to the offices of the
parties as set forth herein during normal business hours or delivered prepaid
registered mail or by telex, cable or telecopy to the parties at the following
addresses or such other addresses as may be notified by any party from time to
time.

To the Fund:       EVERGREEN MANAGED INCOME FUND
                   c/o Evergreen Investment Management Company - Legal Division
                   200 Berkeley Street, MA9000
                   Boston, MA  02116-9000
                   Attention: Michael H. Koonce, Secretary
                   Telephone:  617-210-3663
                   Telecopy: 617-210-3468

To the Custodian:  STATE STREET BANK AND TRUST COMPANY
                   Lafayette Corporate Center
                   2 Avenue de Lafayette, LCC/3SW
                   Boston, MA  02111-1724
                   Attention:  William E. Monaghan, II, Vice President
                   Telephone: 617-662-2401
                   Telecopy: 617-662-2198

Such notice, instruction or other instrument shall be deemed to have been served
in the case of a registered letter at the expiration of five business days after
posting, in the case of cable twenty-four hours after dispatch and, in the case
of telex, immediately on dispatch and if delivered outside normal business hours
it shall be deemed to have been received at the next time after delivery when
normal business hours commence and in the case of cable, telex or telecopy on
the business day after the receipt thereof. Evidence that the notice was
properly addressed, stamped and put into the post shall be conclusive evidence
of posting.

         SECTION 18.7 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all such
counterparts taken together shall constitute one and the same Agreement.

         SECTION 18.8 SEVERABILITY. If any provision or provisions of this
Agreement shall be held to be invalid, unlawful or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired.

         SECTION 18.9 REPRODUCTION OF DOCUMENTS. This Agreement and all
schedules, addenda, exhibits, attachments and amendments hereto may be
reproduced by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process. The parties hereto all/each agree that
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.

         SECTION 18.10 REMOTE ACCESS SERVICES ADDENDUM. The Custodian and the
Fund agree to be bound by the terms of the Remote Access Services Addendum
hereto.

         SECTION 18.11 SHAREHOLDER COMMUNICATIONS ELECTION. SEC Rule 14b-2
requires banks which hold securities for the account of customers to respond to
requests by issuers of securities for the names, addresses and holdings of
beneficial owners of securities of that issuer held by the bank unless the
beneficial owner has expressly objected to disclosure of this information. In
order to comply with the rule, the Custodian needs the Fund to indicate whether
it authorizes the Custodian to provide the Fund's name, address, and share
position to requesting companies whose securities the Fund owns. If the Fund
tells the Custodian "no," the Custodian will not provide this information to
requesting companies. If the Fund tells the Custodian "yes" or does not check
either "yes" or "no" below, the Custodian is required by the rule to treat the
Fund as consenting to disclosure of this information for all securities owned by
the Fund or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's name
and address for any purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the alternatives
below.

YES [ ] The Custodian is authorized to release the Fund's name, address, and
share positions.

NO [X] The Custodian is not authorized to release the Fund's name, address, and
share positions.


<PAGE>



                                 SIGNATURE PAGE


IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the date first above-written.

FUND SIGNATURE ATTESTED TO BY:              EVERGREEN MANAGED INCOME FUND



_______________________                     By:____________________________
Name:                                                Name:
Title:                                                        Title:



SIGNATURE ATTESTED TO BY:                   STATE STREET BANK AND TRUST COMPANY



____________________                        By:________________________________
Stephanie L. Poster                            Joseph L. Hooley
Vice President                                 Executive Vice President


<PAGE>



                                   STATE STREET                      SCHEDULE A

                             GLOBAL CUSTODY NETWORK
                                  SUBCUSTODIANS




Country                    Subcustodian

Argentina                  Citibank, N.A.


Australia                  Westpac Banking Corporation


Austria                    Erste Bank der Osterreichischen Sparkassen AG


Bahrain                    HSBC Bank Middle East
                           (as delegate of the Hongkong and Shanghai Banking
                            Corporation Limited)


Bangladesh                 Standard Chartered Bank


Belgium                    Fortis Bank nv-sa


Benin                      via Societe Generale de Banques en Cote d'Ivoire,
                           Abidjan, Ivory Coast


Bermuda                    The Bank of Bermuda Limited


Bolivia                    Citibank, N. A.


Botswana                   Barclays Bank of Botswana Limited


Brazil                     Citibank, N.A.


Bulgaria                   ING Bank N.V.


Burkina Faso               via Societe Generale de Banques en Cote d'Ivoire,
                           Abidjan, Ivory Coast


Canada                     State Street Trust Company Canada


Cayman Islands             Bank of Nova Scotia Trust Company (Cayman) Ltd.


Chile                      BankBoston, N.A.


People's Republic          The Hongkong and Shanghai Banking Corporation
of China                   Limited,
                           Shanghai and Shenzhen branches



Colombia                   Cititrust Colombia S.A. Sociedad Fiduciaria


Costa Rica                 Banco BCT S.A.


Croatia                    Privredna Banka Zagreb d.d


Cyprus                     Cyprus Popular Bank Ltd.


Czech Republic             Ceskoslovenska Obchodni Banka, A.S.


Denmark                    Danske Bank A/S


Ecuador                    Citibank, N.A.


Egypt                      HSBC Bank Egypt S.A.E.
                           (as delegate of The Hongkong and Shanghai Banking
                            Corporation Limited)


Estonia                    Hansabank


Finland                    Nordea Bank Finland Plc.


France                     BNP Paribas Securities Services, S.A.


Germany                    Deutsche Bank AG

                           Dresdner Bank AG


Ghana                      Barclays Bank of Ghana Limited


Greece                     National Bank of Greece S.A.


Guinea-Bissau              via Societe Generale de Banques en Cote d'Ivoire,
                           Abidjan, Ivory Coast


Hong Kong                  Standard Chartered Bank


Hungary                    HVB Bank Hungary Rt.


Iceland                    Icebank Ltd.


India                      Deutsche Bank AG

                           The Hongkong and Shanghai Banking Corporation Limited


Indonesia                  Standard Chartered Bank


Ireland                    Bank of Ireland


Israel                     Bank Hapoalim B.M.


Italy                      BNP Paribas Securities Services, S.A.


Ivory Coast                Societe Generale de Banques en Cote d'Ivoire


Jamaica                    Scotiabank Jamaica Trust and Merchant Bank Ltd.


Japan                      Mizuho Corporate Bank Ltd.

                           Sumitomo Mitsui Banking Corporation


Jordan                     HSBC Bank Middle East
                           (as delegate of the Hongkong and Shanghai Banking
                            Corporation Limited)


Kazakhstan                 HSBC Bank Kazakhstan
                           (as delegate of the Hongkong and Shanghai Banking
                            Corporation Limited)


Kenya                      Barclays Bank of Kenya Limited


Republic of Korea          Deutsche Bank AG

                           The Hongkong and Shanghai Banking Corporation Limited


Latvia                     A/s Hansabanka

Lebanon                    HSBC Bank Middle East
                           (as delegate of The Hongkong and Shanghai Banking
                            Corporation Limited)


Lithuania                  Vilniaus Bankas AB


Malaysia                   Standard Chartered Bank Malaysia Berhad


Mali                       via Societe Generale de Banques en Cote d'Ivoire,
                           Abidjan, Ivory Coast


Mauritius                  The Hongkong and Shanghai Banking Corporation Limited


Mexico                     Banco Nacional de Mexico S.A.


Morocco                    Banque Commerciale du Maroc


Namibia                    Standard Bank Namibia Limited


Netherlands                KAS BANK N.V.


New Zealand                Westpac Banking Corporation


Niger                      via Societe Generale de Banques en Cote d'Ivoire,
                           Abidjan, Ivory Coast


Nigeria                    Stanbic Bank Nigeria Limited


Norway                     Nordea Bank Norge ASA


Oman                       HSBC Bank Middle East
                           (as delegate of The Hongkong and Shanghai Banking
                            Corporation Limited)


Pakistan                   Deutsche Bank AG


Palestine                  HSBC Bank Middle East
                           (as delegate of The Hongkong and Shanghai Banking
                            Corporation Limited)

Panama                     BankBoston, N.A.


Peru                       Citibank, N.A.


Philippines                Standard Chartered Bank


Poland                     Bank Handlowy w Warszawie S.A.


Portugal                   Banco Comercial Portugues S.A.


Puerto Rico                Citibank N.A.


Qatar                      HSBC Bank Middle East
                           (as delegate of The Hongkong and Shanghai Banking
                            Corporation Limited)


Romania                    ING Bank N.V.


Russia                     ING Bank (Eurasia) ZAO, Moscow


Senegal                    via Societe Generale de Banques en Cote d'Ivoire,
                           Abidjan, Ivory Coast


Singapore                  The Development Bank of Singapore Limited


Slovak Republic            Ceskoslovenska Obchodni Banka, A.S., pobocka
                           zahranicnej banky v SR


Slovenia                   Bank Austria Creditanstalt d.d. - Ljubljana


South Africa               Nedcor Bank Limited

                           Standard Bank of South Africa Limited


Spain                      Banco Santander Central Hispano S.A.


Sri Lanka                  The Hongkong and Shanghai Banking Corporation Limited


Swaziland                  Standard Bank Swaziland Limited


Sweden                     Skandinaviska Enskilda Banken AB


Switzerland                UBS AG


Taiwan - R.O.C.            Central Trust of China


Thailand                   Standard Chartered Bank


Togo                       via Societe Generale de Banques en Cote d'Ivoire,
                           Abidjan, Ivory Coast


Trinidad & Tobago          Republic Bank Limited


Tunisia                    Banque Internationale Arabe de Tunisie


Turkey                     Citibank, N.A.


Uganda                     Barclays Bank of Uganda Limited


Ukraine                    ING Bank Ukraine


United Arab Emirates       HSBC Bank Middle East
                           (as delegate of The Hongkong and Shanghai Banking
                            Corporation Limited)

United Kingdom             State Street Bank and Trust Company,  London Branch


Uruguay                    BankBoston, N.A.


Venezuela                  Citibank, N.A.


Vietnam                    The Hongkong and Shanghai Banking Corporation Limited


Zambia                     Barclays Bank of Zambia Limited


Zimbabwe                   Barclays Bank of Zimbabwe Limited



<PAGE>



                             STATE STREET                            SCHEDULE B
                             GLOBAL CUSTODY NETWORK
                    DEPOSITORIES OPERATING IN NETWORK MARKETS




        Country                                   Depositories

         Argentina                          Caja de Valores S.A.


         Australia                          Austraclear Limited


         Austria                            Oesterreichische Kontrollbank AG
                                            (Wertpapiersammelbank Division)


         Bahrain                            Clearing, Settlement, and Depository
                                            System of the Bahrain Stock Exchange


         Belgium                            Caisse Interprofessionnelle de
                                            Depots et de Virements de Titres,
                                            S.A.

                                            Banque Nationale de Belgique


         Benin                              Depositaire Central - Banque de
                                            Reglement


         Bermuda                            Bermuda Securities Depository


         Brazil                             Central de Custodia e de Liquidacao
                                            Financeira de Titulos Privados
                                            (CETIP)

                                            Companhia Brasileira de Liquidacao
                                             e Custodia

                                            Sistema Especial de Liquidacao e de
                                             Custodia (SELIC)


         Bulgaria                           Bulgarian National Bank

                                            Central Depository AD


         Burkina Faso                       Depositaire Central - Banque de
                                             Reglement


         Canada                             The Canadian Depository for
                                             Securities Limited


         Chile                              Deposito Central de Valores S.A.


         People's Republic                  China Securities Depository and
                                            Clearing Corporation Limited
         of China                           Shanghai Branch

                                            China Securities Depository and
                                            Clearing Corporation Limited
                                            Shenzhen Branch


         Colombia                           Deposito Central de Valores

                                            Deposito Centralizado de Valores
                                             de Colombia S..A. (DECEVAL)


         Costa Rica                         Central de Valores S.A.


         Croatia                            Ministry of Finance

                                            Sredisnja Depozitarna Agencija d.d.


         Cyprus                             Central Depository and Central
                                             Registry


         Czech Republic                     Czech National Bank

                                            Stredisko cennych papiru - Ceska
                                             republika


         Denmark                            Vaerdipapircentralen (Danish
                                             Securities Center)


         Egypt                              Misr for Clearing, Settlement, and
                                             Depository S.A.E.


         Estonia                            Eesti Vaartpaberikeskus


         Finland                            Suomen Arvopaperikeskus


         France                             Euroclear France


         Germany                            Clearstream Banking AG, Frankfurt


         Greece                             Apothetirion Titlon AE - Central
                                             Securities Depository

                                            Bank of Greece,
                                            System for Monitoring Transactions
                                            in Securities in Book-Entry Form


         Guinea-Bissau                      Depositaire Central - Banque de
                                             Reglement


         Hong Kong                          Central Moneymarkets Unit

                                            Hong Kong Securities Clearing
                                             Company Limited


         Hungary                            Kozponti Elszamolohaz es Ertektar
                                            (Budapest) Rt. (KELER)


         Iceland                            Iceland Securities Depository
                                             Limited


         India                              Central Depository Services India
                                             Limited

                                            National Securities Depository
                                             Limited

                                            Reserve Bank of India


         Indonesia                          Bank Indonesia

                                            PT Kustodian Sentral Efek Indonesia


         Israel                             Tel Aviv Stock Exchange Clearing
                                             House Ltd. (TASE Clearinghouse)


         Italy                              Monte Titoli S.p.A.


         Ivory Coast                        Depositaire Central - Banque de
                                             Reglement


         Jamaica                            Jamaica Central Securities
                                             Depository


         Japan                              Bank of Japan  - Net System

                                            Japan Securities Depository Center
                                             (JASDEC) Incorporated



         Kazakhstan                         Central Depository of Securities


         Kenya                              Central Bank of Kenya


         Republic of Korea                  Korea Securities Depository


         Latvia                             Latvian Central Depository


         Lebanon                            Banque du Liban

                                            Custodian and Clearing Center of
                                            Financial Instruments for
                                            Lebanon and the Middle East
                                            (Midclear) S.A.L.



         Lithuania                          Central Securities Depository of
                                            Lithuania


         Malaysia                           Bank Negara Malaysia

                                            Malaysian Central Depository Sdn.
                                            Bhd.


         Mali                               Depositaire Central - Banque de
                                            Reglement


         Mauritius                          Bank of Mauritius

                                            Central Depository and Settlement
                                             Co. Ltd.


         Mexico                             S.D. Indeval, S.A. de C.V.


         Morocco                            Maroclear


         Netherlands                        Euroclear Nederlands


         New Zealand                        New Zealand Central Securities
                                            Depository Limited


         Niger                              Depositaire Central - Banque de
                                             Reglement


         Nigeria                            Central Securities Clearing System
                                             Limited


         Norway                             Verdipapirsentralen (Norwegian
                                             Central Securities Depository)


         Oman                               Muscat Depository & Securities
                                             Registration Company, SAOC


         Pakistan                           Central Depository Company of
                                             Pakistan Limited

                                            State Bank of Pakistan


         Palestine                          Clearing Depository and Settlement,
                                             a department of the Palestine Stock
                                             Exchange


         Panama                             Central Latinoamericana de Valores,
                                             S.A. (LatinClear)


         Peru                               Caja de Valores y Liquidaciones,
                                             Institucion de Compensacion y
                                             Liquidacion de Valores S.A


         Philippines                        Philippine Central Depository, Inc.

                                            Registry of Scripless Securities
                                            (ROSS) of the Bureau of Treasury


         Poland                             Central Treasury Bills Registrar

                                            Krajowy Depozyt Papierow
                                             Wartosciowych S.A.
                                            (National Depository of Securities)


         Portugal                           INTERBOLSA - Sociedade Gestora de
                                             Sistemas de Liquidacao e de
                                             Sistemas Centralizados de Valores
                                             Mobiliarios, S.A.


         Qatar                              Central Clearing and Registration
                                             (CCR), a department of the Doha
                                             Securities Market


         Romania                            Bucharest Stock Exchange Registry
                                             Division

                                            National Bank of Romania

                                            National Securities Clearing,
                                             Settlement and Depository Company


         Russia                             Vneshtorgbank, Bank for Foreign
                                             Trade of the Russian Federation


         Senegal                            Depositaire Central - Banque de
                                             Reglement


         Singapore                          The Central Depository (Pte) Limited

                                            Monetary Authority of Singapore


         Slovak Republic                    National Bank of Slovakia

                                            Stredisko cennych papierov SR, a.s.


         Slovenia                           KDD - Centralna klirinsko depotna
                                             druzba d.d.


         South Africa                       The Central Depository Limited

                                            Share Transactions Totally
                                             Electronic (STRATE) Ltd.


         Spain                              Banco de Espana

                                            Servicio de Compensacion y
                                             Liquidacion de Valores, S.A.



