<PAGE>
FIRST UNION MONEY MARKET PORTFOLIO
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
May 2, 1995
Dear Shareholders of First Union Money Market Portfolio:
On June 30, 1994, First Union National Bank of North Carolina ("FUNB-NC"),
whose Capital Management Group acts as investment adviser to the First Union
Money Market Portfolio ("First Union Money Market"), acquired Evergreen Asset
Management Corp. ("Evergreen Asset") and its affiliate, Lieber & Company. Major
factors in the decision of FUNB-NC to acquire Evergreen Asset included its
desire to broaden the scope of its mutual fund offerings to all of its current
and prospective clients, including those who currently hold shares of First
Union Funds, achieve the greater economies of scale generally associated with
increased assets under management, and enhance its portfolio management
capabilities. Included in the sixteen open-end investment company portfolios
managed by Evergreen Asset is the Evergreen Money Market Fund ("Evergreen Money
Market").
The proposal contained in the accompanying proxy statement provides, in
effect, for the combination of First Union Money Market and Evergreen Money
Market, funds with substantially similar investment objectives and policies.
Under the proposed Agreement and Plan of Reorganization (the "Plan"), Evergreen
Money Market will acquire substantially all of the assets of First Union Money
Market in exchange for shares of Evergreen Money Market. This combination is
consistent with the goals noted above and serves the interests of First Union
Money Market's shareholders by ensuring that their assets continue to be managed
in a money market portfolio that can take advantage of the greatest possible
administrative efficiencies.
As discussed more fully in the proxy statement, the combined fund will
remain part of the First Union mutual fund organization under the management of
Evergreen Asset. As a result of the proposed combination, the full resources of
the combined Evergreen/First Union capital management team will be harnessed for
the benefit of First Union Money Market's current shareholders.
If shareholders of First Union Money Market approve the Plan, upon
consummation of the transaction contemplated in the Plan you will receive shares
of a class of Evergreen Money Market with the same letter designation and the
same distribution-related and shareholder servicing-related expenses and sales
charges, including contingent deferred sales charges, if any, and having a value
equal to the value of your then outstanding shares of First Union Money Market.
The proposed transaction will not result in any federal income tax liability for
you or for First Union Money Market. As a shareholder of Evergreen Money Market
you will have the ability to exchange your shares for shares of the other funds
in the Evergreen family of funds comparable to your present right to exchange
among the portfolios of First Union Funds.
The Trustees of First Union Funds have called a special meeting of
shareholders of First Union Money Market to be held June 15, 1995 to consider
the proposed transaction. WE STRONGLY INVITE YOUR PARTICIPATION BY ASKING YOU TO
REVIEW, COMPLETE AND RETURN YOUR PROXY AS SOON AS POSSIBLE.
Detailed information about the proposed transaction is described in the
enclosed proxy statement. I thank you for your participation as a shareholder
and urge you to please exercise your right to vote by completing, dating and
signing the enclosed proxy card. A self-addressed, postage-paid envelope has
been enclosed for your convenience.
If you have any questions regarding the proposed transaction, please call
1-800-326-3241.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED AS SOON AS
POSSIBLE.
Sincerely,
(Signature of Edward C. Gonzales appears here)
EDWARD C. GONZALES
PRESIDENT
FIRST UNION FUNDS
<PAGE>
FIRST UNION MONEY MARKET PORTFOLIO, A PORTFOLIO OF FIRST UNION FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 15, 1995
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of the First Union Money Market Portfolio ("First Union Money
Market"), a portfolio of First Union Funds, will be held at the offices of First
Union Corporation, Two First Union Center, 301 S. Tryon Street, Charlotte, N.C.
28288 on June 15, 1995 at 10:00 a.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization (the
"Plan") dated as of March 21, 1995, providing for the acquisition of
substantially all of the assets of First Union Money Market by The
Evergreen Money Market Fund ("Evergreen Money Market"), a series of The
Evergreen Money Market Trust, in exchange for shares of Evergreen Money
Market, and the assumption by Evergreen Money Market of certain
identified liabilities of First Union Money Market. The Plan also
provides for the distribution of such shares of Evergreen Money Market
to shareholders of First Union Money Market in liquidation of and
subsequent termination of First Union Money Market. A vote in favor of
the Plan is a vote in favor of liquidation and dissolution of First
Union Money Market.
2. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
The Trustees of First Union Funds have fixed the close of business on
April 17, 1995 as the record date for the determination of shareholders
of First Union Money Market entitled to notice of and to vote at this
Meeting or any adjournment thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND IN PERSON ARE URGED WITHOUT DELAY TO SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By order of the Board of Trustees
PETER J. GERMAIN
SECRETARY
May 2, 1995
<PAGE>
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense involved in validating your vote if you fail
to sign your proxy card(s) properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
Registration on the proxy card(s).
2. JOINT ACCOUNTS: Either party may sign, but the name of the party signing
should conform exactly to a name shown in the Registration on the proxy
card(s).
