EVERGREEN SELECT MONEY MARKET TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
STATEMENT OF ADDITIONAL INFORMATION
November 17, 1997
EVERGREEN SELECT 100% TREASURY MONEY MARKET FUND
(THE "FUND")
The Fund is a series of an open-end management investment company, known as
"Evergreen Select Money Market Trust" (the "Trust").
This statement of additional information ("SAI") provides additional
information about all classes of shares of the Fund listed above. It is not a
prospectus and you should read it in conjunction with the prospectuses of the
Funds dated November 17, 1997, as supplemented from time to time. You may get a
copy of the prospectuses from Evergreen Distributor, Inc.
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TABLE OF CONTENTS
INVESTMENT POLICIES..........................................................4
Additional Information on Securities and Investment Practices.......4
Investment Restrictions And Guidelines........................... 5
MANAGEMENT OF THE TRUST......................................................7
INVESTMENT ADVISORY AND OTHER SERVICES.......................................9
Investment Adviser..................................................9
Distributor........................................................10
Distribution Plan..................................................10
Additional Service Providers.......................................11
BROKERAGE ALLOCATION AND OTHER PRACTICES....................................12
Selection of Brokers...............................................12
Brokerage Commissions..............................................12
General Brokerage Policies.........................................12
TRUST ORGANIZATION..........................................................13
Form of Organization...............................................13
Description of Shares..............................................13
Voting Rights......................................................13
Limitation of Trustees' Liability..................................13
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES.............................14
Exchanges..........................................................14
How the Fund Values Its Shares.....................................14
Shareholder Services...............................................14
PRINCIPAL UNDERWRITER.......................................................15
CALCULATION OF PERFORMANCE DATA.............................................15
ADDITIONAL INFORMATION......................................................16
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FINANCIAL STATEMENTS........................................................16
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INVESTMENT POLICIES
The investment objectives of the Fund and a description of the
securities in which the Fund may invest are set forth in the Fund's
prospectuses. The following expands upon the discussion in the prospectuses
regarding certain investments of the Fund.
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES
Loans of Securities
To generate income and offset expenses, the Fund may lend portfolio
securities to broker-dealers and other financial institutions. Loans of
securities by the Fund may not exceed 30% of the value of the Fund's total
assets. 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.
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.
Although voting rights attendant to securities lent pass to the
borrower, the Fund may call such loans at any time and may vote the securities
if it believes a material event affecting the investment is to occur. The Fund
may experience a delay in receiving additional collateral or in recovering the
securities lent or may even suffer a loss of rights in the collateral should the
borrower of the securities fail financially. The Fund may only make loans to
borrowers deemed to be of good standing, under standards approved by the Board
of Trustees, when the income to be earned from the loan justifies the attendant
risks.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
The Fund may purchase securities on a when-issued or delayed-delivery
basis and may purchase or sell securities on a forward commitment basis. These
transactions involve the purchase of debt obligations when delivery and payment
normally taking place within a month or more after the date of commitment to
purchase. The Fund will only make commitments to purchase obligations on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date. The when-issued securities are subject
to market fluctuation, and no interest accrues on the security to the purchaser
during this period. The payment obligation and the interest rate that will be
received on the securities are each fixed at the time the purchaser enters into
the commitment.
Segregated accounts will be established with the custodian, and the
Fund will maintain liquid assets in an amount at least equal in value to the
Fund's commitments to purchase when-issued securities. If the value of these
assets declines, the Fund will place additional liquid assets in the account on
a daily basis so that the value of the assets in the account is equal to the
amount of such commitments.
Purchasing obligations on a when-issued basis is a form of leveraging
and can involve a risk that the yields available in the market when the delivery
takes place may actually be higher than those obtained in the transaction
itself. In that case there could be an unrealized loss at the time of delivery.