         Sri Lanka                          Central Depository System (Pvt)
                                             Limited


         Sweden                             Vardepapperscentralen  VPC AB
                                             (Swedish Central Securities
                                              Depository)


         Switzerland                        SegaIntersettle AG (SIS)


         Taiwan - R.O.C.                    Taiwan Securities Central Depository
                                             Company Limited


         Thailand                           Bank of Thailand

                                            Thailand Securities Depository
                                             Company Limited


         Togo                               Depositaire Central - Banque de
                                             Reglement


         Trinidad and Tobago                Trinidad and Tobago Central Bank


         Tunisia                            Societe Tunisienne
                                             Interprofessionelle pour la
                                             Compensation et de Depots des
                                             Valeurs Mobilieres (STICODEVAM)


         Turkey                             Central Bank of Turkey

                                            Takas ve Saklama Bankasi A.S.
                                             (TAKASBANK)


         Uganda                             Bank of Uganda


         Ukraine                            Mizhregionalny Fondovy Souz

                                            National Bank of Ukraine


         United Arab Emirates               Clearing and Depository System,
                                             a department of theDubai Financial
                                             Market


         Venezuela                          Banco Central de Venezuela


         Vietnam                            Securities Registration, Clearing
                                             and Settlement, Depository
                                             Department of the Securities
                                             Trading Center


         Zambia                             Bank of Zambia

                                            LuSE Central Shares Depository
                                             Limited




        TRANSNATIONAL

         Euroclear

         Clearstream Banking AG





<PAGE>



                                   SCHEDULE C

                               MARKET INFORMATION

Publication/Type of Information                      Brief Description
(scheduled frequency)


The Guide to Custody in World Markets      An overview of settlement and
(hardcopy annually and regular             safekeeping procedures,
for the website updates)                   custody practices and foreign
                                           investor considerations for the
                                           markets in which State Street
                                           offers custodial services.

Global Custody Network Review
(annually)

     Information relating to Foreign  Sub-Custodians in
     State Street's   Global Custody Network.  The Review stands as an
     integral  part of the  materials  that State  Street  provides  to its U.S.
     mutual fund  clients to assist them in complying  with SEC Rule 17f-5.  The
     Review also gives insight into State Street's market  expansion and Foreign
     Sub-Custodian  selection processes,  as well as the procedures and controls
     used to monitor the  financial  condition  and  performance  of our Foreign
     Sub-Custodian banks.

Securities  Depository  Review
(annually)

     Custody risk analyses of the Foreign  Securities
     Depositories  presently operating  in  Network  markets.  This
     publication is an integral part of the materials that State Street provides
     to its U.S. mutual fund clients to meet informational  obligations  created
     by SEC Rule 17f-7.

Global Legal  Survey
(annually)

     With  respect to each market in which State  Street  offers
     custodial    services,  opinions  relating  to whether  local law
     restricts (i) access of a fund's  independent  public  accountants to books
     and records of a Foreign Sub-Custodian or Foreign Securities System, (ii) a
     fund's  ability to recover in the event of  bankruptcy  or  insolvency of a
     Foreign  Sub-Custodian or Foreign Securities System, (iii) a fund's ability
     to  recover  in the event of a loss by a Foreign  Sub-Custodian  or Foreign
     Securities  System,  and (iv) the ability of a foreign  investor to convert
     cash and cash equivalents to U.S. dollars.

Subcustodian  Agreements
(annually)

     Copies of the contracts  that State Street has entered
     into with each  Foreign  Sub-Custodian that maintains U.S. mutual
     fund assets in the markets in which State Street offers custodial services.

Global Market Bulletin
(daily or as  necessary)

     Information on changing settlement and custody conditions
     in   markets  where State Street  offers  custodial
     services.  Includes  changes  in  market  and tax  regulations,  depository
     developments,  dematerialization  information,  as  well  as  other  market
     changes that may impact State Street's clients.

Foreign Custody Advisories
(as  necessary)

     For those markets where State Street offers custodial
     services  that exhibit  special  risks or  infrastructures
     impacting custody, State Street issues market advisories to highlight those
     unique market  factors  which might impact our ability to offer  recognized
     custody service levels.

Material  Change  Notices
 (presently  on  a  quarterly
  basis or as  otherwise  necessary)

     Informational  letters  and  accompanying   materials
     confirming   State  Street's  foreign  custody
     arrangements,  including  a  summary  of
     material changes with Foreign  Sub-Custodians that have occurred during the
     previous  quarter.  The notices also  identify any material  changes in the
     custodial risks associated with maintaining  assets with Foreign Securities
     Depositories.




<PAGE>




                                   SCHEDULE D
                                       TO
                               CUSTODIAN AGREEMENT


SPECIAL SUB-CUSTODIANS

None



<PAGE>




             REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT


         ADDENDUM to that certain Custodian Agreement dated as of May 16, 2003
(the "Custodian Agreement") between Evergreen Managed Income Fund (the
"Customer") and State Street Bank and Trust Company, including its subsidiaries
and affiliates ("State Street").


         State Street has developed and utilizes proprietary accounting and
other systems in conjunction with the custodian services which State Street
provides to the Customer. In this regard, State Street maintains certain
information in databases under its control and ownership which it makes
available to its customers (the "Remote Access Services").

THE SERVICES

State Street agrees to provide the Customer, and its designated investment
advisors, consultants or other third parties authorized by State Street
("Authorized Designees") with access to In~SightSM as described in Exhibit A or
such other systems as may be offered from time to time (the "System") on a
remote basis.

SECURITY PROCEDURES

The Customer agrees to comply, and to cause its Authorized Designees to comply,
with remote access operating standards and procedures and with user
identification or other password control requirements and other security
procedures as may be issued from time to time by State Street for use of the
System and access to the Remote Access Services. The Customer agrees to advise
State Street immediately in the event that it learns or has reason to believe
that any person to whom it has given access to the System or the Remote Access
Services has violated or intends to violate the terms of this Addendum and the
Customer will cooperate with State Street in seeking injunctive or other
equitable relief. The Customer agrees to discontinue use of the System and
Remote Access Services, if requested, for any security reasons cited by State
Street.

FEES

Fees and charges for the use of the System and the Remote Access Services and
related payment terms shall be as set forth in the custody fee schedule in
effect from time to time between the parties. The Customer shall be responsible
for any tariffs, duties or taxes imposed or levied by any government or
governmental agency by reason of the transactions contemplated by this Addendum,
including, without limitation, federal, state and local taxes, use, value added
and personal property taxes (other than income, franchise or similar taxes which
may be imposed or assessed against State Street). Any claimed exemption from
such tariffs, duties or taxes shall be supported by proper documentary evidence
delivered to State Street.

Proprietary Information/Injunctive Relief

The  System and  Remote  Access  Services  described  herein and the  databases,
computer   programs,   screen  formats,   report  formats,   interactive  design
techniques,  formulae,  processes,  systems,  software,  know- how,  algorithms,
programs,  training aids, printed materials,  methods,  books,  records,  files,
documentation  and other  information  made  available  to the Customer by State
Street as part of the Remote  Access  Services and through the use of the System
and all copyrights, patents, trade secrets and other proprietary rights of State
Street related thereto are the exclusive,  valuable and confidential property of
State Street and its relevant  licensors (the  "Proprietary  Information").  The
Customer  agrees on behalf of itself and its  Authorized  Designees  to keep the
Proprietary  Information  confidential  and to limit access to its employees and
Authorized  Designees  (under a similar  duty of  confidentiality)  who  require
access to the System for the purposes intended. The foregoing shall not apply to
Proprietary  Information  in the  public  domain or  required  by law to be made
public.

The Customer agrees to use the Remote Access Services only in connection with
the proper purposes of this Addendum. The Customer will not, and will cause its
employees and Authorized Designees not to, (i) permit any third party to use the
System or the Remote Access Services, (ii) sell, rent, license or otherwise use
the System or the Remote Access Services in the operation of a service bureau or
for any purpose other than as expressly authorized under this Addendum, (iii)
use the System or the Remote Access Services for any fund, trust or other
investment vehicle without the prior written consent of State Street, or (iv)
allow or cause any information transmitted from State Street's databases,
including data from third party sources, available through use of the System or
the Remote Access Services, to be published, redistributed or retransmitted for
other than use for or on behalf of the Customer, as State Street's customer.

The Customer agrees that neither it nor its Authorized Designees will modify the
System in any way; enhance or otherwise create derivative works based upon the
System, nor will your or your Authorized Designees reverse engineer, decompile
or otherwise attempt to secure the source code for all or any part of the
System.

The Customer acknowledges that the disclosure of any Proprietary Information, or
of any  information  which at law or equity ought to remain  confidential,  will
immediately  give  rise  to  continuing   irreparable  injury  to  State  Street
inadequately  compensable  in  damages  at law and that  State  Street  shall be
entitled to obtain immediate  injunctive relief against the breach or threatened
breach of any of the  foregoing  undertakings,  in  addition  to any other legal
remedies which may be available.

Limited Warranties

State Street represents and warrants that it is the owner of and has the right
to grant access to the System and to provide the Remote Access Services
contemplated herein. Because of the nature of computer information technology
including, but not limited to, the use of the Internet, and the necessity of
relying upon third party sources, and data and pricing information obtained from
third parties, the System and Remote Access Services are provided "AS IS", and
the Customer and its Authorized Designees shall be solely responsible for the
investment decisions, results obtained, regulatory reports and statements
produced using the Remote Access Services. State Street and its relevant
licensors will not be liable to the Customer or its Authorized Designees for any
direct or indirect, special, incidental, punitive or consequential damages
arising out of or in any way connected with the System or the Remote Access
Services, nor shall either party be responsible for delays or nonperformance
under this Addendum arising out of any cause or event beyond such party's
control.

State Street will take  reasonable  steps to ensure that its products (and those
of its third-party  suppliers) reflect the available state of the art technology
to offer products that are Year 2000 compliant,  including,  but not limited to,
century  recognition of dates,  calculations that correctly compute same century
and multi century  formulas and date values,  and interface  values that reflect
the date issues  arising  between now and December 31, 2099,  and if any changes
are  required,  State Street will make the changes to its products at no cost to
you and in a  commercially  reasonable  time frame and will require  third-party
suppliers to do likewise. The Customer will do likewise for its systems.

EXCEPT AS EXPRESSLY SET FORTH IN THIS ADDENDUM, STATE STREET, FOR ITSELF AND ITS
RELEVANT LICENSORS,  EXPRESSLY  DISCLAIMS ANY AND ALL WARRANTIES  CONCERNING THE
SYSTEM AND THE  SERVICES TO BE RENDERED  HEREUNDER,  WHETHER  EXPRESS OR IMPLIED
INCLUDING,  WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A
PARTICULAR PURPOSE.

Infringement

State Street will defend or, at our option, settle any claim or action brought
against the Customer to the extent that it is based upon an assertion that
access to the System or use of the Remote Access Services by the Customer under
this Addendum constitutes direct infringement of any patent or copyright or
misappropriation of a trade secret, provided that the Customer notifies State
Street promptly in writing of any such claim or proceeding and cooperates with
State Street in the defense of such claim or proceeding. Should the System or
the Remote Access Services or any part thereof become, or in State Street's
opinion be likely to become, the subject of a claim of infringement or the like
under any applicable patent or copyright or trade secret laws, State Street
shall have the right, at State Street's sole option, to (i) procure for the
Customer the right to continue using the System or the Remote Access Services,
(ii) replace or modify the System or the Remote Access Services so that the
System or the Remote Access Services becomes noninfringing, or (iii) terminate
this Addendum without further obligation.

Termination

Either party to the Custodian Agreement may terminate this Addendum (i) for any
reason by giving the other party at least one-hundred and eighty (180) days
prior written notice in the case of notice of termination by State Street to the
Customer or thirty (30) days notice in the case of notice from the Customer to
State Street of termination, or (ii) immediately for failure of the other party
to comply with any material term and condition of the Addendum by giving the
other party written notice of termination. This Addendum shall in any event
terminate within ninety (90) days after the termination of the Custodian
Agreement. In the event of termination, the Customer will return to State Street
all copies of documentation and other confidential information in its possession
or in the possession of its Authorized Designees. The foregoing provisions with
respect to confidentiality and infringement will survive termination for a
period of three (3) years.

Miscellaneous

This Addendum and the exhibit hereto constitute the entire understanding of the
parties to the Custodian Agreement with respect to access to the System and the
Remote Access Services. This Addendum cannot be modified or altered except in a
writing duly executed by each of State Street and the Customer and shall be
governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts.

By its execution of the Custodian Agreement, the Customer (a) confirms to State
Street that it informs all Authorized Designees of the terms of this Addendum;
(b) accepts responsibility for its and its Authorized Designees' compliance with
the terms of this Addendum; and (c) indemnifies and holds State Street harmless
from and against any and all costs, expenses, losses, damages, charges, counsel
fees, payments and liabilities arising from any failure of the Customer or any
of its Authorized Designees to abide by the terms of this Addendum.


<PAGE>



                                    EXHIBIT A
                                       to

             REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT



                                   IN~SIGHT SM
                           System Product Description

In~SightSM provides bilateral information delivery, interoperability, and
on-line access to State Street. In~SightSM allows users a single point of entry
into State Street's diverse systems and applications. Reports and data from
systems such as Investment Policy MonitorSM, Multicurrency HorizonSM, Securities
Lending, Performance & Analytics and Electronic Trade Delivery can be accessed
through In~SightSM. This Internet-enabled application is designed to run from a
Web browser and perform across low-speed data lines or corporate high-speed
backbones. In~SightSM also offers users a flexible toolset, including an ad-hoc
query function, a custom graphics package, a report designer, and a scheduling
capability. Data and reports offered through In~SightSM will continue to
increase in direct proportion with the customer roll out, as it is viewed as the
information delivery system will grow with State Street's customers.



<PAGE>



[GRAPHIC OMITTED]
                             FUNDS TRANSFER ADDENDUM

OPERATING GUIDELINES


1. Obligation of the Sender: State Street is authorized to promptly debit
Client's account(s) upon the receipt of a payment order in compliance with the
selected Security Procedure chosen for funds transfer and in the amount of money
that State Street has been instructed to transfer. State Street shall execute
payment orders in compliance with the Security Procedure and with the Client's
instructions on the execution date provided that such payment order is received
by the customary deadline for processing such a request, unless the payment
order specifies a later time. All payment orders and communications received
after this time will be deemed to have been received on the next business day.

2. Security Procedure: The Client acknowledges that the Security Procedure it
has designated on the Selection Form was selected by the Client from Security
Procedures offered by State Street. The Client agrees that the Security
Procedures are reasonable and adequate for its wire transfer transactions and
agrees to be bound by any payment orders, amendments and cancellations, whether
or not authorized, issued in its name and accepted by State Street after being
confirmed by any of the selected Security Procedures. The Client also agrees to
be bound by any other valid and authorized payment order accepted by State
Street. The Client shall restrict access to confidential information relating to
the Security Procedure to authorized persons as communicated in writing to State
Street. The Client must notify State Street immediately if it has reason to
believe unauthorized persons may have obtained access to such information or of
any change in the Client's authorized personnel. State Street shall verify the
authenticity of all instructions according to the Security Procedure.

3. Account Numbers: State Street shall process all payment orders on the basis
of the account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the account
number, the account number shall take precedence and govern. Financial
institutions that receive payment orders initiated by State Street at the
instruction of the Client may also process payment orders on the basis of
account numbers, regardless of any name included in the payment order. State
Street will also rely on any financial institution identification numbers
included in any payment order, regardless of any financial institution name
included in the payment order.

4. Rejection: State Street reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance in
the account to be charged at the time of State Street's receipt of such payment
order; (b) if initiating such payment order would cause State Street, in State
Street's sole judgment, to exceed any volume, aggregate dollar, network, time,
credit or similar limits upon wire transfers which are applicable to State
Street; or (c) if State Street, in good faith, is unable to satisfy itself that
the transaction has been properly authorized.

5. Cancellation or Amendment: State Street shall use reasonable efforts to act
on all authorized requests to cancel or amend payment orders received in
compliance with the Security Procedure provided that such requests are received
in a timely manner affording State Street reasonable opportunity to act.
However, State Street assumes no liability if the request for amendment or
cancellation cannot be satisfied.

6. Errors: State Street shall assume no responsibility for failure to detect any
erroneous payment order provided that State Street complies with the payment
order instructions as received and State Street complies with the Security
Procedure. The Security Procedure is established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.

7. Interest and Liability Limits: State Street shall assume no responsibility
for lost interest with respect to the refundable amount of any unauthorized
payment order, unless State Street is notified of the unauthorized payment order
within thirty (30) days of notification by State Street of the acceptance of
such payment order. In no event shall State Street be liable for special,
indirect or consequential damages, even if advised of the possibility of such
damages and even for failure to execute a payment order.

8. Automated Clearing House ("ACH") Credit Entries/Provisional Payments: When a
Client initiates or receives ACH credit and debit entries pursuant to these
Guidelines and the rules of the National Automated Clearing House Association
and the New England Clearing House Association, State Street will act as an
Originating Depository Financial Institution and/or Receiving Depository
Institution, as the case may be, with respect to such entries. Credits given by
State Street with respect to an ACH credit entry are provisional until State
Street receives final settlement for such entry from the Federal Reserve Bank.
If State Street does not receive such final settlement, the Client agrees that
State Street shall receive a refund of the amount credited to the Client in
connection with such entry, and the party making payment to the Client via such
entry shall not be deemed to have paid the amount of the entry.

9. Confirmation Statements: Confirmation of State Street's execution of payment
orders shall ordinarily be provided within 24 hours. Notice may be delivered
through State Street's proprietary information systems, such as, but not limited
to Horizon and GlobalQuest(R), account statements, advices, or by facsimile or
callback. The Client must report any objections to the execution of a payment
order within 30 days.