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy
card(s) should be indicated unless it is reflected in the form of
Registration. For example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
<S> <C>
CORPORATE ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp. John Doe
c/o John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d/12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith, Jr. John B. Smith, Jr. Executor
</TABLE>
<PAGE>
PROSPECTUS/PROXY STATEMENT DATED MAY 2, 1995
ACQUISITION OF ASSETS OF
FIRST UNION MONEY MARKET PORTFOLIO,
A PORTFOLIO OF FIRST UNION FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
BY AND IN EXCHANGE FOR SHARES OF
THE EVERGREEN MONEY MARKET FUND,
A SERIES OF THE EVERGREEN MONEY MARKET TRUST
2500 WESTCHESTER AVENUE
PURCHASE, NEW YORK 10577
This Prospectus/Proxy Statement is being furnished to shareholders of the
First Union Money Market Portfolio ("First Union Money Market"), a portfolio of
First Union Funds, in connection with a proposed Agreement and Plan of
Reorganization (the "Plan"), to be submitted to shareholders of First Union
Money Market for consideration at a Special Meeting of Shareholders to be held
on June 15, 1995 at 10:00 a.m. Eastern Daylight Time, at the offices of First
Union Corporation, Two First Union Center, 301 S. Tryon Street, Charlotte, N.C.,
and any adjournments thereof (the "Meeting"). The Plan provides for
substantially all of the assets of First Union Money Market to be acquired by
The Evergreen Money Fund ("Evergreen Money Market"), a series of The Evergreen
Money Market Trust (the "Trust"), in exchange for shares of Evergreen Money
Market and the assumption by Evergreen Money Market of certain identified
liabilities of First Union Money Market (hereinafter referred to as the
"Reorganization"). Following the Reorganization, shares of Evergreen Money
Market will be distributed to shareholders of First Union Money Market in
liquidation of First Union Money Market, and First Union Money Market will be
terminated. Holders of shares in First Union Money Market will receive shares of
the Class of Evergreen Money Market (the "Corresponding Shares") having the same
letter designation and the same distribution-related fees, shareholder
servicing-related fees and contingent deferred sales charges ("CDSCs"), if any,
as the shares of the Class of First Union Money Market held by them prior to the
Reorganization (see "Summary -- Distribution of Shares"). As a result of the
proposed Reorganization, shareholders of First Union Money Market will receive
that number of full and fractional Corresponding Shares of Evergreen Money
Market having an aggregate net asset value equal to the aggregate net asset
value of such shareholder's shares of First Union Money Market. The
Reorganization is being structured as a tax-free reorganization for federal
income tax purposes.
Evergreen Money Market is a diversified series of the Trust, an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust has only one series, Evergreen
Money Market.
Evergreen Money Market seeks as high a level of current income as is
consistent with preserving capital and providing liquidity. Evergreen Money
Market invests only in high quality money market instruments. The shares of
Evergreen Money Market are presently issued in three Classes: Class A, Class B
and Class Y Shares.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about Evergreen Money Market
that shareholders of First Union Money Market should know before voting on the
Reorganization. Certain relevant documents listed below, which have been filed
with the Securities and Exchange Commission ("SEC"), are incorporated in whole
or in part by reference. A Statement of Additional Information dated May 2,
1995, relating to this Prospectus/Proxy Statement and the Reorganization,
incorporating by reference the financial statements of Evergreen Money Market
for the fiscal period ended August 31, 1994 and the financial statements of
First Union Money Market dated December 31, 1994, has been filed with the SEC
and is incorporated by reference in its entirety into this Prospectus/Proxy
Statement. A copy of such Statement of Additional Information is available upon
request and without charge by writing to the Trust at the address listed on the
cover page of this Prospectus/Proxy Statement or by calling toll-free
1-800-326-3241. In order to expedite delivery, any such request should refer to
"Evergreen Money Market -- Prospectus/Proxy Statement/Statement of Additional
Information."
The Prospectuses of Evergreen Money Market dated January 3, 1995 and its
Annual Report for the fiscal year ended August 31, 1994 are incorporated herein
by reference in their entirety, insofar as they relate to Evergreen Money Market
only, and not to any other fund described therein, and copies are included for
your information. The two Prospectuses, which pertain (i) to Class Y shares and
(ii) to Class A shares and Class B shares differ only insofar as they pertain to
the separate distribution and shareholder servicing arrangements applicable to
the Classes. Shareholders of First Union Money Market
<PAGE>
will receive, with this Prospectus/Proxy Statement, copies of the Prospectus
pertaining to the respective Class of Evergreen Money Market that they will
receive as a result of the consummation of the Reorganization. Additional
information about Evergreen Money Market is contained in its Statement of
Additional Information which has been filed with the SEC and is available upon
request and without charge by writing to Evergreen Money Market at the address
listed on the cover page of this Prospectus/Proxy Statement or by calling
toll-free 1-800-326-3241.
The Prospectuses of First Union Money Market dated February 28, 1995,
insofar as they relate to First Union Money Market only, and not to any other
portfolios therein, are incorporated herein in their entirety by reference.
Copies of the Prospectuses and a Statement of Additional Information dated the
same date are available upon request without charge by writing First Union Money
Market at the address listed on the cover page of this Prospectus/Proxy
Statement or by calling toll-free 1-800-326-3241.