The Fund uses when-issued, delayed-delivery and forward commitment
transactions to secure what it considers to be an advantageous price and yield
at the time of purchase. When the Fund engages in
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when-issued, delayed-delivery and forward commitment transactions, it relies on
the buyer or seller, as the case may be, to consummate the sale. If the buyer or
seller fails to complete the sale, then the Fund may miss the opportunity to
obtain the security at a favorable price or yield.
Typically, no income accrues on securities the Fund has committed to
purchase prior to the time when delivery of the securities is made, although the
Fund may earn income on securities it has deposited in a segregated account.
When purchasing a security on a when-issued, delayed delivery, or forward
commitment basis, the Fund assumes the rights and risks of ownership of the
security, including the risk of price and yield fluctuations, and takes such
fluctuations into account when determining its net asset value. Because the Fund
is not required to pay for the security until the delivery date, these risks are
in addition to the risks associated with the Fund's other investments.
INVESTMENT RESTRICTIONS AND GUIDELINES
Fundamental Policies
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 Investment Company Act of 1940, as amended
(the "1940 Act"). Unless otherwise stated, all references to the assets of the
Fund are in terms of current market value.
Diversification
The Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
Concentration
The Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry, except for (a) securities
issued or guaranteed by the U.S. government or its agencies or instrumentalities
and (b) domestic bank money market instruments.
Issuing Senior Securities
Except as permitted under the 1940 Act, the Fund may not issue senior
securities.
Borrowing
The Fund may not borrow money, except to the extent permitted by
applicable law.
Underwriting Securities Issued by Other Persons
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.
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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
companies that invest in real estate.
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
contacts 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.
Loans to Other Persons
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.
Guidelines
Unlike the Fundamental Policies above, to the extent permitted by law,
the following guidelines may be changed by the Trust's Board of Trustees without
shareholder approval. Unless otherwise stated, all references to the assets of
the Fund are in terms of current market value.
Diversification
To remain classified as a diversified investment company under the 1940
Act, the Fund must conform with the following: With respect to the 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 U.S. Government or its agencies or instrumentalities.
Borrowings
The Fund may borrow money from banks or enter into reverse repurchase
agreements in an amount up to one third of its total assets. The Fund may also
borrow an additional 5% of its total assets from banks or others. The Fund may
borrow only as a temporary measure for extraordinary or emergency purposes. The
Fund will not purchase securities while borrowings are outstanding except to
exercise prior commitments and to exercise subscription rights. The Fund may
obtain such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities. The Fund may purchase securities on margin
and engage in short sales to the extent permitted by applicable law.
Illiquid Securities
The Fund may not invest more than 10% of its net assets in securities
that are illiquid. A security is illiquid when the Fund may not dispose of it in
the ordinary course of business within seven days at approximately the value at
which the Fund has the investment on its books.
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Investment in Other Investment Companies
The Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, the Fund may not (1) own more
than 3% of the outstanding voting stock of another investment company, (2)
invest more than 5% of its assets in any single investment company, and (3)
invest more than 10% of its assets in investment companies. However, the Fund
may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund.
MANAGEMENT OF THE TRUST
Set forth below are the Trustees and officers of the Trust and their
principal occupations and some of their affiliations over the last five years.
Unless otherwise indicated, the address for each Trustee and officer is 200
Berkeley Street, Boston, Massachusetts, 02116. Each Trustee is also a Trustee of
each of the other Trusts in the Evergreen Fund complex, other than Evergreen
Variable Trust, of which Messrs Howell, Salton and Scofield are the only
Trustees.
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<S> <C> <C>
Name Position with Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
Laurence B. Ashkin Trustee Real estate developer and construction consultant;
(DOB: 2/2/28) and President of Centrum Equities and Centrum
Properties, Inc.
Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc.;
(DOB: 10/23/34) and former Managing Director, Seaward
Management Corporation (investment advice).