<PAGE>




10. Liability on Foreign Accounts: State Street shall not be required to repay
any deposit made at a non-U.S. branch of State Street, or any deposit made with
State Street and denominated in a non-U.S. dollar currency, if repayment of such
deposit or the use of assets denominated in the non-U.S. dollar currency is
prevented, prohibited or otherwise blocked due to: (a) an act of war,
insurrection or civil strife; (b) any action by a non-U.S. government or
instrumentality or authority asserting governmental, military or police power of
any kind, whether such authority be recognized as a defacto or a dejure
government, or by any entity, political or revolutionary movement or otherwise
that usurps, supervenes or otherwise materially impairs the normal operation of
civil authority; or(c) the closure of a non-U.S. branch of State Street in order
to prevent, in the reasonable judgment of State Street, harm to the employees or
property of State Street. The obligation to repay any such deposit shall not be
transferred to and may not be enforced against any other branch of State Street.

The foregoing provisions constitute the disclosure required by Massachusetts
General Laws, Chapter 167D, Section 36.

While State Street is not obligated to repay any deposit made at a non-U.S.
branch or any deposit denominated in a non-U.S. currency during the period in
which its repayment has been prevented, prohibited or otherwise blocked, State
Street will repay such deposit when and if all circumstances preventing,
prohibiting or otherwise blocking repayment cease to exist.

11. MISCELLANEOUS: State Street and the Client agree to cooperate to attempt to
recover any funds erroneously paid to the wrong party or parties, regardless of
any fault of State Street or the Client, but the party responsible for the
erroneous payment shall bear all costs and expenses incurred in trying to effect
such recovery. These Guidelines may not be amended except by a written agreement
signed by the parties.








<PAGE>





Security Procedure(s) Selection Form

Please select one or more of the funds transfer security procedures indicated
below.

[ ]SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions that
provides telecommunication services for its membership. Participation is limited
to securities brokers and dealers, clearing and depository institutions,
recognized exchanges for securities, and investment management institutions.
SWIFT provides a number of security features through encryption and
authentication to protect against unauthorized access, loss or wrong delivery of
messages, transmission errors, loss of confidentiality and fraudulent changes to
messages. SWIFT is considered to be one of the most secure and efficient
networks for the delivery of funds transfer instructions. Selection of this
security procedure would be most appropriate for existing SWIFT members.

[ ]Standing Instructions
Standing Instructions may be used where funds are transferred to a broker on the
Client's established list of brokers with which it engages in foreign exchange
transactions. Only the date, the currency and the currency amount are variable.
In order to establish this procedure, State Street will send to the Client a
list of the brokers that State Street has determined are used by the Client. The
Client will confirm the list in writing, and State Street will verify the
written confirmation by telephone. Standing Instructions will be subject to a
mutually agreed upon limit. If the payment order exceeds the established limit,
the Standing Instruction will be confirmed by telephone prior to execution.

[ ]Remote Batch Transmission
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data
communications between the Client and State Street. Security procedures include
encryption and or the use of a test key by those individuals authorized as
Automated Batch Verifiers.
Clients selecting this option should have an existing facility for completing
CPU-CPU transmissions. This delivery mechanism is typically used for high-volume
business.

[ ]Global Horizon Interchangesm Funds Transfer Service
Global Horizon Interchange Funds Transfer Service (FTS) is a State Street
proprietary microcomputer-based wire initiation system. FTS enables Clients to
electronically transmit authenticated Fedwire, CHIPS or internal book transfer
instructions to State Street. This delivery mechanism is most appropriate for
Clients with a low-to-medium number of transactions (5-75 per day), allowing
Clients to enter, batch, and review wire transfer instructions on their PC prior
to release to State Street.

[ ]Telephone Confirmation (Callback)
Telephone confirmation will be used to verify all non-repetitive funds transfer
instructions received via untested facsimile or phone. This procedure requires
Clients to designate individuals as authorized initiators and authorized
verifiers. State Street will verify that the instruction contains the signature
of an authorized person and prior to execution, will contact someone other than
the originator at the Client's location to authenticate the instruction.
Selection of this alternative is appropriate for Clients who do not have the
capability to use other security procedures.

[ ]Repetitive Wires
For situations where funds are transferred periodically (minimum of one
instruction per calendar quarter) from an existing authorized account to the
same payee (destination bank and account number) and only the date and currency
amount are variable, a repetitive wire may be implemented. Repetitive wires will
be subject to a mutually agreed upon limit. If the payment order exceeds the
established limit, the instruction will be confirmed by telephone prior to
execution. Telephone confirmation is used to establish this process. Repetitive
wire instructions must be reconfirmed annually.
This alternative is recommended whenever funds are frequently transferred
between the same two accounts.

[ ]Transfers Initiated by Facsimile
The Client faxes wire transfer instructions directly to State Street Mutual Fund
Services. Standard security procedure requires the use of a random number test
key for all transfers. Every six months the Client receives test key logs from
State Street. The test key contains alpha-numeric characters, which the Client
puts on each document faxed to State Street. This procedure ensures all wire
instructions received via fax are authorized by the Client.
We provide this option for Clients who wish to batch wire instructions and
transmit these as a group to State Street Mutual Fund Services once or several
times a day.



[ ]Automated Clearing House (ACH)
State Street receives an automated transmission or a magnetic tape from a Client
for the initiation of payment (credit) or collection (debit) transactions
through the ACH network. The transactions contained on each transmission or tape
must be authenticated by the Client. Clients using ACH must select one or more
of the following delivery options:

[ ]Global Horizon Interchange Automated Clearing House Service
Transactions are created on a microcomputer, assembled into batches and
delivered to State Street via fully authenticated electronic transmissions in
standard NACHA formats.

[ ]Transmission from Client PC to State Street Mainframe with Telephone Callback

[ ]Transmission from Client Mainframe to State Street Mainframe with Telephone
 Callback

[ ]Transmission from DST Systems to State Street Mainframe with Encryption

[ ]Magnetic Tape Delivered to State Street with Telephone Callback



State Street is hereby instructed to accept funds transfer instructions only via
the delivery methods and security procedures indicated. The selected delivery
methods and security procedure(s) will be effective __________________
for payment orders initiated by our organization.



Key Contact Information

Whom shall we contact to implement your selection(s)?

Client operations contact                         Alternate Contact

- ------------------------------------            ---------------------------
                  Name                                   Name

- ------------------------------------            ---------------------------
                  Address                                Address

- ------------------------------------            ---------------------------
                  City/State/Zip Code                    City/State/Zip Code

- ------------------------------------            ---------------------------
                  Telephone Number                       Telephone Number

- ------------------------------------            ---------------------------
                  Facsimile Number                       Facsimile Number

- ------------------------------------
                  SWIFT Number

- ------------------------------------
                  Telex Number


<PAGE>








INSTRUCTION(S)

TELEPHONE CONFIRMATION

Fund:  Evergreen Managed Income Fund
Investment Adviser:  Evergreen Investment Management Company, LLC
Investment Sub-Adviser:  First International Advisors, LLC d/b/a Evergreen
                         International Advisors

Authorized Initiators
    Please Type or Print

Please provide a listing of Fund officers or other individuals who are currently
authorized to initiate wire transfer instructions to State Street:

NAME                TITLE (Specify whether position       SPECIMEN SIGNATURE
                    is with Fund or Investment
                    Adviser)

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

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

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

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

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



Authorized Verifiers
    Please Type or Print


Please provide a listing of Fund officers or other individuals who will be
CALLED BACK to verify the initiation of repetitive wires of $10 million or more
and all non-repetitive wire instructions:


NAME                CALLBACK PHONE NUMBER            DOLLAR LIMITATION (IF ANY)


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

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

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

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

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










<PAGE>




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K1
<SEQUENCE>11
<FILENAME>adminagree.txt
<TEXT>

                        ADMINISTRATIVE SERVICES AGREEMENT

         This Administrative Services Agreement is made as of this 25th day of
April, 2003 between Evergreen Managed Income Fund, a Delaware statutory trust
(herein called the "Trust"), and Evergreen Investment Services, Inc., a Delaware
corporation (herein called "EIS").

                              W I T N E S S E T H:

     WHEREAS,  the Trust is a  Delaware  statutory  trust  registered  under the
Investment Company Act of 1940; and

         WHEREAS, the Trust desires to retain EIS as its Administrator to
provide it with administrative services and EIS is willing to render such
services.

         NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree as follows:

1. APPOINTMENT OF ADMINISTRATOR. The Trust hereby appoints EIS as Administrator
of the Trust on the terms and conditions set forth in this Agreement; and EIS
hereby accepts such appointment and agrees to perform the services and duties
set forth in Section 2 of this Agreement in consideration of the compensation
provided for in Section 4 hereof.

2. SERVICES AND DUTIES. As Administrator, and subject to the supervision and
control of the Trustees of the Trust, EIS will hereafter provide facilities,
equipment and personnel to carry out the following administrative services for
operation of the business and affairs of the Trust:

         (a)    Prepare, file and maintain the Trust's governing documents,
                including the Declaration of Trust (which has previously been
                prepared and filed), the By laws, minutes of meetings of
                Trustees and shareholders, and proxy statements for meetings of
                shareholders;

         (b)    Prepare and file with the Securities and Exchange Commission and
                the appropriate state securities authorities the registration
                statements for the Trust and the Trust's shares and all
                amendments thereto, reports to regulatory authorities and
                shareholders, prospectuses, proxy statements, and such other
                documents as may be necessary or convenient to enable the Trust
                to make an offering of its shares;

         (c)    Prepare, negotiate and administer contracts on behalf of the
                Trust with, among others, the Trust's underwriters, custodian
                and transfer agent;

         (d)    Supervise the Trust's fund accounting agent in the maintenance
                of the Trust's general ledger and in the preparation of the
                Trust's financial statements, including oversight of expense
                accruals and payments and the determination of the net asset
                value of the Trust's assets and of the Trust's shares, and of
                the declaration and payment of dividends and other distributions
                to shareholders;

         (e)    Calculate performance data of the Trust for dissemination to
                information services covering the investment company industry;

         (f)    Prepare and file the Trust's tax returns;

         (g)    Examine and review the operations of the Trust's custodian and
                transfer agent;

         (h)    Coordinate the layout and printing of publicly disseminated
                prospectuses and reports;

         (i)    Prepare various shareholder reports;

         (j)    Prepare and file an application for listing the Trust's shares
                on the American Stock Exchange, and prepare and file any other
                documents required to be filed with such Exchange or any other
                exchange on which the Trust's shares are listed or traded;

         (k)    Coordinate shareholder meetings;

         (l)    Provide general compliance services; and

         (m)    Advise the Trust and its Trustees on matters concerning the
                Trust and its affairs.

         The foregoing, along with any additional services that EIS shall agree
in writing to perform for the Trust hereunder, shall hereafter be referred to as
"Administrative Services." Administrative Services shall not include any duties,
functions, or services to be performed for the Trust by the Trust's investment
adviser, underwriters, custodian or transfer agent pursuant to their agreements
with the Trust.

3. EXPENSES. EIS shall be responsible for expenses incurred in providing office
space, equipment and personnel as may be necessary or convenient to provide the
Administrative Services to the Trust. The Trust shall be responsible for all
other expenses incurred by EIS on behalf of the Trust, including without
limitation postage and courier expenses, printing expenses, registration fees,
filing fees, all stock exchange listing expenses, fees of outside counsel and
independent auditors, insurance premiums, fees payable to Trustees who are not
EIS employees, and trade association dues.

4. COMPENSATION. As compensation for the Administrative Services provided to the
Trust, the Trust hereby agrees to pay and EIS hereby agrees to accept as full
compensation for its services rendered hereunder an administrative fee,
calculated daily and payable monthly, at the annual rate of 0.05% of the Trust's
average daily Total Assets (defined as net assets of the Trust plus borrowings
or other leverage for investment purposes to the extent excluded in calculating
net assets).

5. RESPONSIBILITY OF ADMINISTRATOR. EIS shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or negligence on its part in the performance of
its duties or from reckless disregard by it of its obligations and duties under
this Agreement. EIS shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Trust) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
Any person, even though also an officer, director, partner, employee or agent of
EIS, who may be or become an officer, trustee, employee or agent of the Trust,
shall be deemed, when rendering services to the Trust or acting on any business
of the Trust (other than services or business in connection with the duties of
EIS hereunder) to be rendering such services to or acting solely for the Trust
and not as an officer, director, partner, employee or agent or one under the
control or direction of EIS even though paid by EIS.

6. DURATION AND TERMINATION.

         (a) This Agreement shall be in effect until December 31, 2003, and
         shall continue in effect from year to year thereafter, provided it is
         approved, at least annually, by a vote of a majority of Trustees of the
         Trust including a majority of the disinterested Trustees.

         (b) This Agreement may be terminated at any time, without payment of
         any penalty, on sixty (60) days' prior written notice by a vote of a
         majority of the Trust's Trustees or by EIS.

 7. AMENDMENT. No provision of this Agreement may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.

8. NOTICES. Notices of any kind to be given to the Trust hereunder by EIS shall
be in writing and shall be duly given if delivered to the Trust at: 200 Berkeley
Street, Boston, MA 02116, Attention: Secretary. Notices of any kind to be given
to EIS hereunder by the Trust shall be in writing and shall be duly given if
delivered to EIS at 200 Berkeley Street, Boston, Massachusetts 02116. Attention:
Chief Administrative Officer.

9. LIMITATION OF LIABILITY. EIS is hereby expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust and agrees that
the obligations pursuant to this Agreement of the Trust be limited solely to the
assets of the Trust, and EIS shall not seek satisfaction of any such obligation
from the assets of the shareholders, Trustees, officers, employees or agents of
the Trust, or any of them.

10. MISCELLANEOUS. The captions in this Agreement are included for convenience
of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. Subject to the provisions of Section 5 hereof, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by Delaware law;
provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or regulation
promulgated by the Securities and Exchange Commission thereunder.

         IN WITNESS WHEREOF, the parties hereto have caused this Administrative
Services Agreement to be executed by their officers designated below as of the
day and year first above written.


EVERGREEN MANAGED INCOME FUND



By:      /s/ Maureen E. Towle
Name:    Maureen E. Towle
Title:   Assistant Secretary



EVERGREEN INVESTMENT SERVICES, INC.



By:      /s/ Michael H. Koonce
Name:    Michael H. Koonce
Title:   Secretary

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K 2
<SEQUENCE>12
<FILENAME>transferagenagree.txt
<TEXT>



















                      Transfer Agency and Service Agreement
                                      Among
  Each of the Evergreen Investments Closed End Funds Listed on Exhibit B Hereto
                                       and
                          EquiServe Trust Company, N.A.
                                       and
                                 EquiServe, Inc.

















Table of Contents

Section 1.            Certain Definitions.....................................4

Section 2.            Appointment of Agent....................................5

Section 3.            Standard Services.......................................6

Section 4.            Dividend Disbursing Services............................8

Section 5.            Shareholder Internet Account Access Services............9

Section 6.            Optional Services......................................10

Section 7             Fee and Expenses.......................................10

Section 8.            Representations and Warranties of Transfer Agent.......12

Section 9.            Representations and Warranties of Customer.............12

Section 10.           Indemnification/Limitation of Liability................13

Section 11.           Damages................................................15

Section 12.           Responsibilites of the Transfer Agent..................15

Section 13.           Covenants of the Customer and Transfer Agent...........16

Section 14.           Data Access and Propreitary Information................17

Section 15.           Confidentiality........................................19

Section 16.           Term and Terminiation..................................19

Section 17.           Assignment.............................................21

Section 18.           Unaffiliated Third Parties.............................21

Section 19.           Miscellaneous..........................................21

Section 19.1          Notice.................................................21

Section 19.2          Successors.............................................22

Section 19.3.         Amendments.............................................22

Section 19.4.         Severability...........................................22

Section 19.5.         Governing Law..........................................22

Section 19.6          Force Majeure..........................................22

Section 19.7          Descriptive Headings...................................22

Section 19.8          Third Party Beneficiaries..............................22

Section 19.9          Survival    ........................................ . 23

Section 19.10         Priorities............................................ 23

Section 19.11.        Merger of Agreement....................................23

Section 19.12         Counterparts...........................................23


<PAGE>



         AGREEMENT made as of the 1st day of March, 2003, by and among each of
the Evergreen Investments, closed-end Funds listed on Exhibit B hereto, a
corporation, having a principal office and place of business at 200 Berkley
Street, Boston, Massachusetts 02116 (each a "Customer" or the "Customer"), and
EquiServe, Inc., a Delaware corporation, and its fully owned subsidiary
EquiServe Trust Company, N.A., a federally charted trust company doing business
at 150 Royall Street, Canton, Massachusetts 02021 (collectively, the "Transfer
Agent" or individually "EQI" and the "Trust Company", respectively).

     WHEREAS, the Customer desires to appoint the Transfer Agent as sole
transfer agent, registrar, administrator of dividend reinvestment plans, option
plans, and direct stock purchase plans and EQI as dividend disbursing agent and
processor of all payments received or made by Customer under this Agreement.

     WHEREAS, the Trust Company and EQI desire to accept such respective
appointments and perform the services related to such appointments;

     WHEREAS, the Board of Trustees of each Customer has approved appointment of
the Transfer Agent.

     NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:

1.       Certain Definitions.

(a)      "Account" or "Accounts" shall mean the account of each Shareholder
         which account shall hold any full or fractional shares of stock held by
         such Shareholder and/or outstanding funds or tax reporting to be done.