Included as Exhibit A of this Prospectus/Proxy Statement is a copy of the
Plan.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED
OR GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
AN INVESTMENT IN EVERGREEN MONEY MARKET IS NEITHER ISSUED NOR GUARANTEED BY
THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
COMPARISON OF FEES AND EXPENSES........................................................................................ 4
Expense Ratios....................................................................................................... 7
SUMMARY................................................................................................................ 8
Proposed Reorganization.............................................................................................. 8
Tax Consequences..................................................................................................... 8
Investment Objectives and Policies -- Evergreen Money Market......................................................... 8
Investment Objectives and Policies -- First Union Money Market....................................................... 9
Comparative Performance Information for Each Fund.................................................................... 9
Management of the Funds.............................................................................................. 10
Distribution of Shares............................................................................................... 11
Purchase and Redemption Procedures................................................................................... 13
Exchange Privileges.................................................................................................. 13
Dividend Policy...................................................................................................... 13
RISKS.................................................................................................................. 14
INFORMATION ABOUT THE REORGANIZATION................................................................................... 14
Reasons for the Reorganization....................................................................................... 14
Agreement and Plan of Reorganization................................................................................. 14
Federal Income Tax Consequences...................................................................................... 15
Recommendation of the Board.......................................................................................... 16
Pro Forma Capitalization............................................................................................. 17
Shareholder Information.............................................................................................. 17
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES....................................................................... 18
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS........................................................................ 20
Form of Organization................................................................................................. 20
Capitalization....................................................................................................... 20
Shareholder Liability................................................................................................ 21
Shareholder Meetings and Voting Rights............................................................................... 21
Liquidation or Dissolution........................................................................................... 21
Liability and Indemnification of Trustees............................................................................ 21
Rights of Inspection................................................................................................. 22
ADDITIONAL INFORMATION................................................................................................. 22
VOTING INFORMATION CONCERNING THE MEETING.............................................................................. 22
FINANCIAL STATEMENTS AND EXPERTS, LEGAL MATTERS........................................................................ 23
OTHER BUSINESS......................................................................................................... 23
</TABLE>
3
<PAGE>
COMPARISON OF FEES AND EXPENSES
The amounts for Class A shares and Class B shares of Evergreen Money Market
set forth in the following tables and in the examples are estimated based on the
experience of Evergreen Money Market Class Y shares for the fiscal period ended
August 31, 1994; the amounts for Class Y shares of Evergreen Money Market are
based on the experience of such shares for the fiscal period ended August 31,
1994. Class A shares and Class B shares of Evergreen Money Market were first
offered to the public as of January 3, 1995. The estimated amounts for each
class of First Union Money Market set forth in the following tables and examples
are based on the expenses expected during the fiscal year ending December 31,
1995.
The following tables show for Evergreen Money Market and First Union Money
Market the shareholder transaction expenses and annual fund operating expenses
associated with an investment in the respective comparable Classes of shares of
Evergreen Money Market and shares of First Union Money Market, and such costs
and expenses associated with an investment in each Class of shares of Evergreen
Money Market assuming consummation of the Reorganization.
COMPARISON OF CLASS Y SHARES OF EVERGREEN MONEY MARKET
WITH CLASS Y SHARES OF FIRST UNION MONEY MARKET
<TABLE>
<CAPTION>
EVERGREEN MONEY FIRST UNION MONEY EVERGREEN MONEY MARKET
MARKET (1) MARKET (2) PRO FORMA
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)........................................... None None None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price)............................. None None None
Contingent Deferred Sales Charge............................. None None None
Exchange Fee (only applies after 4 exchanges per calendar
year)..................................................... $5 None $5
Redemption Fees.............................................. None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
Advisory Fees................................................ .50% .35% .50%
12b-1 Fees................................................... None None None
Other Expenses............................................... .21% .35% .21%
Annual Fund Operating Expenses................................. .71% .70% .71%
</TABLE>
(1) The annual fund operating expenses and examples for Evergreen Money Market
Trust do not reflect the voluntary advisory fee waiver of .39 of 1% of
average net assets for the fiscal period ending August 31, 1994.
Evergreen Asset has agreed to reimburse Evergreen Money Market to the extent
that its aggregate annual fund operating expenses (including Evergreen
Asset's fee, but excluding taxes, interest, brokerage commissions, Rule
12b-1 distribution-related fees and shareholder servicing-related fees and
extraordinary expenses) exceed 1.00% of average net assets. From time to
time Evergreen Asset may, at its discretion, also reduce or waive its fees
or reimburse Evergreen Money Market for certain of its other expenses in
order to reduce its expense ratio. Evergreen Asset may cease these voluntary
waivers and reimbursements at any time.
(2) The estimated annual fund operating expenses and examples for First Union
Money Market do not reflect a voluntary advisory fee waiver by FUNB-NC of
.22% of average net assets, and a voluntary 12b-1 fee waiver of .10% of
average net assets with respect to Class A Shares only, based on expenses
expected for the fiscal period ending December 31, 1995.
4
<PAGE>
COMPARISON OF CLASS A SHARES OF EVERGREEN MONEY MARKET
WITH CLASS A SHARES OF FIRST UNION MONEY MARKET
<TABLE>
<CAPTION>
EVERGREEN MONEY FIRST UNION MONEY EVERGREEN MONEY MARKET
MARKET (1) MARKET (2) PRO FORMA
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)........................................... None None 4.75%
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price).............................. None None None
Contingent Deferred Sales Charge............................. None None None
Exchange Fee................................................. None None None
Redemption Fees.............................................. None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
Advisory Fees................................................ .50% .35% .50%
12b-1 Fees*.................................................. .30% .30% .30%
Other Expenses............................................... .21% .35% .21%
Annual Fund Operating Expenses................................. 1.01% 1.00% 1.01%
</TABLE>
* The Rule 12b-1 distribution plans of Class A shares of Evergreen Money Market
and First Union Money Market permit payments, at an annual rate of up to .75%
and .35%, respectively, of each Fund's respective average daily net assets
attributable to such classes. Currently, the annual rate at which such
payments may be made is limited to .30% of average daily net assets.