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the Finance
(DOB: 10/12/38) Committee, Cambridge College; Chairman Emeritus
and Director, American Institute of Food and Wine;
Chairman and President, Oldways Preservation and
Exchange Trust (education); former Chairman of
the Board, Director, and Executive Vice President,
The London Harness Company; former Managing
Partner, Roscommon Capital Corp.; former Chief
Executive Officer, Gifford Gifts of Fine Foods;
former Chairman, Gifford, Drescher & Associates
(environmental consulting); and former Director,
Keystone Investments, Inc.
James S. Howell Chairman of the Former Chairman of the Distribution Foundation for
(DOB: 8/13/24) Board of Trustees the Carolinas; and former Vice President of Lance
Inc. (food manufacturing).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer,
(DOB: 2/14/39) Carson Products Company; Director of Phoenix
Total Return Fund and Equifax, Inc.; Trustee of
Phoenix Series Fund, Phoenix Multi-Portfolio Fund,
and The Phoenix Big Edge Series Fund; and former
President, Morehouse College.
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Name Position with Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
Gerald M. McDonnell Trustee Sales Representative with Nucor-Yamoto, Inc.
(DOB: 7/14/39) (steel producer).
Thomas L. McVerry Trustee Former Vice President and Director of Rexham
(DOB: 8/2/39) Corporation; and former Director of Carolina
Cooperative Federal Credit Union.
*William Walt Pettit Trustee Partner in the law firm of Holcomb and Pettit, P.A.
(DOB: 8/26/55)
David M. Richardson Trustee Vice Chair and former Executive Vice President,
(DOB: 9/14/41) DHR International, Inc. (executive recruitment);
former Senior Vice President, Boyden International
Inc. (executive recruitment); and Director,
Commerce and Industry Association of New
Jersey, 411 International, Inc., and J&M Cumming
Paper Co.
Russell A. Salton, III MD Trustee Medical Director, U.S. Health Care/Aetna Health
(DOB: 6/2/47) Services; former Managed Health Care Consultant;
and former President, Primary Physician Care.
Michael S. Scofield Trustee Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43)
Richard J. Shima Trustee Chairman, Environmental Warranty, Inc. (insurance
(DOB: 8/11/39) agency); Executive Consultant, Drake Beam Morin,
Inc. (executive outplacement); Director of
Connecticut Natural Gas Corporation, Hartford
Hospital, Old State House Association, Middlesex
Mutual Assurance Company, and Enhance
Financial Services, Inc.; Chairman, Board of
Trustees, Hartford Graduate Center; Trustee,
Greater Hartford YMCA; former Director, Vice
Chairman and Chief Investment Officer, The
Travelers Corporation; former Trustee, Kingswood-
Oxford School; and former Managing Director and
Consultant, Russell Miller, Inc.
John J. Pileggi, 230 President and Senior Managing Director, Furman Selz LLC since
Park Avenue, Suite 910 Treasurer 1992; Managing Director from 1984 to 1992;
New York, New York Consultant to BISYS Fund Services since 1996.
George O. Martinez, Secretary Senior Vice President and Director of
3435 Stelzer Road Administration and Regulatory Services, BISYS
Columbus, Ohio Fund Services; Vice President/Assistant General
Counsel, Alliance Capital Management from 1988.
</TABLE>
*This Trustee may be considered an interested trustee within the meaning of the
1940 Act.
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The officers of the Trust are all officers and/or employees of The
BISYS Group, Inc. ("BISYS"), except for Mr. Pileggi, who is a consultant to
BISYS.
Listed below is the estimated Trustee compensation for the twelve-month
period ended February 28, 1998.