(b)      "Additional Services" shall mean any and all services which are not
         Services as set forth in the Fee and Service Schedule, but performed by
         Transfer Agent upon request of Customer.

(c)      "Agreement" shall mean this agreement and any and all exhibits or
         schedules attached hereto and any and all amendments or modifications,
         which may from time to time be executed.

(d)      "Annual Period" shall mean each twelve (12) month period commencing on
         the Effective Date and, thereafter, on each anniversary of the
         Effective Date.

(e)      "Closed Account" shall mean an account with a zero share balance, no
         outstanding funds or no reportable tax information.

(f)      "Customer ID(s)" shall have the meaning set forth in Section 14.3.

(g)      "Data Access Service" shall have the meaning set forth in Section 14.1.

(h)      "Dividend Reinvestment Plan" and "Direct Stock Purchase Plan" shall
         mean the services as set forth in Section 4 and in the Fee and Service
         Schedule.

(i)      "Effective Date" shall mean the date first stated above.

(j)      "Fee and Service Schedule" shall mean the fees and services set forth
         in the "Fee and Service Schedule" attached hereto.

(k)      "Password(s)" shall have the meaning set forth in Section 14.3.

(l)      "Proprietary Information" shall have the meaning set forth in Section
         14.3.

(m)      "Security Procedures" shall have the meaning set forth in Section 5.1.

(n)      "Services" shall mean any and all services as further described herein
         and in the "Fee and Service Schedule" or other schedules attached
         hereto.

 (o) "Share" shall mean Customer's common stock, no par value per share
authorized by the Customer's Declaration of Trust, and other classes of
Customer's stock to be designated by the Customer in writing and for which the
Transfer Agent agrees to service under this Agreement.

(p) "Shareholder" shall mean the holder of record of Shares.

(q) "Shareholder Data" shall have the meaning set forth in Section 14.2.

(r) "Shareholder Internet Services" shall have the meaning set forth in Section
5.1.

2. Appointment of Agent.

     2.1 Appointments. The Customer hereby appoints the Transfer Agent to act as
sole transfer agent and registrar for all Shares in accordance with the terms
and conditions hereof and as administrator of Plans and appoints EQI as dividend
disbursing agent and processor of all payments received or made by or on behalf
of the Customer under this Agreement, and the Transfer Agent and EQI accept the
appointments. Customer shall provide Transfer Agent with certified copies of
resolutions dated the date hereof appointing the Trust Company as Transfer
Agent.

     2.2 Documents. In connection with the appointing of Transfer Agent as the
transfer agent and registrar for each Customer, the Customer will provide or has
previously provided each of the following documents to the Transfer Agent:

              (a)     Copies of Registration Statements and amendments thereto,
                      filed with the Securities and Exchange Commission for
                      initial public offerings;

              (b)     Specimens of all forms of outstanding stock certificates,
                      in forms
                      approved by the Board of Trustees of the Customer, with a
                      certificate of the Secretary of the Customer as to such
                      approval;

              (c)   Specimens of the Signatures of the officers of the Customer
                      authorized to sign stock certificates and individuals
                      authorized to sign written instructions and requests; and

               (d)  An opinion of counsel for the Customer addressed to both the
                    Trust Company and EQI with respect to:

                    (i)  The  Customer's  organization  and existence  under the
                         laws of its state of organization;

                    (ii) The status of all Shares of the Customer covered by the
                         appointment  under  the  Securities  Act  of  1933,  as
                         amended,  and any  other  applicable  federal  or state
                         statute; and

                    (iii)That all issued  Shares are,  and all  unissued  Shares
                         will be, when issued,  validly  issued,  fully paid and
                         non-assessable.

     2.3 Records. Transfer Agent may adopt as part of its records all lists of
holders, records of Customer's stock, books, documents and records which have
been employed by any former agent of Customer for the maintenance of the ledgers
for the Customer's shares, provided such ledger is certified by an officer of
Customer or the prior transfer agent to be true, authentic and complete.

     2.4 Shares. Customer shall, if applicable, inform Transfer Agent as to (i)
the existence or termination of any restrictions on the transfer of Shares and
in the application to or removal from any certificate of stock of any legend
restricting the transfer of such Shares or the substitution for such certificate
of a certificate without such legend, (ii) any authorized but unissued Shares
reserved for specific purposes, (iii) any outstanding Shares which are
exchangeable for Shares and the basis for exchange, (iv) reserved Shares subject
to option and the details of such reservation and (v) special instructions
regarding dividends and information of foreign holders.

     2.5 Customer's Agent. Transfer Agent represents that it is engaged in an
independent business and will perform its obligations under this Agreement as an
agent of Customer.

     2.6 Certificates. Customer shall deliver to Transfer Agent an appropriate
supply of stock certificates, which certificates shall provide a signature panel
for use by an officer of or authorized signor for Transfer Agent to sign as
transfer agent and registrar, and which shall state that such certificates are
only valid after being countersigned and registered.

3.  Standard Services.

     3.1  Transfer Agent Services. The Transfer Agent will perform the following
          services:

              In accordance with the procedures established from time to time by
agreement between the Customer and the Transfer Agent, the Transfer Agent shall:

              (a)     issue and record the appropriate number of Shares as
                      authorized and hold such Shares in the appropriate
                      Shareholder account;

               (b)  effect transfers of Shares by the registered  owners thereof
                    upon receipt of appropriate documentation;

              (c)     act as agent for Shareholders pursuant to the Dividend
                      Reinvestment Plan, and other investment programs as
                      amended from time to time in accordance with the terms of
                      the agreements relating thereto to which the Transfer
                      Agent is or will be a party; and

               (d)  issue  replacement   certificates  for  those   certificates
                    alleged to have been lost,  stolen or destroyed upon receipt
                    by  the  Transfer  Agent  of an  open  penalty  surety  bond
                    satisfactory to it and holding it and the Customer harmless,
                    absent  notice to the Customer  and the Transfer  Agent that
                    such   certificates  have  been  acquired  by  a  bona  fide
                    purchaser.  The  Transfer  Agent,  at its option,  may issue
                    replacement   certificates   in  place  of  mutilated  stock
                    certificates   upon   presentation   thereof   without  such
                    indemnity.  Further,  the  Transfer  Agent  may at its  sole
                    option  accept  indemnification  from a  Customer  to  issue
                    replacement  certificates for those certificates  alleged to
                    have  been  lost,  stolen  or  destroyed  in lieu of an open
                    penalty bond.

3.2     EQI Services. In accordance with procedures established from time to
        time by agreement between the Customer and EQI, EQI shall:

              (a)     prepare and transmit payments for dividends and
                      distributions declared by the Customer, provided good
                      funds for said dividends or distributions are received by
                      EQI prior to the scheduled payable date for said dividends
                      or distributions;

              (b)     issue replacement checks and place stop orders on original
                      checks based on shareholder's representation that a check
                      was not received or was lost. Such stop orders and
                      replacements will be deemed to have been made at the
                      request of Customer, and Customer shall be responsible for
                      all losses or claims resulting from such replacement; and

              (c)     Receive all payments made to the Customer or the Transfer
                      Agent under the Dividend Reinvestment Plan, Direct Stock
                      Purchase Plan, and Plans and make all payments required to
                      be made under such plans, including all payments required
                      to be made to the Customer.

     3.3 Customary Services. The Transfer Agent shall perform all the customary
services of a transfer agent, agent of dividend reinvestment plan, cash purchase
plan and other investment programs as described in Section 3.1 consistent with
those requirements in effect as of the date of this Agreement. EQI shall perform
all the customary services of a dividend disbursing agent and a processor of
payments as described in Section 3.2 consistently with those requirements in
effect as of the date of this Agreement. The detailed services and definition,
frequency, limitations and associated costs (if any) of the Services to be
performed by the Transfer Agent are set out in the attached Fee and Service
Schedule.

     3.4 Compliance with Laws. The Customer agrees that each of the Trust
Company and EQI is obligated to and the Trust Company and EQI agree to comply
with all applicable federal, state and local laws and regulations, codes, order
and government rules in the performance of its duties under this Agreement.

     3.5 Unclaimed Property and Lost Shareholders. The Transfer Agent shall
report unclaimed property to each state in compliance with state law and shall
comply with Section 17Ad-17 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), for lost Shareholders. If the Customer is not in
compliance with applicable state laws, there will be no charge for the first two
years for this service for such Customer, other than a charge of $3.00 per due
diligence notice mailed; provided that after the first two years, the Transfer
Agent will charge such Customer its then standard fee plus any out-of-pocket
expenses.

     3.6 Compliance with Office of Foreign Asset Control ("OFAC") Regulations.
The Transfer Agent shall ensure compliance with OFAC laws.

4. Dividend Disbursing Services.

     4.1 Declaration of Dividends. Upon receipt of a written notice from the
President, any Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer of Customer declaring the payment of a dividend, EQI shall
disburse such dividend payments provided that in advance of such payment,
Customer furnishes EQI with sufficient funds. The payment of such funds to EQI
for the purpose of being available for the payment of dividend checks from time
to time is not intended by Customer to confer any rights in such funds on
Customer's Shareholders whether in trust or in contract or otherwise.

     4.2 Stop Payments. Customer hereby authorizes EQI to stop payment of checks
issued in payment of dividends, but not presented for payment, when the payees
thereof allege either that they have not received the checks or that such checks
have been mislaid, lost, stolen, destroyed or, through no fault of theirs, are
otherwise beyond their control and cannot be produced by them for presentation
and collection, and EQI shall issue and deliver duplicate checks in replacement
thereof, and Customer shall indemnify Transfer Agent against any loss or damage
resulting from reissuance of the checks.

4.3 Tax Withholding. EQI is hereby authorized to deduct from all dividends
declared by a Customer and disbursed by EQI, as dividend disbursing agent, the
tax required to be withheld pursuant to Sections 1441, 1442 and 3406 of the
Internal Revenue Code of 1986, as amended, or by any Federal or State statutes
subsequently enacted, and to make the necessary return and payment of such tax
in connection therewith.

5.  Shareholder Internet Account Access Services.

      5.1 Shareholder Internet Services. The Transfer Agent shall provide
internet access to each Customer's shareholders through Transfer Agent's web
site, equiserve.com ("Shareholder Internet Services"), pursuant to its
established procedures ("Security Procedures"), to allow shareholders to view
their account information and perform certain on-line transaction request
capabilities. The Shareholder Internet Services shall be provided at no
additional charge at this time, other than the transaction fees currently being
charged for the different transactions as described on the Fee and Service
Schedule. The Transfer Agent reserves the right to charge a fee for this service
at any time in the future.

      5.2 Scope of Transfer Agent Shareholder Internet Services Obligations.
Transfer Agent shall at all times use reasonable care in performing Shareholder
Internet Services under this Agreement. With respect to any claims for losses,
damages, costs or expenses which may arise directly or indirectly from Security
Procedures which Transfer Agent has implemented or omitted, Transfer Agent shall
be presumed to have used reasonable care if it has followed, in all material
respects, its Security Procedures then in effect. Transfer Agent may, but shall
not be required to, modify such Security Procedures from time to time to the
extent it believes, in good faith, that such modifications will enhance the
security of Shareholder Internet Services. All data and information
transmissions accessed via Shareholder Internet Services are for informational
purposes only, and are not intended to satisfy regulatory requirements or comply
with any laws, rules, requirements or standards of any federal, state or local
governmental authority, agency or industry regulatory body, including the
securities industry, which compliance is the sole responsibility of Customer.

      5.3      No Other Warranties.

EXCEPT AS OTHERWISE EXPRESSLY STATED IN SECTION 5.2 OF THIS AGREEMENT, THE
SHAREHOLDER INTERNET SERVICES ARE PROVIDED "AS-IS," ON AN "AS AVAILABLE" BASIS,
AND TRANSFER AGENT HEREBY SPECIFICALLY DISCLAIMS ANY AND ALL REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, REGARDING SUCH SERVICES PROVIDED BY TRANSFER
AGENT HEREUNDER, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING
OR COURSE OF PERFORMANCE.

6.  Optional Services.

To the extent that a Customer elects to engage the Transfer Agent to provide the
services listed below the Customer shall engage the Transfer Agent to provide
such services upon terms and fees to be agreed upon by the parties:

         (a)     Corporate actions (including inter alia, odd lot buy backs,
                 exchanges, mergers, redemptions, subscriptions, capital
                 reorganization, coordination of post-merger services and
                 special meetings).

7.  Fees and Expenses.

     7.1 Fee and Service Schedules. Each Customer agrees to pay Transfer Agent
the fees for Services performed pursuant to this Agreement as set forth in the
Fee and Service Schedule attached hereto, for the initial term of the Agreement
(the "Initial Term").

     7.2 COLA/Fee Increases. After the Initial Term of the Agreement, providing
that service mix and volumes remain constant, the fees listed in the Fee and
Service Schedule shall be increased (a) by the accumulated change in the
National Employment Cost Index for Service Producing Industries (Finance,
Insurance, Real Estate) for the preceding years of the contract, as published by
the Bureau of Labor Statistics of the United States Department of Labor or (b)
to the Transfer Agent's minimum fee then in effect, whichever is greater. Fees
will be increased on this basis on each successive contract anniversary
thereafter.

      7.3 Adjustments. Notwithstanding Section 7.1 above, fees, and the
out-of-pocket expenses and advances identified under Section 7.4 below, may be
changed from time to time as agreed upon in writing between the Transfer Agent
and the Customer.

      7.4 Out-of-Pocket Expenses. In addition to the fees paid under Section 7.1
above, the Customer agrees to reimburse the Transfer Agent for out-of-pocket
expenses, including but not limited to postage, forms, telephone, microfilm,
microfiche, taxes, records storage, exchange and broker fees, or advances
incurred by the Transfer Agent for the items set out in Exhibit A attached
hereto. Out-of-pocket expenses may include the costs to transfer agent of
administrative expenses. In addition, any other expenses incurred by the
Transfer Agent at the request or with the consent of the Customer, will be
reimbursed by the Customer.

      7.5 Conversion Funds. Conversion funding required by any out of proof
condition caused by a prior agents' services shall be advanced to Transfer Agent
prior to the commencement of services.

      7.6 Postage. Postage for mailing of dividends, proxies, Customer reports
and other mailings to all Shareholder Accounts shall be advanced to the Transfer
Agent by the Customer prior to commencement of the mailing date of such
materials.

      7.7 Invoices. The Customer agrees to pay all fees and reimbursable
expenses within 30 days of the date of the respective billing notice, except for
any fees or expenses that are subject to good faith dispute. In the event of
such a dispute, the Customer may only withhold that portion of the fee or
expense subject to the good faith dispute. The Customer shall notify the
Transfer Agent in writing within twenty-one (21) calendar days following the
receipt of each billing notice if the Customer is disputing any amounts in good
faith. If the Customer does not provide such notice of dispute within the
required time, the billing notice will be deemed accepted by the Customer. The
Customer shall settle such disputed amounts within five (5) business days of the
day on which the parties agree on the amount to be paid by payment of the agreed
amount. If no agreement is reached, then such disputed amounts shall be settled
as may be required by law or legal process.

      7.8 Taxes. Customer shall pay all sales or use taxes in lieu thereof with
respect to the Services (if applicable) provided by Transfer Agent under this
Agreement.

      7.9      Late Payments.
               -------------

     (a) If any undisputed amount in an invoice of the Transfer Agent (for fees
or reimbursable expenses) is not paid when due, the Customer shall pay the
Transfer Agent interest thereon (from the due date to the date of payment) at a
per annum rate equal to one percent (1.0%) plus the Prime Rate (that is, the
base rate on corporate loans posted by large domestic banks) published by The
Wall Street Journal (or, in the event such rate is not so published, a
reasonably equivalent published rate selected by Customer on the first day of
publication during the month when such amount was due). Notwithstanding any
other provision hereof, such interest rate shall be no greater than permitted
under applicable provisions of Massachusetts or New Jersey law.

     (b) The failure by Customer to pay an invoice within 90 days after receipt
of such invoice or the failure by the Customer to timely pay two consecutive
invoices shall constitute a material breach pursuant to Section 16.4(a) below.
The Transfer Agent may terminate this Agreement for such material breach
immediately and shall not be obligated to provide the Customer with 30 days to
cure such breach.

      7.10 Services Required by Legislation. Services required by legislation or
regulatory mandate that become effective after the Effective Date of this
Agreement shall not be part of the Services, and shall be billed by appraisal.

      7.11 Overtime Charges. Overtime charges will be assessed in the event of a
late delivery to the Transfer Agent of Customer material for mailings to
Shareholders, unless the mail date is rescheduled. Such material includes, but
is not limited to, proxy statements, quarterly and annual reports, dividend
enclosures and news releases.

      7.12 Bank Accounts. The Customer acknowledges that the bank accounts
maintained by EQI in connection with the Services will be in its name and that
EQI may receive investment earnings in connection with the investment at EQI's
risk and for its benefit of funds held in those accounts from time to time.

8.  Representations and Warranties of Transfer Agent.

     8.1 Governance. The Trust Company is a federally chartered limited purpose
national bank duly organized under the laws of the United States and EQI is a
corporation validly existing and in good standing under the laws of the State of
Delaware and each has full corporate power, authority and legal right to
execute, deliver and perform this Agreement. The execution, delivery and
performance of this Agreement by Transfer Agent has been duly authorized by all
necessary corporate action and constitutes the legal valid and binding
obligation of Transfer Agent enforceable against Transfer Agent in accordance
with its terms.