(1) See Footnote 1 on page 4.
(2) See Footnote 2 on page 4.
COMPARISON OF CLASS B SHARES OF EVERGREEN MONEY MARKET
WITH CLASS B SHARES OF FIRST UNION MONEY MARKET
<TABLE>
<CAPTION>
EVERGREEN MONEY MARKET FIRST UNION MONEY EVERGREEN MONEY MARKET
(1) MARKET (2) PRO FORMA
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)................... None None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).............. None None None
Contingent Deferred Sales Charge................. 5% during 1st year , 5% during 1st year , 5% during 1st year ,
4% during 2nd year , 4% during 2nd year , 4% during 2nd year ,
3% during 3rd year , 3% during 3rd year , 3% during 3rd year ,
3% during 4th year , 3% during 4th year , 3% during 4th year ,
2% during 5th year , 2% during 5th year , 2% during 5th year ,
1% during 6th year , 1% during 6th year , 1% during 6th year ,
1% during 7th year , 1% during 7th year , 1% during 7th year ,
and 0% after 7th year and 0% after 7th year and 0% after 7th year
Exchange Fee....................................... None None None
Redemption Fees.................................... None None None
</TABLE>
<TABLE>
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE
OF AVERAGE DAILY NET ASSETS)
Advisory Fees................................. .50% .35% .50%
12b-1 Fees**.................................. 1.00% 1.00% 1.00%
Other Expenses................................ .21% .35% .21%
Annual Fund Operating Expenses.................. 1.71% 1.70% 1.71%
</TABLE>
** The Rule 12b-1 distribution plans for Class B shares of First Union Money
Market and Evergreen Money Market provide for payment of total 12b-1 fees
under the plans at an annual rate of 1.00% of average net assets. A portion
of the 12b-1 fees equivalent to .25 of 1% of average annual assets will be
shareholder servicing-related. Distribution-related 12b-1 fees will be
limited to .75 of 1% of average annual assets as permitted under the rules of
the NASD.
(1) See Footnote 1 on page 4.
(2) See Footnote 2 on page 4.
5
<PAGE>
EXAMPLES. The following tables show for the respective Classes of shares of
each Fund, and for Evergreen Money Market, assuming consummation of the
Reorganization, examples of the cumulative effect of the shareholder transaction
expenses and annual fund operating expenses indicated above on a $1,000
investment in such shares for the periods specified, assuming (i) a 5% annual
return, and (ii) redemption at the end of such period and, additionally for
Class B shares, no redemption at the end of each period.
In the following examples (i) the expenses for Class B Shares assume
deduction at the time of redemption (if applicable) of the maximum CDSC
applicable for that time period, and (ii) the expenses for Class B Shares
reflect the conversion to Class A Shares seven years after purchase (years eight
through ten, therefore, reflect Class A expenses).
CLASS Y SHARES
<TABLE>
<CAPTION>
EVERGREEN MONEY FIRST UNION MONEY EVERGREEN MONEY MARKET
MARKET MARKET PRO FORMA
<S> <C> <C> <C>
After 1 year............... $ 7 $ 7 $ 7
After 3 years.............. $23 $22 $ 23
After 5 years.............. $40 $39 $ 40
After 10 years............. $88 $87 $ 88
</TABLE>
CLASS A SHARES
<TABLE>
<CAPTION>
EVERGREEN MONEY FIRST UNION MONEY EVERGREEN MONEY MARKET
MARKET MARKET PRO FORMA
<S> <C> <C> <C>
After 1 year............... $ 10 $ 10 $ 10
After 3 years.............. $ 32 $ 32 $ 32
After 5 years.............. $ 56 $ 55 $ 56
After 10 years............. $ 124 $ 122 $124
</TABLE>
CLASS B SHARES
<TABLE>
<CAPTION>
ASSUMING REDEMPTION AT END OF PERIOD
EVERGREEN MONEY FIRST UNION MONEY EVERGREEN MONEY MARKET
MARKET MARKET PRO FORMA
<S> <C> <C> <C>
After 1 year............... $ 67 $ 67 $ 67
After 3 years.............. $ 84 $ 84 $ 84
After 5 years.............. $ 113 $ 112 $113
After 10 years............. $ 175 $ 174 $175
</TABLE>
<TABLE>
<CAPTION>
ASSUMING NO REDEMPTION AT END OF PERIOD
EVERGREEN MONEY FIRST UNION MONEY EVERGREEN MONEY MARKET
MARKET MARKET PRO FORMA
<S> <C> <C> <C>
After 1 year............... $ 17 $ 17 $ 17
After 3 years.............. $ 54 $ 54 $ 54
After 5 years.............. $ 93 $ 92 $ 93
After 10 years............. $ 175 $ 174 $175
</TABLE>
The purpose of the foregoing examples is to assist a First Union Money
Market shareholder in understanding the various costs and expenses that an
investment in the respective Classes of shares of Evergreen Money Market as a
result of the Reorganization would bear directly and indirectly, as compared
with the various direct and indirect expenses borne by a First Union Money
Market shareholder. These examples should not be considered a representation of
past or future expenses or annual return. Actual expenses and annual return may
be greater or less than those shown.