COMPENSATION TABLE
Total
Compensation
Aggregate From Registrant
Compensation And Fund Complex
Trustee From Registrant Paid To Directors
Laurence B. Ashkin $5,500 $68,673
Charles A.Austin $ 943 $43,312
K. Dun Gifford $ 857 $38,818
James S. Howell $7,615 $107,167
Leroy Keith Jr. $ 857 $39,218
Gerald M. McDonnell $6,005 $94,014
Thomas L. McVerry $6,515 $96,065
William Walt Petit $6,003 $91,709
David M. Richardson $ 943 $43,312
Russell A. Salton,III $6,120 $93,651
Michael S. Scofield $5,820 $90,815
Richard J. Shima $3,900 $63,333
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The First Capital Group of First Union National Bank ("FUNB") is the
investment adviser (the "Adviser") to the Fund. FUNB is a subsidiary of First
Union Corporation, a bank holding company headquartered in Charlotte, North
Carolina. First Union Corporation and its subsidiaries provide a broad range of
financial services to individuals and businesses throughout the United States.
First Union Corporation and FUNB are located at 301 South College Street,
Charlotte, North Carolina 28288-0630.
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Pursuant to the advisory agreement (the "Advisory Agreement") between
the Trust and the Adviser, and subject to the supervision of the Trust's Board
of Trustees, the Adviser 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 Adviser pays for all of the expenses incurred in connection with the
provision of its services.
All charges and expenses, other than those specifically referred to as
being borne by the Adviser, including, but not limited to, (1) custodian charges
and expenses; (2) bookkeeping and independent auditors' charges and expenses;
(3) transfer agent charges and expenses; (4) fees and expenses of Independent
Trustees; (5) brokerage commissions, brokers' fees and expenses; (6) issue and
transfer taxes; (7) costs and expenses under the Distribution Plan; (8) taxes
and trust fees payable to governmental agencies; (9) the cost of share
certificates; (10) fees and expenses of the registration and qualification of
such Fund and its shares with the Securities and Exchange Commission ("SEC") or
under state or other securities laws; (11) expenses of preparing, printing and
mailing prospectuses, statements of additional information, notices, reports and
proxy materials to shareholders of such Fund; (12) expenses of shareholders' and
Trustees' meetings; (13) charges and expenses of legal counsel for such Fund and
for the Independent Trustees of the Trust on matters relating to such Fund; and
(14) charges and expenses of filing annual and other reports with the SEC and
other authorities; and all extraordinary charges and expenses of such Fund.
The Fund pays the Adviser an annual fee for its services equal to 0.25%
of average daily net assets. The Adviser has voluntarily agreed to reduce its
advisory fee by 0.10%, resulting in a net advisory fee of 0.15%.
Under the Advisory Agreement, any liability of the Adviser in
connection with rendering services thereunder is limited to situations involving
its willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties.
The Advisory Agreement continues 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 of the Trust or by a vote of a majority of the
Fund's outstanding shares (as defined in the 1940 Act). In either case, the
terms of the Advisory Agreement and continuance thereof must be approved by the
vote of a majority of the Independent Trustees (Trustees who are not interested
persons of the Fund, as defined in the 1940 Act, and who have no direct or
indirect financial interest in the Fund's Distribution Plan or any agreement
related thereto) cast in person at a meeting called for the purpose of voting on
such approval. The Advisory Agreement may be terminated, without penalty, on 60
days' written notice by the Trust's Board of Trustees or by a vote of a majority
of outstanding shares. The Advisory Agreement will terminate automatically upon
its "assignment" as that term is defined in the 1940 Act.
DISTRIBUTOR
Evergreen Distributor, Inc. (the "Distributor") markets the fund
through broker-dealers and other financial representatives. Its address is 125
55th Street, New York, NY 10019.
DISTRIBUTION PLAN
Rule 12b-1 under the 1940 Act permits investment mutual funds to use
their assets to pay for distributing their shares. However, to take advantage of
Rule 12b-1, the 1940 Act requires that mutual funds comply with various
conditions, including adopting a distribution plan. The Fund has adopted a
distribution plan for its Institutional Service Shares (the "Plan") that permits
the Fund to deduct up to 0.25% of the Institutional Service class's average net
assets to pay for shareholder services. The Board of Trustees, including a
majority of the Independent Trustees, has approved the Plan.