     8.2 Compliance. The execution, delivery and performance of the Agreement by
Transfer Agent will not violate, conflict with or result in the breach of any
material term, condition or provision of, or require the consent of any other
party to, (i) any existing law, ordinance, or governmental rule or regulation to
which Transfer Agent is subject, (ii) any judgement, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory official,
body or authority which is applicable to Transfer Agent, (iii) the incorporation
documents or by-laws of , or any material agreement to which Transfer Agent is a
party.

      8.3 Facilities. The Transfer Agent has and will continue to have access to
the necessary facilities, equipment and personnel to perform its duties and
obligations under this Agreement.

      8.4 Computer Services. DATA ACCESS SERVICE AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS,
AS AVAILABLE BASIS. TRANSFER AGENT EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT
THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CUSTOMER
HEREBY ACKNOWLEDGES THAT THE DATA ACCESS SERVICE MAY NOT BE OR BECOME AVAILABLE
DUE TO ANY NUMBER OF FACTORS INCLUDING WITHOUT LIMITATION PERIODIC SYSTEM
MAINTENANCE, SCHEDULED OR UNSCHEDULED, ACTS OF GOD, TECHNICAL FAILURE,
TELECOMMUICATIONS INFRASTRUCTURE OR DELAY OR DISRUPTION ATTRIBUTATLE TO VIRUSES,
DENIAL OF SERVICE ATTACKS, INCREASED OR FLUCTUATING DEMAND, AND ACTIONS AND
OMISSIONS OF THIRD PARTIES. THEREFORE TRANSFER AGENT EXPRESSLY DISCLAIMS ANY
EXPRESS OR IMPLIED WARRANTY REGARDING SYSTEM AND/OR DATA ACCESS SERVICE
AVAILABILITY, ACCESSABILITY, OR PERFORMANCE.

9.  Representations and Warranties of Customer.

      Each Customer represents and warrants to the Transfer Agent that:

9.1  Organizations.  It is a corporation duly organized and existing and in good
     standing under the laws of Delaware;

      9.2 Governance. It is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement. All
corporate proceedings required by said Articles of Incorporation, By-Laws and
applicable law have been taken to authorize it to enter into and perform this
Agreement; and

      9.3 Securities Act of 1933. A registration statement under the Securities
Act of 1933, as amended (the "1933 Act") has been filed and is currently
effective, or will be effective prior to the sale of any Shares, and will remain
so effective, and all appropriate state securities law filings have been made
with respect to all the Shares of the Customer being offered for sale except for
any Shares which are offered in a transaction or series of transactions which
are exempt from the registration requirements of the 1933 Act and state
securities laws; information to the contrary will result in immediate
notification to the Transfer Agent.

10.  Indemnification/Limitation of Liability.

      10.1 Standard of Care. The Transfer Agent shall at all times act in good
faith and agrees to use its best efforts within reasonable time limits to insure
the accuracy of all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
said errors are caused by its negligence, bad faith or willful misconduct or
that of its employees as set forth and subject to the limitations set forth in
Section 10.4 below.

      10.2 Customer Indemnity. The Transfer Agent shall not be responsible for,
and the Customer shall indemnify and hold the Transfer Agent harmless from and
against, any and all losses, claims, damages, costs, charges, counsel fees and
expenses, payments, expenses and liability arising out of or attributable to:

        (a) All actions of the Transfer Agent or its agents or subcontractors
        required to be taken pursuant to this Agreement, provided such actions
        are taken in good faith and without negligence or willful misconduct;

        (b) The Customer's lack of good faith, negligence or willful misconduct
        or the breach of any representation or warranty of the Customer
        hereunder;

        (c) The reliance or use by the Transfer Agent or its agents or
        subcontractors of information, records and documents which (i) are
        received by the Transfer Agent or its agents or subcontractors and
        furnished to it by or on behalf of the Customer, and (ii) have been
        prepared and /or maintained by the Customer or any other person or firm
        on behalf of the Customer. Such other person or firm shall include any
        former transfer agent or former registrar, or co-transfer agent or
        co-registrar or any current registrar where the Transfer Agent is not
        the current registrar;

        (d) The reliance or use by the Transfer Agent or its agents or
        subcontractors of any paper or document reasonably believed to be
        genuine and to have been signed by the proper person or persons
        including Shareholders or electronic instruction from Shareholders
        submitted through the shareholder Internet Services or other electronic
        means pursuant to security procedures established by the Transfer Agent;

        (e) The reliance on, or the carrying out by the Transfer Agent or its
        agents or subcontractors of any instructions or requests of the
        Customer's representatives;

        (f) The offer or sale of Shares in violation of any federal or state
        securities laws requiring that such Shares be registered or in violation
        of any stop order or other determination or ruling by any federal or
        state agency with respect to the offer or sale of such Shares;

        (g) The negotiations and processing of all checks, including checks made
        payable to prospective or existing shareholders which are tendered to
        the Transfer Agent for the purchase of Shares (commonly known as "third
        party checks");

        (h)Any actions taken or omitted to be taken by any former agent of
        Customer and arising from Transfer Agent's reliance on the certified
        list of holders; and

        (i) The negotiation, presentment, delivery or transfer of Shares through
        the Direct Registration System Profile System.

      10.3 Instructions. At any time the Transfer Agent may apply to any officer
of the Customer for instruction, and may consult with legal counsel for the
Transfer Agent or the Customer with respect to any matter arising in connection
with the services to be performed by the Transfer Agent under this Agreement,
and Transfer Agent and its agents and subcontractors shall not be liable and
shall be indemnified by the Customer for any action taken or omitted by it in
reliance upon such instructions or upon the advice or opinion of such counsel.
The Transfer Agent, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document reasonably believed to be
genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided the Transfer Agent
or its agents or subcontractors by telephone, in person, machine readable input,
telex, CRT data entry or similar means authorized by the Customer, and shall not
be held to have notice of any change of authority of any person, until receipt
of written notice thereof from the Customer. The Transfer Agent, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of officers of the Customer, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.

      10.4 Transfer Agent Indemnification/Limitation of Liability. Transfer
Agent shall be responsible for and shall indemnify and hold the Customer
harmless from and against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liability arising out of or attributable to
Transfer Agent's refusal or failure to comply with the terms of this Agreement,
or which arise out of Transfer Agent's negligence or willful misconduct or which
arise out of the breach of any representation or warranty of Transfer Agent
hereunder, for which Transfer Agent is not entitled to indemnification under
this Agreement; provided, however, that Transfer Agent's aggregate liability
during any term of this Agreement with respect to, arising from, or arising in
connection with this Agreement, or from all services provided or omitted to be
provided under this Agreement, whether in contract, or in tort, or otherwise, is
limited to, and shall not exceed, the amounts paid hereunder by the Customer to
Transfer Agent as fees and charges, but not including reimbursable expenses,
during the six (6) calendar months immediately preceding the event for which
recovery from the Transfer Agent is being sought.

      10.5 Notice. In order that the indemnification provisions contained in
this Section shall apply, upon the assertion of a claim for which one party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
indemnifying party shall have the option to participate with the indemnified
party in the defense of such claim or to defend against said claim in its own
name or the name of the indemnified party. The indemnified party shall in no
case confess any claim or make any compromise in any case in which the
indemnifying party may be required to indemnify it except with the indemnifying
party's prior written consent.

11.   Damages.

     NO PARTY SHALL BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER, INCLUDING, BUT NOT LIMITED TO,
LOSS OF ANTICIPATED PROFITS, OCCASIONED BY A BREACH OF ANY PROVISION OF THIS
AGREEMENT EVEN IF APPRISED OF THE POSSIBILITY OF SUCH DAMAGES.

12.  Responsibilities of the Transfer Agent.

      The Transfer Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Customer,
by its acceptance hereof, shall be bound:

      12.1 Whenever in the performance of its duties hereunder the Transfer
Agent shall deem it necessary or desirable that any fact or matter be proved or
established prior to taking or suffering any action hereunder, such fact or
matter may be deemed to be conclusively proved and established by a certificate
signed by the Chairman of the Board, the President, any Vice President, the
Treasurer, any Assistant treasurer, the Secretary or any Assistant Secretary of
the Customer and delivered to the Transfer Agent. Such certificate shall be full
authorization to the recipient for any action taken or suffered in good faith by
it under the provisions of this Agreement in reliance upon such certificate.

      12.2 The Customer agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Transfer Agent for the carrying out, or performing by the Transfer Agent
of the provisions of this Agreement.

      12.3 Transfer Agent, any of its affiliates or subsidiaries, and any
stockholder, director, officer or employee of the Transfer Agent may buy, sell
or deal in the securities of the Customer or become pecuniary interested in any
transaction in which the Customer may be interested, or contract with or lend
money to the Customer or otherwise act as fully and freely as though it were not
appointed as agent under this Agreement. Nothing herein shall preclude the
Transfer Agent from acting in any other capacity for the Customer or for any
other legal entity.

      12.4 No provision of this Agreement shall require the Transfer Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
it shall believe in good faith that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to it.

13.  Covenants of the Customer and Transfer Agent.

     13.1 Customer  Corporate  Authority.  The  Customer  shall  furnish  to the
          Transfer Agent the following:

     (a)  A copy of the Articles of Incorporation and By-Laws of the Customer;


     (b)  Copies  of all  material  amendments  to its  Declaration  of Trust or
          By-Laws  made after the date of this  Agreement,  promptly  after such
          amendments are made; and

     (c)  A certificate of the Customer as to the Shares authorized,  issued and
          outstanding,  as well as a  description  of all  reserves  of unissued
          Shares  relating to the exercise of options,  warrants or a conversion
          of debentures or otherwise.

      13.2 Transfer Agent Facilities. The Transfer Agent hereby agrees to
establish and maintain facilities and procedures reasonably acceptable to the
Customer for the safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any, and for the preparation, use, and
recordkeeping of such certificates, forms and devices.

      13.3 Records. The Transfer Agent shall keep records relating to the
services to be performed hereunder, in the form and manner as it may deem
advisable. The Transfer Agent agrees that all such records prepared or
maintained by it relating to the services performed hereunder are the property
of the Customer and will be preserved, maintained and made available in
accordance with the requirements of law, and will be surrendered promptly to the
Customer on and in accordance with its request.

      13.4 Confidentiality. The Transfer Agent and the Customer agree that all
books, records, information and data pertaining to the business of the other
party which are exchanged or received pursuant to the negotiation or the
carrying out of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be required by law.

      13.5 Non-Solicitation of Transfer Agent Employees. Customer shall not
attempt to hire or assist with the hiring of an employee of EquiServe or
affiliated companies or encourage any employee to terminate their relationship
with EquiServe or its affiliated companies.

      13.6 Notification. Customer shall notify Transfer Agent as soon as
possible in advance of any stock split, stock dividend similar event which may
affect the Shares, and any bankruptcy, insolvency, moratorium or other
proceeding regarding Customer affecting the enforcement of creditors' rights.
Notwithstanding any other provision of the Agreement to the contrary, Transfer
Agent will have no obligation to perform any Services under the Agreement
subsequent to the commencement of any bankruptcy, insolvency, moratorium or
other proceeding regarding Customer affecting the enforcement of creditor'
rights unless Transfer Agent receives assurance satisfactory to it that it will
receive full payment for such services. Further, Customer may not assume the
Agreement after the filing of a bankruptcy petition without transfer agents
written consent.

14.    Data Access Service and Proprietary Information.

      14.1 Transfer Agent has developed a data access service that enables the
Customer to access the Customer's shareholder records maintained on Transfer
Agent's computer system through the Internet or remote access, as the case may
be (the "Data Access Service"). The Customer wishes to use such Data Access
Service subject to the terms and conditions set forth herein. Therefore, the
Customer and Transfer Agent agree as follows:

      14.2      Access to Shareholder Data.

       The Service provided to the Customer pursuant to this Agreement shall
include granting the Customer access to the Shareholder, Customer and proxy
information ("Shareholder Data") maintained on the records database for the
purpose of examining, maintaining, editing, or processing transactions with
respect to Shareholder Data.

      14.3      Procedures for Access.

       To use the Data Access Service, the Customer must access through the
Internet or remote terminal, as the case may be, pursuant to the procedures
provided by Transfer Agent. Such access is accomplished by entering a unique
Customer identification ("Customer ID(s)") and passwords ("Password(s)")
assigned to the Customer by Transfer Agent. Each Customer ID and Password
assigned to the Customer is for use only by the Customer. The Customer shall
establish and maintain reasonable security and control over all such Customer
IDs and Passwords. Transfer Agent shall maintain reasonable security and control
over each Customer ID. After Transfer Agent assigns the Customer a Password, the
Customer shall change the Password. The Customer recognizes that Transfer Agent
does not have knowledge of the Password, which is selected by the Customer and
is within the Customer's exclusive control after the necessary change. The
Customer may change any Password thereafter at any time. Customer agrees to
notify Transfer Agent immediately if any employee of Customer granted access to
the Data Access Service leaves the employ of the Customer, in order to enable
Transfer Agent to terminate such employee's access.

     14.4       Proprietary Information.

     The Customer acknowledges that the databases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Customer by the Transfer Agent as part of the Data
Access Service to access Shareholder Data maintained by the Transfer Agent on
data bases under the control and ownership of the Transfer Agent or other third
party constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the Transfer
Agent or other third party. In no event shall Proprietary Information be deemed
Shareholder Data. The Customer agrees to treat all Proprietary Information as
proprietary to the Transfer Agent and further agrees that it shall not divulge
any Proprietary Information to any person or organization except as may be
provided hereunder. Without limiting the foregoing, the Customer agrees for
itself and its employees and agents:

     (a)  to refrain  from  copying or  duplicating  in any way the  Proprietary
          Information, other than to print out pages reflecting Shareholder Data
          to provide to shareholders or for Customer's internal use;

     (b)  to refrain from  obtaining  unauthorized  access to any portion of the
          Proprietary Information, and if such access is inadvertently obtained,
          to inform  Transfer  Agent in a timely manner of such fact and dispose
          of such information in accordance with Transfer Agent's instructions;

     (c)  to refrain from causing or allowing the Proprietary  Information  from
          being  retransmitted to any other computer facility or other location,
          except with the prior written consent of Transfer Agent;

     (d)  that  the  Customer  shall  have  access  only  to  those   authorized
          transactions agreed upon by the parties; and

     (e)  to honor all  reasonable  written  requests made by Transfer  Agent to
          protect at  Transfer  Agent's  expense  the rights of  Transfer  Agent
          Proprietary Information at common law, under federal copyright law and
          under other federal or state law.

Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 14.

       14.5 Content. If the Customer notifies the Transfer Agent that any part
of the Data Access Service does not operate in material compliance with the user
documentation provided by the Transfer Agent for such service, the Transfer
Agent shall endeavor in a timely manner to correct such failure. Organizations
from which the Transfer Agent may obtain certain data included in the Services
are solely responsible for the contents of such data and the Customer agrees to
make no claim against the Transfer Agent arising out of the contents of such
third party data, including, but not limited to, the accuracy thereof.

       14.6 Transactions. If the transactions available to the Customer include
the ability to originate electronic instructions to the Transfer Agent in order
to (i) effect the transfer or movement of Shares or direct EQI to transfer cash
or (ii) transmit Shareholder information or other information, then in such
event the Transfer Agent shall be entitled to rely on the validity and
authenticity of such instructions without undertaking any further inquiry as
long as such instructions are undertaken in conformity with security procedures
established by the Transfer Agent from time to time.

15.    Confidentiality.

      15.1 Covenant. The Transfer Agent and the Customer agree that they will
not, at any time during the term of this Agreement or after its termination,
reveal, divulge, or make known to any person, firm, corporation or other
business organization, any customers' lists, trade secrets, cost figures and
projections, profit figures and projections, or any other secret or confidential
information whatsoever, whether of the Transfer Agent or of the Customer, used
or gained by the Transfer Agent or the Customer during performance under this
Agreement. The Customer and the Transfer Agent further covenant and agree to
retain all such knowledge and information acquired during and after the term of
this Agreement respecting such lists, trade secrets, or any secret or
confidential information whatsoever in trust for the sole benefit of the
Transfer Agent or the Customer and their successors and assigns. The above
prohibition of disclosure shall not apply to the extent that the Transfer Agent
must disclose such data to its sub-contractor or agent for purposes of providing
services under this Agreement.

      15.2 Request for Records. In the event that any requests or demands are
made for the inspection of the Shareholder records of the Customer, other than
request for records of Shareholders pursuant to standard subpoenas from state or
federal government authorities (e.g., in divorce and criminal actions), the
Transfer Agent will endeavor to notify the Customer and to secure instructions
from an authorized officer of the Customer as to such inspection. The Transfer
Agent expressly reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by counsel that it may be held liable for
the failure to exhibit the Shareholder records to such person or if required by
law or court order.

16.  Term and Termination.

     16.1 Term. The Initial Term of this Agreement shall be three (3) years from
the date first stated above unless terminated pursuant to the provisions of
this Section 16.  Unless a terminating  party gives written  notice to the other
party sixty (60) days before the  expiration of the Initial Term this  Agreement
will renew  automatically  from year to year ("Renewal  Term").  Sixty (60) days
before the  expiration of the Initial Term or a Renewal Term the parties to this
Agreement  will agree upon a Fee Schedule for the upcoming  Renewal  Term. If no
new fee schedule is agreed upon,  the fees will increase as set forth in Section
7.2.