6
<PAGE>
EXPENSE RATIOS
The expense ratios for the respective 12 month periods ended December 31,
1994 are as follows:
<TABLE>
<CAPTION>
EVERGREEN MONEY FIRST UNION MONEY
MARKET MARKET
<S> <C> <C>
Class Y Shares...................................... .33 of 1% .41 of 1%
Class A Shares...................................... .63 of 1%* .61 of 1%
Class B Shares...................................... 1.33 of 1%* 1.30 of 1%
</TABLE>
The above-mentioned expense ratios are net of voluntary advisory fee
waivers and expense reimbursements by each Fund's investment adviser. These
voluntary fee waivers and expense reimbursements may be discontinued at any time
without notice. If no advisory fee waivers and reimbursements had been made,
these expense ratios would have been as follows:
<TABLE>
<CAPTION>
EVERGREEN MONEY FIRST UNION MONEY
MARKET MARKET
<S> <C> <C>
Class Y Shares...................................... .73 of 1% .68 of 1%
Class A Shares...................................... 1.03 of 1%* .98 of 1%
Class B Shares...................................... 1.73 of 1%* 1.56 of 1%
</TABLE>
If the Funds were consolidated, and based upon the level of advisory fee
waiver on the part of Evergreen in effect for the 12 month period ended December
31, 1994, the pro forma expense ratios for the 12 month period ended December
31, 1994 would have been as follows:
<TABLE>
<CAPTION>
EVERGREEN MONEY
MARKET
PRO FORMA
<S> <C> <C>
Class Y Shares...................................... .39 of 1%
Class A Shares...................................... .69 of 1%
Class B Shares...................................... 1.39 of 1%
</TABLE>
The following are the annualized expense ratios of Evergreen Money Market
for its fiscal year ended August 31, 1994.
<TABLE>
<CAPTION>
EXCLUDING
NET OF ADVISORY ADVISORY FEE
FEE WAIVER WAIVER
<S> <C> <C>
Class Y Shares...................................... .32 of 1% .71 of 1%
Class A Shares...................................... .62 of 1%* 1.01 of 1%*
Class B Shares...................................... 1.32 of 1%* 1.71 of 1%*
</TABLE>
* Expense ratios for Evergreen Money Market Class A shares and Class B shares
are based upon the expense ratios of the Class Y shares adjusted for Rule
12b-1 distribution and shareholder servicing fees. Class A shares and Class B
shares commenced operations on January 3, 1995.
7
<PAGE>
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ADDITIONAL
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS/PROXY STATEMENT, AND, TO THE
EXTENT NOT INCONSISTENT WITH SUCH ADDITIONAL INFORMATION, THE PROSPECTUSES OF
EVERGREEN MONEY MARKET DATED JANUARY 3, 1995 AND THE PROSPECTUSES OF FIRST UNION
MONEY MARKET DATED FEBRUARY 28, 1995 (WHICH ARE INCORPORATED HEREIN BY
REFERENCE), AND THE PLAN, A COPY OF WHICH IS ATTACHED TO THIS PROSPECTUS/PROXY
STATEMENT AS EXHIBIT A.
PROPOSED REORGANIZATION
The Plan provides for the transfer of substantially all of the assets of
First Union Money Market in exchange for shares of Evergreen Money Market and
the assumption by Evergreen Money Market of certain identified liabilities of
First Union Money Market. (First Union Money Market and Evergreen Money Market
each may also be referred to in this Prospectus/Proxy Statement as a "Fund" and
collectively as the "Funds".) The Plan also calls for the distribution of
Corresponding Shares (as defined above) of Evergreen Money Market to First Union
Money Market shareholders in liquidation of First Union Money Market as part of
the Reorganization. As a result of the Reorganization, each shareholder of First
Union Money Market will become the owner of that number of full and fractional
Corresponding Shares of Evergreen Money Market having an aggregate net asset
value equal to the aggregate net asset value of the shareholder's shares of
First Union Money Market as of the close of business on the date that First
Union Money Market's assets are exchanged for shares of Evergreen Money Market.
See "Information About the Reorganization."
The Trustees of First Union Funds, including the Trustees who are not
"interested persons," as that term is defined in the 1940 Act (the "Independent
Trustees"), have concluded that the Reorganization would be in the best
interests of shareholders of First Union Money Market and that the interests of
the shareholders of First Union Money Market will not be diluted as a result of
the transactions contemplated by the Reorganization. Accordingly, the Trustees
have submitted the Plan for the approval of First Union Money Market's
shareholders.
THE BOARD OF TRUSTEES OF FIRST UNION FUNDS RECOMMENDS APPROVAL OF THE PLAN
EFFECTING THE REORGANIZATION.
The Board of Trustees of the Trust has also approved the Plan, and
accordingly, Evergreen Money Market's participation in the Reorganization.
Approval of the Reorganization will require the affirmative vote of more
than 50% of its outstanding voting securities of First Union Money Market, with
shares of all Classes voting as one Class. See "Voting Information Concerning
the Meeting."
