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The Evergreen Fund, which has four different classes, A, B, C and I, is a fund that is managed by Evergreen Investments which is the name under which Wachovia Corporation operates its investment management business. Based upon KlaymanToskes’ investigation, investors of the Evergreen Fund were advised that the investment objective of the Fund was preservation of capital. Specifically, within several verbal discussions as well as the sales material distributed to the investing public, the Fund was promoted as one that sought “current income consistent with preservation of capital and low principal fluctuation.” However, investors have reported that Wachovia misled them with regard to the risks associated with the Fund, as well as the Fund’s exposure to the subprime mortgage market.
It turns out that the Fund was not diversified, but instead was over-concentrated with approximately 72% of its assets invested in the mortgage industry. Apparently, the Fund primarily invested in residential and commercial fixed and variable rate mortgage-backed securities including collateralized mortgage obligations (“CMOs”) and other types of mortgage related securities. As a result of the high-risk asset allocation of the Fund, it experienced a decline of about 20% in less than 3 weeks.