                    16.2 Early Termination. Notwithstanding anything contained
in this Agreement to the contrary, should Customer desire to move any of its
Services provided by the Transfer Agent hereunder to a successor service
provider prior to the expiration of the then current Initial or Renewal Term, or
without the required notice period, the Transfer Agent shall make a good faith
effort to facilitate the conversion on such prior date, however, there can be no
guarantee that the Transfer Agent will be able to facilitate a conversion of
Services on such prior date. In connection with the foregoing, should Services
be converted to a successor service provider, or if the Customer is liquidated
or its assets merged or purchased or the like with another entity which does not
utilize the services of the Transfer Agent, the fees payable to the Transfer
Agent shall be calculated as if the services had remained with the Transfer
Agent until the expiration of the then current Initial or Renewal Term and
calculated at existing rates on the date notice of termination was given to the
Transfer Agent, and the payment of fees to the Transfer Agent as set forth
herein shall be accelerated to the date prior to the conversion or termination
of services. Section 16.2 shall not apply if the Transfer Agent is terminated
for cause under Section 16.4(a) of this Agreement.

                    16.3 Expiration of Term. After the expiration of the Initial
Term or Renewal Term whichever currently in effect, should either party exercise
its right to terminate, all reasonable out-of-pocket expenses or costs
associated with the movement of records and material will be borne by the
Customer. Additionally, the Transfer Agent reserves the right to charge for any
other reasonable expenses associated with such termination and a
de-conversion/transition fee in an amount equal to 25% of the aggregate fees
incurred by Customer during the immediately preceding twelve (12) month period,
provided, however, such fee shall in no event be less than $5,000.

      16.4        Termination.
                  -----------

      This Agreement may be terminated in accordance with the following:

                  (a) at any time by any party upon a material breach of a
                  representation, covenant or term of this Agreement by any
                  other unaffiliated party which is not cured within a period
                  not to exceed thirty (30) days after the date of written
                  notice thereof by one of the other parties; and

                  (b) by Transfer Agent, at any time, in the event that during
                  the term of this Agreement, a bankruptcy or insolvency
                  proceeding is filed by or against Customer or a trustee or
                  receiver is appointed for any substantial part of Customer's
                  property (and in a case of involuntary bankruptcy, insolvency
                  or receivership proceeding, there is entered an order for
                  relief, or order appointing a receiver or some similar order
                  or decree and Customer does not succeed in having such order
                  lifted or stayed within sixty (60) days from the date of its
                  entry), or Customer makes an assignment of all or
                  substantially all of its property for the benefit of creditors
                  or ceases to conduct its operations in the normal course or
                  business.

      16.5 Records. Upon receipt of written notice of termination, the parties
      will use commercially practicable efforts to effect an orderly termination
      of this Agreement. Without limiting the foregoing, Transfer Agent will
      deliver promptly to Customer, in machine readable form on media as
      reasonably requested by Customer, all Shareholder and other records, files
      and data supplied to or compiled by Transfer Agent on behalf of Customer.

17.  Assignment.

      17.1 Affiliates. The Transfer Agent may, without further consent of the
      Customer assign its rights and obligations hereunto to any affiliated
      transfer agent registered under Section 17A(c)(2) of the Exchange Act.

      17.2 Sub-contractors. Transfer Agent may, without further consent on the
      part of Customer, subcontract with other subcontractors for telephone and
      mailing services as may be required from time to time; provided, however,
      that the Transfer Agent shall be as fully responsible to the Customer for
      the acts and omissions of any subcontractor as it is for its own acts and
      omissions.

18.  Unaffiliated Third Parties.

      Nothing herein shall impose any duty upon the Transfer Agent in connection
with or make the Transfer Agent liable for the actions or omissions to act of
unaffiliated third parties such as, by way of example and not limitation,
airborne services, the U.S. mails and telecommunication companies, provided, if
the Transfer Agent selected such company, the Transfer Agent shall have
exercised due care in selecting the same.

19.      Miscellaneous.

      19.1      Notices.

      Any notice or communication by the Transfer Agent or the Customer to the
other is duly given if in writing and delivered in person or mailed by first
class mail, postage prepaid, telex, telecopier or overnight air courier
guaranteeing next day delivery, to the other's address:

                  If to the Customer:

                  Evergreen Investments
                  200 Berkeley Street
                  Boston, MA 02116
                  Attn: General Counsel
                  (617) 210-3663

                  If to the Transfer Agent:
                  EquiServe Trust Company, N.A.
                  c/o EquiServe, Inc.
                  150 Royall Street
                  Canton, MA  02021
                  Telecopy No.: (781) 575-4188
                  Attn:  General Counsel

      The Transfer Agent and the Customer may, by notice to the other, designate
additional or different addresses for subsequent notices or communications.

     19.2        Successors.

      All the covenants and provisions of this agreement by or for the benefit
of the Customer or the Transfer Agent shall bind and inure to the benefit of
their respective successors and assigns hereunder.



     19.3       Amendments.

      This Agreement may be amended or modified by a written amendment executed
by the parties hereto and, to the extent required, authorized or approved by a
resolution of the Board of Trustees of the Customer.

     19.4       Severability.

     If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provision, covenants and restrictions
of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.

     19.5       Governing Law.

      This Agreement shall be governed by the laws of The Commonwealth of
Massachusetts.

     19.6       Force Majeure.

     Notwithstanding anything to the contrary contained herein, Transfer Agent
shall not be liable for any delays or failures in performance resulting from
acts beyond its reasonable control including, without limitation, acts of God,
terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or
malfunction of computer facilities, or loss of data due to power failures or
mechanical difficulties with information storage or retrieval systems, labor
difficulties, war, or civil unrest.

     19.7       Descriptive Headings.

     Descriptive headings of the several sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.

     19.8        Third Party Beneficiaries.

     The provisions of this Agreement are intended to benefit only the Transfer
Agent, the Customer and their respective permitted successors and assigns. No
rights shall be granted to any other person by virtue of this agreement, and
there are no third party beneficiaries hereof.

     19.9       Survival.

     All provisions regarding indemnification, warranty, liability and limits
thereon, and confidentiality and protection of proprietary rights and trade
secrets shall survive the termination of this Agreement.



       19.10     Priorities.

     In the event of any conflict, discrepancy, or ambiguity between the terms
and conditions contained in this Agreement and any schedules or attachments
hereto, the terms and conditions contained in this Agreement shall take
precedence.

     19.11       Merger of Agreement.

     This agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter hereof,
whether oral or written.

     19.12       Counterparts.

     This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.





<PAGE>



     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
     be executed by one of its officers thereunto duly authorized, all as of the
     date first written above.

                   Evergreen Investments for the Closed End Funds listed on
                   Exhibit B attached.

                   By: /s/ Catherine F. Kennedy
                   Name:  Catherine F. Kennedy
                   Title:  Assistant Secretary



EquiServe, Inc.                                 EquiServe Trust Company, N.A.

By: /s/ Dennis V. Moccia                        By: /s/ Dennis V. Moccia
    --------------------                            --------------------
Name: Dennis V. Moccia                          Name: Dennis V. Moccia
Title: Managing Director                        Title: Managing Director


DDD 12/04/02


<PAGE>



                                    Exhibit B

Evergreen Income Advantage Fund
Evergreen Managed Income Fund


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2N
<SEQUENCE>13
<FILENAME>audconsent.txt
<TEXT>











                              CONSENT OF INDEPENDENT AUDITORS



Board of Trustees and Shareholders
Evergreen Managed Income Fund:



     We consent to the use of our report  dated May 19,  2003,  included in this
     Registration Statement, and to the references to our firm under the caption
     "EXPERTS" in the Statement of Additional Information.

                                                     /s/ KPMG LLP

Boston, Massachusetts
May 20, 2003







</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2P
<SEQUENCE>14
<FILENAME>initialsubscriagree.txt
<TEXT>








                                                              May 16, 2003


Board of Trustees
Evergreen Income Advantage Fund
200 Berkeley Street
Boston, MA  02116

Re:      Initial Capital Investment Evergreen Managed Income Fund

Ladies and Gentlemen:

         Evergreen Managed Income Fund (the "Trust") has been organized as a
Delaware statutory trust. The Trustees of the Trust initially have designated
one class of shares for the Trust, common shares of beneficially interest
("common shares"). We hereby agree to purchase common shares of the Trust to
provide the initial capitalization of the Trust, upon the terms and conditions
set forth below.

         We shall purchase 5,000 common shares of the Trust at a purchase price
of $20.00 per share, for a total purchase price of $100,000.

         We hereby acknowledge that these shares are being purchased in a
private placement transaction that is exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act") pursuant to Section
4(2) of the Securities Act. We represent that the Trust had made available to us
all information necessary for us to make our investment decision. We further
represent that (i) we are purchasing these shares solely for our own account and
solely for investment purposes without any intent of distributing or reselling
the shares, and (ii) any disposition of the shares will be made in accordance
with the Securities Act, and the rules and regulations thereunder, including
without limitation Rule 144.

                                       Sincerely yours,

                                       EVERGREEN FINANCING COMPANY, LLC


                                       By: _/s/ Michael H. Koonce
                                       Michael H. Koonce
                                       Secretary

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2R 2
<SEQUENCE>15
<FILENAME>advisorcodeofethics.txt
<TEXT>

                                 CODE OF ETHICS


EVERGREEN INVESTMENT MANAGEMENT COMPANY
TATTERSALL ADVISORY GROUP, INC.

                           Effective December 2, 2002

As an Employee of any of the CMG Covered Companies, you are required to read,
understand and abide by this Code of Ethics. The Code contains affirmative
requirements as well as prohibitions that you are required to adhere to in
connection with securities transactions effected on your behalf and on behalf of
clients (including the Evergreen Funds). Such requirements include, among other
things, (i.) notifying the Compliance Department upon establishing a personal
securities account with a broker/dealer, (ii.) in certain cases, obtaining
permission prior to engaging in a personal securities transaction, and (iii.)
reporting personal securities transactions to the Compliance Department. Failure
to adhere to the Code could result in sanctions, including dismissal from
employment, and could also in certain cases expose you to civil or criminal
penalties such as fines and/or imprisonment.

No written code can explicitly cover every situation that possibly may arise.
Even in situations not expressly described, the Code and your fiduciary
obligations generally require you to put the interests of your clients ahead of
your own. In the interests of the company and Evergreen clients, the Compliance
Officer has the obligation and duty to review and deny any instances of conduct
that may not necessarily violate the letter of the code, but give the appearance
of impropriety. If you have any questions regarding the appropriateness of any
action under this Code or under your fiduciary duties generally, you should
contact your Compliance Officer or Assistant General Counsel to discuss the
matter before taking the action in question. Similarly, you should consult with
your Compliance or Legal officer if you have any questions concerning the
meaning or interpretation of any provision of the Code.

Finally, as an Employee of Wachovia Corporation or one of its divisions or
subsidiaries, you should consult Wachovia's Code of Conduct contained in your
Employee Handbook. This Code uses many defined terms that are defined in Section
V.

I. PROHIBITED ACTIVITIES

A. No Employee shall engage in any Security transactions, activity or
relationship that creates or has the appearance of creating a conflict of
interest (financial or other) between the Employee and a Covered Company or a
Client Account. Each Employee shall always place the financial and business
interests of the Covered Companies and Client Accounts before his or her own
personal financial and business interests.

B. No Employee shall:

1) employ any device, scheme or artifice to defraud a Client Account;
2) engage in any act, practice, or course of business which operates or would
operate as a fraud or deceit upon a Client Account ; or
3) engage in any
fraudulent, deceptive or manipulative practice with respect to a Client Account
4) engage in any transactions that may give the appearance of impropriety.

C. No Employee shall purchase or sell, directly or indirectly, any Security for
any Personal Account, any Client Account, the account of a Covered Company, or
any other account, while in possession of Inside Information concerning that
Security or the issuer without the prior written approval of the Compliance
Officer and the Assistant General Counsel and (per Wachovia's Code of Conduct)
Wachovia's Conflict of Interest Committee, which approval shall specifically
determine that such trading would not constitute an improper use of such Inside
Information. Employees possessing Inside Information shall take reasonable
precautions to ensure that such information is not disseminated beyond those
Employees with a need to know such information. Any questions should be directed
to the Compliance Officer or Assistant General Counsel.

D. No Employee shall recommend or cause a Covered Company or Client Account to
take action or refrain from taking action for the Employee's own personal
benefit.

E. (1) No Employee shall purchase or sell any Security for any Personal Account
if he or she knows such Security (i.) is being purchased or sold for any Covered
Company or Client Account or (ii.) is being actively considered for purchase or
sale by any Covered Company or Client account.

      (2) A Covered Company shall not purchase or sell any Security for its own
account if the Employee making such purchase or sale knows such Security (i.) is
being purchased or sold for any Client Account or (ii.) is being actively
considered for purchase or sale by any Client Account.

The prohibitions contained in E.(1) and E.(2) shall not apply to:

(a) purchases  pursuant to a dividend  reinvestment  program or purchases  based
upon preexisting status as a security holder, policyholder or depositor;

(b)  purchases  of  Securities  through  the  exercise  of rights  issued to the
Employee as part of a pro rata issue to all holders of such Securities,  and the
sale of such rights;

(c) transactions that are non-volitional,  including any sale out of a brokerage
account  resulting  from a bona fide margin call as long as  collateral  was not
withdrawn from such account within 10 days prior to the call; and

(d) transactions  previously  approved in writing by the Compliance Officer that
have been  determined  not to be harmful to any  Client  Account  because of the
volume of trading in the Security.

F. No Employee shall purchase a Security for any Personal Account in an initial
public offering, except for initial public offerings where the individual has a
right to purchase the Security based on a preexisting status as a security
holder, policy holder or depositor.

G. No Employee shall maintain or open a brokerage account constituting a
Personal Account unless duplicate confirmations and statements of all account
activity are forwarded to the Compliance Officer.

H. No Employee shall use any Derivative to evade the restrictions of this Code
of Ethics.

I. No Investment Person shall be a director of a publicly traded company other
than Wachovia Corporation without prior written approval of the Compliance
Officer. Approval generally will not be granted.

J. No Access Person shall make investments for any Personal Account in any
investment club without prior written approval from the Compliance Officer.

K. No Access Person may purchase a Security for any Personal Account in a
private offering without prior written approval of the person's Chief Investment
Officer or the Compliance Officer. In considering whether to grant such
approval, the Compliance Officer or Chief Investment Officer will consider
several factors, including but not limited to:

(1) whether the investment opportunity should be reserved for a Client Account;
and
(2) whether the opportunity is being offered to the Access Person by virtue of
his or her position with respect to a Client Account or a Covered Company.

If approval is granted, the Access Person must disclose the investment to the
appropriate Chief Investment Officer before participating in any way in any
decision as to whether a Client Account should invest in such Security or in
another Security issued by the same issuer. In such circumstances, the Chief
Investment Officer will conduct a review by investment personnel with no
interest in the issuer prior to a purchase on behalf of a Client Account. The
Compliance Officer shall retain a record of this approval and the rationale
supporting it.

L. No Access Person may offer investment advice or manage any person's portfolio
in which he or she does not have Beneficial Ownership other than a Client
Account without prior written approval from the Compliance Officer.

M. No Investment Person may profit from the purchase and sale or sale and
purchase of the same (or equivalent) Securities (other than securities issued by
Wachovia Corporation) in a Personal Account within 60 calendar days. Any
resulting profits will be disgorged as instructed by the Compliance Officer.

N. No Investment Person may buy or sell a Security for any Personal Account
within seven calendar days before or after a Client Account that he or she
manages, or provides information or advice to, or executes investment decisions
for, trades in that Security, except:

(1) purchases  pursuant to a dividend  reinvestment  program or purchases  based
upon preexisting status as a security holder, policyholder or depositor;

(2)  purchases  of  Securities  through  the  exercise  of rights  issued to the
Employee as part of a pro rata issue to all holders of such Securities,  and the
sale of such rights;

(3) transactions that are non-volitional, including any sale out of a
brokerage account resulting from a bona fide margin call as long as collateral
was not withdrawn from such account within ten days prior to the call; and

(4) transactions  previously  approved in writing by the Compliance Officer that
have been  determined  not to be harmful to any  Client  Account  because of the
volume of trading in the Security.

Any related profits from such transaction will be disgorged as instructed by the
Compliance Officer.

O. No Employee shall, directly or indirectly, in connection with any purchase or
sale of any Security by a Client Account or a Covered Company or in connection
with the business of a Client Account or a Covered Company, accept or receive
from a third party any gift or other thing of more than de minimis value, other
than (i.) business entertainment such as meals and sporting events involving no
more than ordinary amenities and (ii.) unsolicited advertising or promotional
materials that are generally available. An Employee also should consult Wachovia
Corporation's Code of Conduct relating to acceptance of gifts from customers and
suppliers. An Employee shall refer questions regarding the permissibility of
accepting items of more than de minimis value to the Compliance Officer.