If the shareholders of First Union Money Market do not vote to approve the
Reorganization, the Trustees of First Union Funds will continue to operate First
Union Money Market under existing arrangements, or consider other alternatives
in the best interests of the shareholders.
TAX CONSEQUENCES
Prior to or at the completion of the Reorganization, First Union Money
Market will have received an opinion of counsel that the Reorganization has been
structured so that no gain or loss will be recognized by First Union Money
Market or its shareholders for federal income tax purposes as a result of the
receipt of shares of Evergreen Tax Exempt in the Reorganization. The holding
period and aggregate tax basis of Corresponding Shares of Evergreen Money Market
that are received by First Union Money Market shareholders will be the same as
the holding period and aggregate tax basis of shares of First Union Money Market
previously held by such shareholders, provided that shares of First Union Money
Market are held as capital assets. In addition, the holding period and tax basis
of the assets of First Union Money Market in the hands of Evergreen Money Market
as a result of the Reorganization will be the same as in the hands of First
Union Money Market immediately prior to the Reorganization.
INVESTMENT OBJECTIVES AND POLICIES -- EVERGREEN MONEY MARKET
The investment objective of Evergreen Money Market is to achieve as high a
level of current income as is consistent with preserving capital and providing
liquidity. The Fund invests in high quality money market instruments which are
determined to present minimal credit risk and to be of eligible quality under
SEC Rule 2a-7 promulgated under the 1940 Act ("Rule 2a-7"). See "Comparison of
Investment Objectives and Policies -- Rule 2a-7 Investments."
8
<PAGE>
Evergreen Money Market's permitted investments include:
1. Marketable obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities, including issues of the
United States Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities
established under the authority of an act of Congress. Some of these
securities are supported by the full faith and credit of the United
States Government, others are supported by the right of the issuer to
borrow from the Treasury, and still others are supported only by the
credit of the agency or instrumentality.
2. Commercial paper, including variable amount master demand notes, that is
rated in one of the two highest short-term rating categories by any two
of Standard & Poor's Ratings Group ("S&P"), Moody's Investor Service,
Inc. ("Moody's") or any other nationally recognized statistical rating
organization ("SRO") (or by a single rating agency if only one of these
agencies has assigned a rating). The Fund will not invest more than 10%
of its total assets, at the time of investment, in variable amount
master demand notes.
3. Corporate debt securities of the same quality as permitted investment in
commercial paper.
4. Unrated corporate debt securities, commercial paper and bank obligations
that are issued by domestic or foreign issuers which have: (i) an
outstanding class of short-term debt instruments (i.e., instruments
having a maturity of 366 days or less) that (A) is comparable in
priority and security to the unrated securities and (B) meets the rating
requirements of 2 or 3 above; or (ii) an outstanding long-term debt
issue rated in the top two rating categories by an SRO and are
determined by the Trustees to be of comparable quality.
5. Unrated corporate debt securities, commercial paper and bank obligations
otherwise determined by the Trustees to be of comparable quality.
6. Repurchase agreements with respect to the securities described in
paragraphs 1 through 5 above.
The Fund may invest up to 30% of its total assets in bank certificates of
deposit and bankers' acceptances payable in U.S. dollars and issued by foreign
banks (including U.S. branches of foreign banks) or by foreign branches of U.S.
banks.
Evergreen Money Market may borrow funds, issue senior securities and agree
to sell portfolio securities to financial institutions such as banks and
broker-dealers and to repurchase them at a mutually agreed upon date and price
(a "reverse repurchase agreement") for temporary or emergency purposes in
amounts not in excess of 10% of the value of the Fund's total assets at the time
of such borrowing. See " -- Comparison of Investment Objectives and
Policies" below.
INVESTMENT OBJECTIVES AND POLICIES -- FIRST UNION MONEY MARKET
First Union Money Market seeks to provide current income from short-term
securities while preserving capital and maintaining liquidity. First Union Money
Market invests exclusively in a portfolio of high quality money market
instruments maturing in 397 days or less, with an average dollar-weighted
maturity of 90 days or less. First Union Money Market invests in high quality
money market instruments that are rated in the highest short-term rating
category by major SROs, such as S&P or Moody's, or are of comparable quality to
securities having such ratings. First Union Money Market is also subject to Rule
2a-7.
Examples of the instruments in which First Union Money Market may invest
include, but are not limited to: (i) commercial paper; (ii) variable amount
demand master notes; (iii) instruments of domestic banks and foreign banks (such
as certificates of deposit, demand and time deposits, savings shares and
bankers' acceptances) if they have capital, surplus and undivided profits of
over $100,000,000 and/or if their deposits are insured by the Federal Deposit
Insurance Corporation, which instruments include U.S. dollar-denominated
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs"), and Eurodollar time deposits ("ETDs"); (iv) marketable
obligations of, or guaranteed by, the United States Government, its agencies or
instrumentalities, including these obligations purchased on a when-issued or
delayed delivery basis; (v) corporate obligations; and (vi) repurchase
agreements and reverse repurchase agreements for the foregoing instruments and
instruments secured by foregoing.
COMPARATIVE PERFORMANCE INFORMATION FOR EACH FUND
Discussions of the manner of calculation of total return, yield and
effective yield are contained in the respective Prospectuses and Statements of
Additional Information of the Funds.