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The National Association of Securities Dealers, Inc. ("NASD") limits
the amount that a mutual fund may pay annually in distribution costs for sale of
its shares and shareholder service fees. The NASD limits annual expenditures to
1.00% of the aggregate average daily net asset value of its shares, of which
0.75% may be used to pay such distribution costs and 0.25% may be used to pay
shareholder service fees. The NASD also limits the aggregate amount that the
Fund may pay for such distribution costs to 6.25% of gross share sales since the
inception of the distribution plan, plus interest at the prime rate plus 1.00%
on such amounts remaining unpaid from time to time.
The Independent Trustees or a majority of the outstanding voting shares
of the Fund's Institutional Service Class may terminate the Plan.
The Fund cannot change the Plan in a way that materially increases the
distribution expenses of the Institutional Service Class without obtaining
shareholder approval. Otherwise, the Trustees may amend the Plan.
Management must report the amounts and purposes of expenditures under
the Plan to the Independent Trustees quarterly.
While the Institutional Service Distribution Plan is in effect, the
Fund will be required to commit the selection and nomination of candidates for
Independent Trustees to the discretion of the Independent Trustees.
The Independent Trustees of the Trust have determined that the Fund
will benefit from the Institutional Service shares distribution plan.
ADDITIONAL SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
the Fund, subject to the supervision and control of the Trust's Board of
Trustees. EIS provides the Fund with facilities, equipment and personnel and is
entitled to receive a fee based on the aggregate average daily net assets of the
Fund based on the total assets of all mutual funds advised by First Union
subsidiaries. EIS' fee is calculated in accordance with the following schedule:
0.60% on the first $7 billion; 0.0425% on the next $3 billion; 0.035% on the
next $5 billion; 0.025% on the next $10 billion; 0.019% on the next $5 billion
and 0.014% on assets in excess of $30 billion.
Transfer Agent
Evergreen Service Company ("ESC"), a subsidiary of First Union
Corporation, is the Fund's transfer agent. The transfer agent issues and redeems
shares, pays dividends and performs other duties in connection with the
maintenance of shareholder accounts. The transfer agent's address is 200
Berkeley Street, Boston, Massachusetts 02116.
Independent auditors
Price Waterhouse LLP audits the Fund's financial statement. The
auditor's address is 160 Federal Street, Boston, Massachusetts 02110.
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Custodian
State Street Bank and Trust Company is the Fund's custodian. The bank
keeps custody of the Fund's securities and cash and performs other related
duties. The custodian's address is Box 9021, Boston, Massachusetts 02205-9827.
BROKERAGE ALLOCATION AND OTHER PRACTICES
SELECTION OF BROKERS
In effecting transactions in portfolio securities for the Fund, the
Adviser seeks the best execution of orders at the most favorable prices. The
Adviser determines whether a broker has provided the Fund with best execution
and price in the execution of a securities transaction by evaluating, among
other things, the broker's ability to execute large or potentially difficult
transactions, and the financial strength and stability of the broker.
BROKERAGE COMMISSIONS
The Fund expects to buy and sell its fixed-income securities through
principal transactions that are directly from the issuer or from an underwriter
or market maker for the securities. Generally, the Fund will not pay brokerage
commissions for such purchases. Usually, when the Fund buys a security from an
underwriter, the purchase price will include any underwriting commission or
concession. The purchase price for securities bought from dealers serving as
market makers will similarly include the dealer's mark up or reflect a dealer's
mark down. When the Fund executes transactions in the over-the-counter market,
it will deal with primary market makers unless more favorable prices are
otherwise obtainable.