II.      PRE-CLEARING PERSONAL TRADES

Pre-Clearance Procedures and Standards

A.   No Access  Person  may engage in a  Securities  transaction  (other  than a
     transaction  described  in Section B. below)  involving a Personal  Account
     unless  he/she  has first  pre-cleared  the  transaction  by  completing  a
     Personal  Investment  Pre-Clearance  Form  and had the form  signed  and/or
     initialed as set forth  therein.  Approval shall be indicated by the Access
     Person's Chief Investment  Officer or other designated  supervisor  signing
     and  dating the Form  where  indicated  at the  bottom.  Employees  who are
     required to report trades through the StarCompliance  Intranet system shall
     complete a Personalized Trade Authorization Form (PTAF).  Approval shall be
     indicated by an approval  from the  Compliance  Officer.  A trade cannot be
     completed unless an approval has been received or the security is exempt or
     below the de minimis.  Any such approval  shall only be valid until the end
     of the next  trading . The time  allotment is limited to the actual time of
     purchase or sale of the  Security.  If execution of the trade does not take
     place  by the end of the  next  trading  day,  then  another  pre-clearance
     request (or PTAF) must be processed and approved.  "Good till canceled" and
     "no limit" orders are forbidden.


B.       The following transactions are excluded from the pre-clearance
         requirement:

(1)      any transactions in Securities traded on a national securities exchange
         or NASDAQ NMS with an aggregate amount of (i.) 500 shares or less or
         (ii.) $25,000 or less (whichever is a lessor amount) of a particular
         security within a seven-day window. The de minimis is not valid for an
         Investment Person who has knowledge of recent purchases and sales of
         the same security within Client accounts.
(2)      purchases pursuant to a dividend reinvestment program (DRIP) or
         purchases based upon preexisting status as a security holder, policy
         holder or depositor;
(3)      purchases of Securities through the exercise
         of rights issued to the Employee as part of a pro rata issue to all
         holders of such Securities, and the sale of such rights;
(4)      transactions that are non-volitional, including any sale out of a
         brokerage account resulting from a bona fide margin call as long as
         collateral was not withdrawn from such account within ten days prior to
         the call;
(5)      transactions in Securities issued by Wachovia
         Corporation;
(6)      transactions by an Investment Person in a Security
         that all Client Accounts for which the person makes or executes
         investment decisions or recommendations are prohibited under their
         investment guidelines from purchasing; and
(7)      transactions previously
         approved in writing by the Compliance Officer that have been determined
         not to be harmful to any Client Account because of the volume of
         trading in the Security.

C.       Failure to receive pre-approval on applicable trades will result in the
         following actions:

(1)      First Failure: Letter of Reprimand;
(2)      Second Failure: $100.00 fine, payable to a charity agreeable to the
         Compliance Officer and the Access Person;
(3)      Third Failure: $250.00 fine, payable to a charity agreeable to the
         Compliance Officer and the Access Person;
(4)      Fourth Failure: Referral to appropriate management for action.

D. All employees should consult the Wachovia Code of Conduct regarding the
permissibility of investing in other financial institutions.


III. REPORTING REQUIREMENTS

A. Each year every Employee must sign an acknowledgment stating that he/she has
received and reviewed and will comply with this Code of Ethics. New Employees
should read and sign the policy within 30 days of employment.

B. Each Employee shall give written instructions to every broker with whom he or
she transacts for any Personal Account to provide duplicate confirmation for all
purchases and sales of Securities to:

For Evergreen Investment Management Company - Boston, Richmond, New York,
Winston- Salem and Charlotte Employees:

         Evergreen Investments
         Compliance Department
         200 Berkeley Street, 23rd Floor
         Boston, MA  02116

For Tattersall Advisory Group, Inc. Employees:

         Tattersall Advisory Group, Inc.
         6802 Paragon Place, Suite 200
         Richmond, VA  23230
         ATTN:  Compliance Department

C. Employees who are not Investment Persons or Access Persons must report all
transactions for their Personal Account annually for each year ending December
31 by the following January 31. Employees reporting using the StarCompliance
system must file the required annual reports using that system.

D. Each Access Person must report all Securities holdings in all Personal
Accounts upon commencement of employment (or within ten days of becoming an
Access Person) and thereafter annually, for each year ending December 31 by the
following January 31. A separate holdings list need not be provided if all
personal security holdings are otherwise listed on copies of brokerage
statements received by Compliance. If the employee's trades are tracked using
the StarCompliance system, initial holdings must be reported through that
system.

E. Each Access Person shall file with the Compliance Officer within ten calendar
days after the end of each calendar quarter (March 31, June 30, September 30,
December 31) a report listing each Security transaction (including those exempt
from the pre-clearance requirements) effected during the quarter for any
Personal Account; provided, however, a Security transaction need not be
separately reported under this paragraph if a copy of a broker confirmation for
the transaction was forwarded to the appropriate Compliance Officer as required
under Section 1.G. Employees using the StarCompliance system must file quarterly
reports using that system.

F. Any Employee who becomes aware of any person trading on or communicating
Inside Information (or contemplating such actions) must report such event to the
Compliance Officer or the Assistant General Counsel.

G. Any Employee who becomes aware of any person violating this Code of Ethics
must report such event to the Compliance Officer or the Assistant General
Counsel.

IV. ENFORCEMENT

A. Review: - The Compliance Officer shall review reports filed under the Code of
Ethics to determine whether any violation of this Code of Ethics may have
occurred. This includes not only instances of violations against the letter of
the code, but also any instances that may give the appearance of impropriety.

B. Investigation: - The Assistant General Counsel shall investigate any
substantive alleged violation of the Code of Ethics. An Employee allegedly
involved in a violation of the Code of Ethics may be required to deliver to the
Assistant General Counsel or his/her designee all tax returns involving any
Personal Account or any Securities for which the Employee has Beneficial
Ownership for all years requested. Failure to comply may result in termination.

C. Sanctions: - In determining the sanctions to be imposed for a violation of
this Code of Ethics, the following factors, among others, may be considered:

(1) the degree of willfulness of the violation;
(2) the severity of the violation;
(3) the extent, if any, to which an Employee profited or benefited from the
violation;
(4) the adverse effect, if any, of the violation on a Covered Company
or a Client Account; and
(5) any history of prior violation of the Code.

    The following sanctions, among others, may be considered:

(1) disgorgement of profits;
(2) fines;
(3) letter of reprimand;
(4) suspension or termination of employment; and
(5) such other actions as the Compliance Officer in concert with appropriate
legal counsel, or the Boards of Trustees of the Evergreen Funds, shall
determine.

D. All violations of the Code of Ethics involving Employees with
responsibilities relating to the Evergreen Funds or otherwise involving the
Evergreen Funds, and any sanctions imposed shall be reported to the Boards of
Trustees of the Evergreen Funds. All violations of the Code and any sanctions
also shall be reported to the Employee's supervisor, and any regulatory agency
requiring such reporting, and shall be filed in the Employee's personnel record.

E. Potential Legal Penalties for Misuse of Inside Information

(1) civil penalties up to three times the profit gained or loss avoided;
(2) disgorgement of profits;
(3) injunctions, including being banned from the
securities industry;
(4) criminal penalties up to $1 million; and/or
(5) jail sentences.

V. DEFINITIONS

Access Person: Access Person includes: (i.) any director of a Covered Company or
any officer of a Covered Company with the title of Vice President or above, but
excluding any such director or officer excluded in writing by the Covered
Company's Compliance Officer with the approval of the Assistant General Counsel;
(ii.) any Investment Person, but excluding any such person excluded in writing
by the appropriate person's Compliance Officer with the approval of the
Assistant General Counsel; and (iii.) any Employee of a Covered Company who, in
connection with his or her regular duties, makes, participates in, or obtains
information regarding the purchase or sale of a Security by a Client Account or
a Covered Company. Upon the hiring of a new Employee or of a change in an
Employee's job title or responsibilities, the Chief Operating Officer, with the
approval of the appropriate Compliance Officer, will determine whether the
employee or has become an Access Person under the Code. The Compliance Officer
will notify the employee.

Assistant General Counsel:  Michael H. Koonce - 617/210-3663

Beneficial Ownership: A direct or indirect financial interest in an investment
giving a person the opportunity directly or indirectly to participate in the
risks and rewards of the investment, regardless of the actual owner of record.
Securities of which a person may have Beneficial Ownership include, but are not
limited to:

(1) securities owned by a spouse, by or for minor children, or by relatives of
the person or his/her spouse who live in his/her home, including Securities in
trusts of which such persons are beneficiaries;
(2) a proportionate interest in
Securities held by a partnership of which the person is a general partner;
(3) securities for which a person has a right to dividends that are separated or
separable from the underlying securities; and
(4) securities that a person has a
right to acquire through the exercise or conversion of another Security.

Client Account: Any account of any person or entity (including an investment
company) for which a Covered Company provides investment advisory or investment
management services. Client Account does not include brokerage or other accounts
not involving investment advisory or management services.

Compliance  Officer:  The Compliance  Officers for each Covered  Company are set
     forth below:

     Evergreen  Investment  Management  Company - Charlotte,  Boston,  New York,
     Winston-Salem and Richmond

         Cathy White                        617/210-3606
         Jim Angelos                        617/210-3690
         Lisa Styles                        336/747-8830

         Tattersall Advisory Group

         Margaret Corwin                    804/289-2663


Covered Company: Includes Evergreen Investment Management Company and Tattersall
Advisory  Group,  Inc.  Covered  Company also includes any other  registered CMG
investment advisors that are acquired during the time this Code is in effect.

Derivative: Every financial arrangement whose value is linked to, or derived
from, fluctuations in the prices of stock, bonds, currencies or other assets.
Derivatives include but are not limited to futures, forward contracts, options
and swaps on interest rates, currencies, and stocks.

Direct or Indirect Influence or Control: The power on the part of an Employee,
his/her spouse or a relative living in his/her home to directly or indirectly
influence the selection or disposition of investments.

Employee: Any director, officer, or employee of a Covered Company, including
temporary or part-time employees and employees on short-term disability or leave
of absence. Independent contractors and their employees providing services to a
Covered Company, if designated by the Compliance Officer, shall be treated as
Employees under this Code.

Evergreen Funds: The open and closed-end investment companies advised or
administered by the Covered Companies.

Inside Information:  Information regarding a Security or its issuer that has not
yet been effectively  communicated to the public through an SEC filing or widely
distributed  news  release,  and  which a  reasonable  investor  would  consider
important  in making an  investment  decision or which is  reasonably  likely to
impact the trading price of the Security.  Inside Information  includes,  but is
not  limited  to,  information  about  (i.)  dividend  changes,  (ii.)  earnings
estimates and changes to previously released estimates,  (iii.) other changes in
financial  status,  (iv.) proposed  mergers or  acquisitions,  (v.) purchases or
sales of material amounts of assets, (vi.) significant new business, products or
discoveries or losses of business, (vii.) litigation or investigations,  (viii.)
liquidity difficulties or (ix.) management changes.

Investment Person: An Employee who is a portfolio manager, securities analyst,
or trader, or who otherwise makes recommendations regarding or effects the
purchase or sale of securities by a Client Account.

Personal Account: Any holding of Securities constituting Beneficial Ownership,
other than a holding of Securities previously approved by the Compliance Officer
over which the Employee has no Direct Influence or Control. A Personal Account
is not limited to securities accounts maintained at brokerage firms, but also
includes holdings of Securities owned directly by an Employee.

Security: Any type of equity or debt instrument and any rights relating thereto,
such as derivatives, warrants and convertible securities.

Unless otherwise noted, Security does not include:

(1) US Government Securities (see definition below);
(2) commercial paper, certificates of deposit, repurchase agreements, bankers'
acceptances, or any other money market instruments;
(3) shares of registered
open-end investment companies (i.e., mutual funds);
(4) commodities (except the
Security that does include options on individual equity or debt securities);
(5)
real estate investment trusts;
(6) guaranteed insurance contracts/ bank
investment contracts; or
(7) index based securities;
(8) derivatives based on
any instruments listed above.

Shares issued by all closed end funds (excluding index-based derivatives) are
included in the definition of Security.

U.S. Government Securities: All direct obligations of the U.S. Government and
its agencies and instrumentalities (for instance, obligations of GNMA, FHLCC, or
FHLBs).



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2R 3
<SEQUENCE>16
<FILENAME>subadvisorcodeofethics.txt
<TEXT>

                    FIRST INTERNATIONAL ADVISORS, LLC ("FIA")

                  CODE OF PRACTICE GOVERNING PERSONAL DEALINGS



1.  General

FIA's employees and Directors ("staff") are entitled to manage their own affairs
and are not  expected to refrain from  personal  dealings in  investments.  They
must, however, accept that the nature of their work imposes some restrictions on
the  dealings  in which they can engage and reduces the extent to which they can
claim complete privacy for their personal financial  transactions.  This applies
also to dealings  for any pension  policies or similar  arrangements  over which
they have discretion, to dealings by their spouses and children under the age of
18, and by any trust, private company or arrangement with another party in which
they or their spouse (or such other persons) or children have an effective voice
in  investment  decisions  or a beneficial  interest,  and dealings by any other
"connected person".

It is not meant to suggest that such dealings are disallowed. However, care will
be necessary on the part of those  directly or  indirectly  concerned  with such
matters to ensure that the letter and spirit of this Code are not breached.  All
members of staff should be prudent in their financial  dealings.  In particular,
they should not enter into commitments which they may be unable to meet.

         For the purpose of this Code:

     (i)  "investments"  means all types of  investments  other than  government
          securities, life policies and unit trusts;

     (ii) "dealings" include  purchases,  sales,  subscriptions,  acceptances or
          take-over  and other  offers and all other  methods of  acquiring  and
          disposing of investments;

     (iii)"connected  person" means any person who is connected with a member of
          staff by reason of a personal or business  relationship (other than by
          virtue of being a client) such that the member of staff has  influence
          over that person's judgment as to how to invest that person's property
          or exercise any rights  attaching to that  person's  investments  when
          that person is acting on that person's own account.

2.  Confidential Information

It is a fundamental  rule that staff must not use for their own advantage or for
the advantage of others (for example,  other clients),  any information that has
come into their possession relating to policy matters,  investment  decisions or
dealings  concerning  investment  business  undertaken for clients.  The duty of
confidentiality  goes  further,  however,  and a  member  of  staff  must  avoid
disclosing any confidential  information to others, whether or not the member of
staff believes the recipient of the information will benefit.

3.  Insider Dealing

Staff must comply with the Criminal Justice Act of 1993 (Part V Insider Dealing)
and all other subsequent  relevant  legislation.  A summary of the provisions of
the Act is set out in  Attachment B and a copy of the Act is available  from the
Compliance Officer.

If a member of staff is  prohibited  by the Act from  acquiring  or disposing of
investments  for  himself or a connected  person,  that member of staff must not
acquire or dispose of such  investments  for a client unless that client gives a
specific instruction unprompted by a member of staff.

4.  Personal Dealings - Conflict of Interest with clients

     (a)  Members of staff of FIA must at all times avoid actions which involve,
          or might seem to involve,  a conflict of interest  between  themselves
          (or their connected  persons) and a client. For this reason staff must
          not deal in an investment  for  themselves or a connected  person when
          they are aware that FIA or another company in the First Union Group is
          currently buying or selling that investment or a connected  investment
          (for example, an ADR or option) for a client or considering whether to
          do so. Once FIA or the other  company has completed its order (and any
          market  impact of the order has  dissipated)  or decided  not to deal,
          staff  may  do  so.  For  these  purposes,  "are  aware"  means  "have
          knowledge" and does not impose a duty to make enquiries.

     (b)  The staff of FIA must not undertake personal deals for themselves or a
          connected person directly with a client.

     (c)  Under no circumstances  should a member of staff accept placements and
          new issues directly from counterparties with whom FIA regularly deals,
          nor should they accept any  securities  at a discounted  price from an
          intermediary.

          Staging of public  issues it  permitted,  but only to the extent  that
          such application is within the individual's means and within the terms
          of issue.

     (d)  Subject as referred to in this Code, FIA hereby consents to members of
          staff  dealing in the same  investments  as FIA may deal in as part of
          the business it has been authorized to conduct by IMRO (referred to as
          "Permitted Business").

5.  Dealing Services

     (a)  Staff of FIA  dealing  on their own  account  or for the  account of a
          connected  person  may only do so  through  their own  broker or other
          counterparty and must inform the broker or counterparty concerned that
          the staff  member is an employee or Director of FIA.  Members of staff
          must not  request  or accept  from the  broker  any  credit or special
          dealing  facilities  without  the prior and  specific  consent  of the
          Managing Director of FIA.

          Before dealing,  members of staff must clear the proposed  transaction
          in advance by obtaining the approval of the Managing Director.  Within
          24 hours of the deal taking place,  the transaction  should be entered
          in  the  Personal  Dealing  Register,   which  is  maintained  by  the
          Compliance Officer,  and the entry should be initialed by the Managing
          Director.

          FIA's members of staff must  irrevocably  instruct the broker or other
          counterparty  concerned  to provide  copies of contract  notes for all
          dealings,  and any other  information  concerning the dealings of such
          member of staff and  connected  persons,  directly  to the  Compliance
          officer of FIA within one business day of the dealings.

          A file  containing  all such contract  notes will be maintained by the
          Compliance Officer.

(b)      Paragraphs 4, 5(a) and 6 of this Code do not apply to the following:

          (i)  personal  equity  plans  or  pension  arrangements  managed  on a
               discretionary  basis by a person  independent  of the  member  of
               staff and Connected Persons;

          (ii) discretionary management arrangements entered into by a member of
               staff which such an independent manager.

          Details  of such  arrangements  as  referred  to in (i) and (ii) above
          entered  into by a member of staff must be notified to the  Compliance
          Officer as soon as they have been entered into.