The total return of the Class Y shares of Evergreen Money Market and of
each Class of shares of the First Union Money Market for the one year period
ended on December 31, 1994 and the period from inception through December 31,
1994 is set
9
<PAGE>
forth in the table below. (In the case of the Class B shares of First Union
Money Market, performance information reflects the contingent deferred sales
charge.) The inception date for Class Y of Evergreen Money Market is November 2,
1987. The inception dates for each class of shares offered by First Union Money
Market are as follows: Class A January 3, 1989; Class B February 28, 1994; and
Class Y January 3, 1991. Class A and Class B shares of Evergreen Money Market
were not offered as of December 31, 1994 and commenced operations January 3,
1995.
AVERAGE ANNUAL COMPOUNDED TOTAL RETURN
<TABLE>
<CAPTION>
FUND PERIOD CLASS Y CLASS A CLASS B
<S> <C> <C> <C> <C>
Evergreen Money Market........................................................ 1 year 3.98% -- --
From inception 6.10% -- --
First Union Money Market...................................................... 1 year 4.02% 3.81 % --
From inception 4.08% 5.45 % -2.33 %
</TABLE>
The current and effective yield of the Class Y shares of Evergreen Money
Market and of each Class of shares of First Union Money Market for the 7 days
ended December 31, 1994 is set forth in the table below.
CURRENT YIELD
<TABLE>
<CAPTION>
7 DAYS
ENDED CLASS Y CLASS A CLASS B
<S> <C> <C> <C> <C>
Evergreen Money Market................................................................ 12/31/94 5.18% -- --
First Union Money Market.............................................................. 12/31/94 5.29% 5.09% 4.29%
</TABLE>
EFFECTIVE YIELD
<TABLE>
<CAPTION>
7 DAYS
ENDED CLASS Y CLASS A CLASS B
<S> <C> <C> <C> <C>
Evergreen Money Market................................................................ 12/31/94 5.31% -- --
First Union Money Market.............................................................. 12/31/94 5.43% 5.22% 4.38%
</TABLE>
MANAGEMENT OF THE FUNDS
The overall management of each of the First Union Funds and the Trust is
the responsibility of, and is supervised by, its Trustees.
INVESTMENT ADVISERS AND ADMINISTRATORS
EVERGREEN MONEY MARKET. Evergreen Asset Management Corp. ("Evergreen
Asset") is the investment adviser of Evergreen Money Market and, as such,
manages its investments, provides various administrative services and supervises
the Fund's daily business affairs. Under its investment advisory agreement with
Evergreen Money Market, Evergreen Asset is entitled to receive an annual fee
equal to .50 of 1% of the Fund's average daily net assets. Evergreen Asset has
agreed to reimburse Evergreen Money Market to the extent that its aggregate
operating expenses (including Evergreen Asset's fee, but excluding taxes,
interest, brokerage commissions, Rule 12b-1 distribution-related fees and
shareholder servicing-related fees and extraordinary expenses) exceed 1.00% of
average net assets. From time to time Evergreen Asset may, at its discretion,
also reduce or waive its fees or reimburse Evergreen Money Market for certain of
its other expenses in order to reduce its expense ratio. Evergreen Asset may
reduce or cease these voluntary waivers and reimbursements at any time.
Evergreen Asset has engaged Lieber & Company to provide certain sub-advisory
services to Evergreen Asset in connection with its activities as investment
adviser to Evergreen Money Market. The address of Evergreen Asset and of Lieber
and Company is 2500 Westchester Avenue, Purchase, New York 10577. All
reimbursements to Lieber & Company in respect of such services is borne by
Evergreen Asset and does not result in any additional expense to Evergreen Money
Market.
Evergreen Money Market commenced operations on November 2, 1987. Evergreen
Money Market had $244 million in aggregate net assets as of March 1, 1995.
FIRST UNION MONEY MARKET. The Capital Management Group ("CMG"), a division
of First Union National Bank of North Carolina ("FUNB-NC"), One First Union
Center, 301 S. College Street, Charlotte, North Carolina 28288, serves as
investment adviser to First Union Money Market and is responsible for the
management of its investments and supervision of
10
<PAGE>
the Fund's daily business affairs. CMG is entitled to receive an annual fee with
respect to First Union Money Market under its investment advisory agreement with
First Union Funds at an annual rate equal to .35 of 1% of the Fund's average
daily net assets. Federated Administrative Services ("FAS") acts as
administrator and fund accounting agent for First Union Money Market and the
other portfolios of First Union Funds and provides First Union Money Market with
certain administrative personnel and services necessary to operate the Fund. For
its services, FAS is entitled to receive a fee at an annual rate based on the
average daily net assets of First Union Funds, computed as follows: .15 of 1% of
the first $250 million; .125 of 1% of the next $250 million; .10 of 1% of the
next $250 million; and .075 of 1% of assets in excess of $750 million. Unless
waived, the minimum administration fee during a fiscal year shall aggregate at
least $50,000 per portfolio of First Union Funds. Federated Services Company
serves as the transfer agent and dividend disbursing agent for First Union Money
Market. Commencing on July 1, 1995, Evergreen Asset will become the
administrator of First Union Funds pursuant to a contract approved by the
Trustees of First Union Funds on April 20, 1995. If First Union Money Market
were to continue its operations after July 1, 1995, it would be subject to an
administrative fee of not more than .05% of 1% of average daily net assets on an
annual basis.