GENERAL BROKERAGE POLICIES
The Adviser makes investment decisions for the Fund independently from
those of its other clients. It may frequently develop, however, that the Adviser
will make the same investment decision for more than one client. Simultaneous
transactions are inevitable when the same security is suitable for the
investment objective of more than one account. When two or more of its clients
are engaged in the purchase or sale of the same security, the Adviser will
allocate the transactions according to a formula that is equitable to each of
its clients. Although, in some cases, this system could have a detrimental
effect on the price or volume of the Fund's securities, the Fund believes that
in other cases its ability to participate in volume transactions will produce
better executions. In order to take advantage of the availability of lower
purchase prices, the Fund may occasionally participate in group bidding for the
direct purchase from an issuer of certain securities.
The Board of Trustees periodically reviews the Fund's brokerage policy.
Because of the possibility of further regulatory developments affecting the
securities exchanges and brokerage practices generally, the Board of Trustees
may change, modify or eliminate any of the foregoing practices.
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TRUST ORGANIZATION
FORM OF ORGANIZATION
The Trust was formed as a Delaware business trust on September 17, 1997
(the "Declaration of Trust"). A copy of the Declaration of Trust is on file as
an exhibit to the Trust's Registration Statement, of which this statement of
additional information is a part. This summary is qualified in its entirety by
reference to the Declaration of Trust.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
the Fund represents an equal proportionate interest with each other share of
that series and/or class. Upon liquidation, shares are entitled to a pro rata
share of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
VOTING RIGHTS
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual meetings. However, the Trust intends to hold meetings at least
annually. At meetings called for the initial election of Trustees or to consider
other matters, shares are entitled to one vote per share. Shares generally vote
together as one class on all matters. Classes of shares of the Fund have equal
voting rights. No amendment may be made to the Declaration of Trust that
adversely affects any class of shares without the approval of a majority of the
shares of that class. Shares have non-cumulative voting rights, which means that
the holders of more than 50% of the shares voting for the election of Trustees
can elect 100% of the Trustees to be elected at a meeting and, in such event,
the holders of the remaining 50% or less of the shares voting will not be able
to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, unless and until such time as less than a majority of the Trustees
holding office has been elected by shareholders, at which time, the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
LIMITATION OF TRUSTEES' LIABILITY
The 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 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 the duties involved in the conduct of his office.
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PURCHASE, REDEMPTION AND PRICING OF FUND SHARES
EXCHANGES
Investors may exchange shares of any Fund for shares of the same class
of any other Evergreen "Select" fund, as described under "Exchanges" in the Fund
prospectus. Before you make an exchange, you should read the prospectus of the
"Select" fund into which you wish to exchange. The Trust reserves the right to
discontinue, alter or limit the exchange privilege at any time.
HOW THE FUND VALUES ITS SHARES
How and When the Fund Calculates Its Net Asset Value Per Share ("NAV")
The Fund computes its net asset value twice daily, at 12 noon (Eastern
time) and as of the close of regular trading on the New York Stock Exchange
(currently 4:00 p.m. Eastern time). The Fund will not compute its net asset
value on days on which there have been no purchases or sales of its shares.
Also, the Fund will not compute its NAV on the day the following legal holidays
are observed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Each class of shares of the Fund calculates its net asset value per
share by adding up its investments and other assets, subtracting its liabilities
and then dividing the result by the number of shares outstanding.
How the Fund Values the Securities It Owns
The securities in the Fund's portfolio are valued on an amortized cost
basis. Under this method of valuation, a security is initially valued at its
acquisition cost, and thereafter a constant straight-line amortization of any
discount or premium is assumed each day regardless of the impact of fluctuating
interest rates on the market value of the security. The market value of the
obligations in the Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates. As a result, the market value of the obligations
in the Fund's portfolio may vary from the value determined using the amortized
cost method. Securities which are not rated are normally valued on the basis of
valuations provided by a pricing service when such prices are believed to
reflect the fair value of such securities. In addition, securities for which
quotations are not readily available, are valued by a method that the Board of
Trustees believes accurately reflects fair value.
SHAREHOLDER SERVICES
As described in the prospectus, a shareholder may elect to receive his
or her dividends and capital gains distributions in cash instead of shares.