          (c)  Dealings  in First  Union  Corporation  (or any First Union Group
               company,  if appropriate) are not permitted except with the prior
               agreement of the Managing Director.

6.  Connected Persons

          Staff must do all in their  power to ensure  that  connected  persons,
          when acting for their own account,  observe the  requirements  of this
          Code as though they applied to those persons. If a connected person or
          a member of staff is an officer  of  employee  of  another  investment
          business and subject to the personal  dealing rules of that investment
          business instead, the Compliance Officer should be consulted.

7.  Compliance

          (a)  FIA's members of staff should  satisfy  themselves  that they and
               their connected  persons are free to deal in any security.  If in
               any doubt,  they should  consult  the  Managing  Director  before
               dealing.

          (b)  Non-compliance  with this Code and with any amendments  from time
               to time notified to members of staff will, in appropriate  cases,
               be deemed a breach of a fundamental  term of employment  and will
               be grounds for instant dismissal.


                ................................................


I agree to comply with the terms of the above Code of Practice.

Signed:  ................................................

Name:  ...................................................

Date:  ...................................................


                                  ATTACHMENT B

                    SUMMARY OF THE CRIMINAL JUSTICE ACT 1933
                            PART V (INSIDER DEALING)


     1.  Insider  dealing is governed  by the Act,  which  provides,  in general
terms,  that insider dealing by individuals in certain  circumstances  will be a
criminal offense.

     2. The current climate in the securities markets is such that conduct which
may at one time have been  considered  normal may no longer be acceptable and in
any  event is likely to be  scrutinized  and,  where  appropriate,  called  into
question. Insider dealing is increasingly being taken seriously and so care must
be taken at all times to comply with the Act.

     3. Under the Act,  insider dealing is a criminal  offense.  Insider dealing
includes:

          (a)  buying or selling directly or indirectly,  any security the price
               of  which  would  be  likely  to  be  significantly  affected  by
               information  known  to the  person  buying  or  selling  but  not
               generally available;

     or   (b)  encouraging  somebody  else to buy or sell,  whether  or not that
          person realizes the information is not generally available;

     or   (c) merely disclosing the information to another person otherwise than
          in the proper performance of your employment or profession.

     4. The Act makes  provision  for  certain  defenses  to a charge of insider
dealing but they are very limited in scope and difficult to prove.  Only in very
limited  circumstances  will your  actions  not look like an  attempt to benefit
yourself or somebody else.

     5. If you are in any doubt  whether a  transaction  you  propose to make or
information  you propose to disclose will bring you within the scope of the Act,
YOU MUST DISCUSS IT WITH THE COMPLIANCE OFFICER (or in his absence, the Managing
Director) before you take action.


     If convicted of insider dealing, you will be liable to a fine (which may be
substantial) and/or imprisonment. You will have a criminal record.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>17
<FILENAME>powerofattorney.txt
<TEXT>
                                POWER OF ATTORNEY

     I, the undersigned,  hereby  constitute  Maureen E. Towle,  Sally E. Ganem,
Catherine E. Foley, Lloyd Lipsett,  Michael H. Koonce, John A. Dudley, Robert N.
Hickey, David M. Leahy and David Mahaffey,  and each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me and in
my name in the capacity  indicated  below any and all  registration  statements,
including,  but not  limited to,  Forms N-8A,  N-8B-1,  S-5,  N-14 and N-1A,  as
amended from time to time, and any and all  amendments  thereto to be filed with
the Securities and Exchange  Commission for the purpose of registering from time
to time all investment  companies of which I am now or hereafter Trustee and for
which Evergreen  Investment  Management  Company,  LLC, or any other  investment
advisory  affiliate of First Union National  Bank,  serves as Advisor or Manager
and registering from time to time the shares of such companies, and generally to
do all such  things  in my name  and on my  behalf  to  enable  such  investment
companies  to comply  with the  provisions  of the  Securities  Act of 1933,  as
amended,  the Investment  Company Act of 1940, as amended,  and all requirements
and  regulations of the Securities and Exchange  Commission  thereunder,  hereby
ratifying and  confirming my signature as it may be signed by my said  attorneys
to any and all registration statements and amendments thereto.


         In Witness Whereof, I have executed this Power of Attorney as of June
22, 2001.


Signature                                                     Title

/s/ Charles A. Austin, III                                    Trustee
- ------------------------------------
Charles A. Austin, III




<PAGE>



                                POWER OF ATTORNEY

     I, the undersigned,  hereby  constitute  Maureen E. Towle,  Sally E. Ganem,
Catherine E. Foley, Lloyd Lipsett,  Michael H. Koonce, John A. Dudley, Robert N.
Hickey, David M. Leahy and David Mahaffey,  and each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me and in
my name in the capacity  indicated  below any and all  registration  statements,
including,  but not  limited to,  Forms N-8A,  N-8B-1,  S-5,  N-14 and N-1A,  as
amended from time to time, and any and all  amendments  thereto to be filed with
the Securities and Exchange  Commission for the purpose of registering from time
to time all investment  companies of which I am now or hereafter Trustee and for
which Evergreen  Investment  Management  Company,  LLC, or any other  investment
advisory  affiliate of First Union National  Bank,  serves as Advisor or Manager
and registering from time to time the shares of such companies, and generally to
do all such  things  in my name  and on my  behalf  to  enable  such  investment
companies  to comply  with the  provisions  of the  Securities  Act of 1933,  as
amended,  the Investment  Company Act of 1940, as amended,  and all requirements
and  regulations of the Securities and Exchange  Commission  thereunder,  hereby
ratifying and  confirming my signature as it may be signed by my said  attorneys
to any and all registration statements and amendments thereto.


         In Witness Whereof, I have executed this Power of Attorney as of June
22, 2001.


Signature                                                              Title

/s/ K. Dun Gifford                                                     Trustee
- --------------------------------------------
K. Dun Gifford




<PAGE>




                                POWER OF ATTORNEY

     I, the undersigned,  hereby  constitute  Maureen E. Towle,  Sally E. Ganem,
Catherine E. Foley, Lloyd Lipsett,  Michael H. Koonce, John A. Dudley, Robert N.
Hickey, David M. Leahy and David Mahaffey,  and each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me and in
my name in the capacity  indicated  below any and all  registration  statements,
including,  but not  limited to,  Forms N-8A,  N-8B-1,  S-5,  N-14 and N-1A,  as
amended from time to time, and any and all  amendments  thereto to be filed with
the Securities and Exchange  Commission for the purpose of registering from time
to time all investment  companies of which I am now or hereafter Trustee and for
which Evergreen  Investment  Management  Company,  LLC, or any other  investment
advisory  affiliate of First Union National  Bank,  serves as Advisor or Manager
and registering from time to time the shares of such companies, and generally to
do all such  things  in my name  and on my  behalf  to  enable  such  investment
companies  to comply  with the  provisions  of the  Securities  Act of 1933,  as
amended,  the Investment  Company Act of 1940, as amended,  and all requirements
and  regulations of the Securities and Exchange  Commission  thereunder,  hereby
ratifying and  confirming my signature as it may be signed by my said  attorneys
to any and all registration statements and amendments thereto.


         In Witness Whereof, I have executed this Power of Attorney as of June
22, 2001.


Signature                                                              Title

/s/ Leroy Keith, Jr.                                                   Trustee
- --------------------------------------------
Leroy Keith, Jr.




<PAGE>



                                POWER OF ATTORNEY

     I, the undersigned,  hereby  constitute  Maureen E. Towle,  Sally E. Ganem,
Catherine E. Foley, Lloyd Lipsett,  Michael H. Koonce, John A. Dudley, Robert N.
Hickey, David M. Leahy and David Mahaffey,  and each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me and in
my name in the capacity  indicated  below any and all  registration  statements,
including,  but not  limited to,  Forms N-8A,  N-8B-1,  S-5,  N-14 and N-1A,  as
amended from time to time, and any and all  amendments  thereto to be filed with
the Securities and Exchange  Commission for the purpose of registering from time
to time all investment  companies of which I am now or hereafter Trustee and for
which Evergreen  Investment  Management  Company,  LLC, or any other  investment
advisory  affiliate of First Union National  Bank,  serves as Advisor or Manager
and registering from time to time the shares of such companies, and generally to
do all such  things  in my name  and on my  behalf  to  enable  such  investment
companies  to comply  with the  provisions  of the  Securities  Act of 1933,  as
amended,  the Investment  Company Act of 1940, as amended,  and all requirements
and  regulations of the Securities and Exchange  Commission  thereunder,  hereby
ratifying and  confirming my signature as it may be signed by my said  attorneys
to any and all registration statements and amendments thereto.


         In Witness Whereof, I have executed this Power of Attorney as of June
22, 2001.


Signature                                                     Title

/s/ Gerald M. McDonnell                                       Trustee
- ------------------------------------
Gerald M. McDonnell




<PAGE>




                                POWER OF ATTORNEY

     I, the undersigned,  hereby  constitute  Maureen E. Towle,  Sally E. Ganem,
Catherine E. Foley, Lloyd Lipsett,  Michael H. Koonce, John A. Dudley, Robert N.
Hickey, David M. Leahy and David Mahaffey,  and each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me and in
my name in the capacity  indicated  below any and all  registration  statements,
including,  but not  limited to,  Forms N-8A,  N-8B-1,  S-5,  N-14 and N-1A,  as
amended from time to time, and any and all  amendments  thereto to be filed with
the Securities and Exchange  Commission for the purpose of registering from time
to time all investment  companies of which I am now or hereafter Trustee and for
which Evergreen  Investment  Management  Company,  LLC, or any other  investment
advisory  affiliate of First Union National  Bank,  serves as Advisor or Manager
and registering from time to time the shares of such companies, and generally to
do all such  things  in my name  and on my  behalf  to  enable  such  investment
companies  to comply  with the  provisions  of the  Securities  Act of 1933,  as
amended,  the Investment  Company Act of 1940, as amended,  and all requirements
and  regulations of the Securities and Exchange  Commission  thereunder,  hereby
ratifying and  confirming my signature as it may be signed by my said  attorneys
to any and all registration statements and amendments thereto.


         In Witness Whereof, I have executed this Power of Attorney as of June
22, 2001.


Signature                                                              Title

/s/ William W. Pettit                                                  Trustee
- --------------------------------------------
William W. Pettit




<PAGE>




                                POWER OF ATTORNEY

     I, the undersigned,  hereby  constitute  Maureen E. Towle,  Sally E. Ganem,
Catherine E. Foley, Lloyd Lipsett,  Michael H. Koonce, John A. Dudley, Robert N.
Hickey, David M. Leahy and David Mahaffey,  and each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me and in
my name in the capacity  indicated  below any and all  registration  statements,
including,  but not  limited to,  Forms N-8A,  N-8B-1,  S-5,  N-14 and N-1A,  as
amended from time to time, and any and all  amendments  thereto to be filed with
the Securities and Exchange  Commission for the purpose of registering from time
to time all investment  companies of which I am now or hereafter Trustee and for
which Evergreen  Investment  Management  Company,  LLC, or any other  investment
advisory  affiliate of First Union National  Bank,  serves as Advisor or Manager
and registering from time to time the shares of such companies, and generally to
do all such  things  in my name  and on my  behalf  to  enable  such  investment
companies  to comply  with the  provisions  of the  Securities  Act of 1933,  as
amended,  the Investment  Company Act of 1940, as amended,  and all requirements
and  regulations of the Securities and Exchange  Commission  thereunder,  hereby
ratifying and  confirming my signature as it may be signed by my said  attorneys
to any and all registration statements and amendments thereto.


         In Witness Whereof, I have executed this Power of Attorney as of June
22, 2001.


Signature                                                     Title

/s/ David M. Richardson                                       Trustee
- ------------------------------------
David M. Richardson




<PAGE>




                                POWER OF ATTORNEY

     I, the undersigned,  hereby  constitute  Maureen E. Towle,  Sally E. Ganem,
Catherine E. Foley, Lloyd Lipsett,  Michael H. Koonce, John A. Dudley, Robert N.
Hickey, David M. Leahy and David Mahaffey,  and each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me and in
my name in the capacity  indicated  below any and all  registration  statements,
including,  but not  limited to,  Forms N-8A,  N-8B-1,  S-5,  N-14 and N-1A,  as
amended from time to time, and any and all  amendments  thereto to be filed with
the Securities and Exchange  Commission for the purpose of registering from time
to time all investment  companies of which I am now or hereafter Trustee and for
which Evergreen  Investment  Management  Company,  LLC, or any other  investment
advisory  affiliate of First Union National  Bank,  serves as Advisor or Manager
and registering from time to time the shares of such companies, and generally to
do all such  things  in my name  and on my  behalf  to  enable  such  investment
companies  to comply  with the  provisions  of the  Securities  Act of 1933,  as
amended,  the Investment  Company Act of 1940, as amended,  and all requirements
and  regulations of the Securities and Exchange  Commission  thereunder,  hereby
ratifying and  confirming my signature as it may be signed by my said  attorneys
to any and all registration statements and amendments thereto.


         In Witness Whereof, I have executed this Power of Attorney as of June
22, 2001.


Signature                                                     Title

/s/ Russell A. Salton, III, M.D.                              Trustee
- ------------------------------------
Russell A. Salton, III, M.D.




<PAGE>




                                POWER OF ATTORNEY

     I, the undersigned,  hereby  constitute  Maureen E. Towle,  Sally E. Ganem,
Catherine E. Foley, Lloyd Lipsett,  Michael H. Koonce, John A. Dudley, Robert N.
Hickey, David M. Leahy and David Mahaffey,  and each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me and in
my name in the capacity  indicated  below any and all  registration  statements,
including,  but not  limited to,  Forms N-8A,  N-8B-1,  S-5,  N-14 and N-1A,  as
amended from time to time, and any and all  amendments  thereto to be filed with
the Securities and Exchange  Commission for the purpose of registering from time
to time all investment  companies of which I am now or hereafter Trustee and for
which Evergreen  Investment  Management  Company,  LLC, or any other  investment
advisory  affiliate of First Union National  Bank,  serves as Advisor or Manager
and registering from time to time the shares of such companies, and generally to
do all such  things  in my name  and on my  behalf  to  enable  such  investment
companies  to comply  with the  provisions  of the  Securities  Act of 1933,  as
amended,  the Investment  Company Act of 1940, as amended,  and all requirements
and  regulations of the Securities and Exchange  Commission  thereunder,  hereby
ratifying and  confirming my signature as it may be signed by my said  attorneys
to any and all registration statements and amendments thereto.


         In Witness Whereof, I have executed this Power of Attorney as of June
22, 2001.


Signature                                                              Title

/s/ Richard J. Shima                                                   Trustee
- --------------------------------------------
Richard J. Shima




<PAGE>




                                POWER OF ATTORNEY

     I, the undersigned,  hereby  constitute  Maureen E. Towle,  Sally E. Ganem,
Catherine E. Foley, Lloyd Lipsett,  Michael H. Koonce, John A. Dudley, Robert N.
Hickey, David M. Leahy and David Mahaffey,  and each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me and in
my name in the capacity  indicated  below any and all  registration  statements,
including,  but not  limited to,  Forms N-8A,  N-8B-1,  S-5,  N-14 and N-1A,  as
amended from time to time, and any and all  amendments  thereto to be filed with
the Securities and Exchange  Commission for the purpose of registering from time
to time all investment  companies of which I am now or hereafter Chairman of the
Board and Trustee and for which Evergreen Investment Management Company, LLC, or
any other investment  advisory affiliate of First Union National Bank, serves as
Advisor  or  Manager  and  registering  from  time to time  the  shares  of such
companies,  and  generally  to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements   and  regulations  of  the  Securities  and  Exchange   Commission
thereunder,  hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.


         In Witness Whereof, I have executed this Power of Attorney as of June
22, 2001.


Signature                                   Title

/s/ Michael S. Scofield                     Chairman of the Board and Trustee
- ------------------------------------
Michael S. Scofield




<PAGE>




                                POWER OF ATTORNEY

     I, the undersigned,  hereby  constitute  Maureen E. Towle,  Sally E. Ganem,
Catherine E. Foley, Lloyd Lipsett,  Michael H. Koonce, John A. Dudley, Robert N.
Hickey, David M. Leahy and David Mahaffey,  and each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me and in
my name in the capacity  indicated  below any and all  registration  statements,
including,  but not  limited to,  Forms N-8A,  N-8B-1,  S-5,  N-14 and N-1A,  as
amended from time to time, and any and all  amendments  thereto to be filed with
the Securities and Exchange  Commission for the purpose of registering from time
to time all investment  companies of which I am now or hereafter Trustee and for
which Evergreen  Investment  Management  Company,  LLC, or any other  investment
advisory  affiliate of First Union National  Bank,  serves as Advisor or Manager
and registering from time to time the shares of such companies, and generally to
do all such  things  in my name  and on my  behalf  to  enable  such  investment
companies  to comply  with the  provisions  of the  Securities  Act of 1933,  as
amended,  the Investment  Company Act of 1940, as amended,  and all requirements
and  regulations of the Securities and Exchange  Commission  thereunder,  hereby
ratifying and  confirming my signature as it may be signed by my said  attorneys
to any and all registration statements and amendments thereto.


         In Witness Whereof, I have executed this Power of Attorney as of June
22, 2001.


Signature                                                              Title

/s/ Richard Wagoner                                                    Trustee
Richard Wagoner




<PAGE>






</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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