However, ESC will automatically convert a shareholder's distribution option so
that the shareholder reinvests all dividends and distributions in additional
shares when it learns that the postal or other delivery service is unable to
deliver checks or transaction confirmations to the shareholder's address of
record. The Fund will hold the returned distribution or redemption proceeds in a
non interest-bearing account in the shareholder's name until the shareholder
updates his or her address. Therefore, no interest will accrue on amounts
represented by uncashed distribution or redemption checks.
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PRINCIPAL UNDERWRITER
The Distributor is the principal underwriter for the Trust and with
respect to each class of the Fund. The Trust has entered into a Principal
Underwriting Agreement ("Underwriting Agreement") with the Distributor with
respect to each class of the Fund. The Distributor is a subsidiary of The BISYS
Group, Inc.
The Distributor, as agent, has agreed to use its best efforts to find
purchasers for the shares. The Distributor may retain and employ representatives
to promote distribution of the shares and may obtain orders from broker-dealers,
and others, acting as principals, for sales of shares to them. The Underwriting
Agreement provides that the Distributor will bear the expense of preparing,
printing, and distributing advertising and sales literature and prospectuses
used by it.
All subscriptions and sales of shares by the Distributor are at the
public offering price of the shares, which is determined in accordance with the
provisions of the Trust's Declaration of Trust, By-Laws, current prospectuses
and statement of additional information. All orders are subject to acceptance by
the Fund and the Fund reserves the right, in its sole discretion, to reject any
order received. Under the Underwriting Agreement, the Fund is not liable to
anyone for failure to accept any order.
The Distributor has agreed that it will, in all respects, duly comply
with all state and federal laws applicable to the sale of the shares. The
Distributor has also agreed that it will indemnify and hold harmless the Trust
and each person who has been, is, or may be a Trustee or officer of the Trust
against expenses reasonably incurred by any of them in connection with any
claim, action, suit, or proceeding to which any of them may be a party that
arises out of or is alleged to arise out of any misrepresentation or omission to
state a material fact on the part of the Distributor or any other person for
whose acts the Distributor is responsible or is alleged to be responsible,
unless such misrepresentation or omission was made in reliance upon written
information furnished by the Trust.
The Underwriting Agreement provides that it will remain in effect as
long as its terms and continuance are approved annually (i) by a vote of a
majority of the Trust's Independent Trustees, and (ii) by vote of a majority of
the Trust's Trustees, in each case, cast in person at a meeting called for that
purpose.
The Underwriting Agreement may be terminated, without penalty, on 60
days' written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment," as that term is defined in the
1940 Act.
From time to time, if, in the Distributor's judgment, it could benefit
the sales of shares, the Distributor may provide to selected broker-dealers
promotional materials and selling aids, including, but not limited to, personal
computers, related software, and data files.
CALCULATION OF PERFORMANCE DATA
Total return quotations for a class of shares of the Fund as they may
appear from time to time in advertisements 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.
15
<PAGE>
Current yield quotations as they may appear, from time to time, in
advertisements will consist of a quotation based on a 30-day period ended on the
date of the most recent balance sheet of the Fund, computed 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 base period.
Any given yield or total return quotation should not be considered
representative of the Fund's yield or total return for any future period.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectuses or required by law, the
Fund reserves the right to change the terms of the offer stated in its
prospectuses without shareholder approval, including the right to impose or
change fees for services provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in the Fund's
prospectuses, statement of additional information or in supplemental sales
literature issued by such Fund or the Distributor, and no person is entitled to
rely on any information or representation not contained therein.
The Funds' prospectuses and SAI omit certain information contained in
its registration statement, which you may obtain for a fee from the SEC in
Washington, D.C.
FINANCIAL STATEMENTS
Included are the audited statement of assets and liabilities dated
November 7, 1997 and the report thereon of Price Waterhouse LLP for the Fund.
16