First Union Money Market commenced operations on January 3, 1989. As of
March 1, 1995, First Union Money Market had total net assets of $212 million.
CERTAIN INFORMATION REGARDING EVERGREEN ASSET, CMG AND FUNB-NC. Evergreen
Asset, together with its predecessor, has served as investment adviser to the
complex of mutual funds comprising the Evergreen Funds since 1971. Since June
30, 1994, Evergreen Asset has been a wholly-owned subsidiary of FUNB-NC. Stephen
A. Lieber and Nola Maddox Falcone serve as the chief investment officers of
Evergreen Asset and, along with Theodore J. Israel, Jr., were the owners of
Evergreen Asset's predecessor of the same name and the former general partners
of Lieber & Company. In addition to Evergreen Money Market, Evergreen Asset
manages one other mutual fund which invests primarily in money market
instruments, Evergreen Tax-Exempt Money Market Fund. Including Evergreen Money
Market, the total net assets of mutual funds which invest principally in money
market instruments for which Evergreen Asset served as investment adviser at
March 1, 1995 were $630 million.
CMG has advised First Union Funds since First Union Funds' inception in
1984. CMG has been managing trust assets for over 50 years and currently
oversees assets of more than $51.2 billion. CMG employs an experienced staff of
professional investment analysts, portfolio managers, and traders, and uses
several proprietary computer-based systems in conjunction with fundamental
analysis to identify investment opportunities. In addition to First Union Money
Market, CMG manages the sixteen other portfolios of First Union Funds. Including
First Union Money Market, CMG acts as investment adviser to mutual funds which
invest principally in money market instruments having assets of approximately
$1,855 million as of March 1, 1995.
FUNB-NC is a subsidiary of First Union Corporation ("First Union"), a bank
holding company headquartered in Charlotte, North Carolina, with $77.3 billion
in total consolidated assets as of December 31, 1994. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses through offices in 42 states and two foreign countries. First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB-NC, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
DISTRIBUTION OF SHARES
Evergreen Funds Distributor, Inc. ("EFD"), a wholly-owned subsidiary of
Furman Selz Incorporated acts as underwriter of Evergreen Money Market's shares.
Federated Securities Corp. ("FSC"), a subsidiary of Federated Investors, has
acted as distributor of First Union Money Market's shares. Commencing on July 1,
1995, EFD will become the distributor of First Union Funds pursuant to a
contract approved by the Trustees of First Union Funds on April 20, 1995. EFD
and FSC distribute Fund shares directly or through broker-dealers, banks,
including FUNB-NC or other financial intermediaries.
The respective shares of each Fund with the same Class letter designation
have, except to the extent described below, substantially the same CDSCs,
distribution-related fees and shareholder servicing-related fees, if any. The
following is a description of such charges and fees for each of the different
Classes of shares. More detailed descriptions of the distribution arrangements
applicable to the Classes of shares are contained in the respective Evergreen
Money Market Prospectuses and First Union Money Market Prospectuses and in each
Fund's respective Statement of Additional Information.
11
<PAGE>
CLASS Y SHARES. Class Y shares are sold without any sales charges and are
not subject to distribution-related fees or shareholder servicing-related fees.
CLASS A SHARES. Class A shares are sold without an initial sales charge
but, as indicated below, are subject to distribution-related fees.
CLASS B SHARES. Class B shares of both funds are sold without any front-end
sales charges but are subject to a contingent deferred sales charge ("CDSC") if
shares are redeemed during the first seven years after purchase. In addition,
Class B shares are subject to distribution-related fees and shareholder
servicing-related fees as described below. Class B shares held for seven years
are expected to automatically convert to Class A shares at the month end after
expiration of the seven year period.
The amount of the CDSCs applicable to redemptions of Class B shares (which
are charged as a percentage of the lesser of the current net asset value or
original cost) will vary according to the number of years from the purchase in
the manner set forth below.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR OF REDEMPTION SINCE PURCHASE SALES CHARGE
<S> <C>
FIRST................................................................. 5%
SECOND................................................................ 4%
THIRD and FOURTH...................................................... 3%
FIFTH................................................................. 2%
SIXTH and SEVENTH..................................................... 1%
</TABLE>
The CDSC is deducted from the amount of the redemption and is paid to the
respective Fund's distributor. Shares of each Fund acquired through dividend or
distribution reinvestment are not subject to a CDSC. For purposes of determining
the schedule of CDSCs, and the time of conversion to Class A shares, applicable
to Class B shares of Evergreen Money Market received by First Union Money Market
shareholders in the Reorganization, Evergreen Money Market will treat such
shares as having been sold on the date the shares of First Union Money Market
were originally purchased by the First Union Money Market shareholder.
CDSCs will be waived on redemptions of shares, following the death or
disability of a shareholder, to meet distribution requirements for certain
qualified retirement plans or in the case of certain redemptions made under a
Fund's Systematic Cash Withdrawal Plan.
For purposes of conversion to Class A shares, Class B shares received
through the reinvestment of dividends and distributions paid on Class B shares
in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A shares, an equal pro rata
portion of the Class B shares in the sub-account will also convert to Class A
shares.
Class B shares are subject to higher distribution-related fees than the
corresponding shares of each Fund on which a front-end sales charge is imposed
for a period of approximately seven years (after which they are expected to
convert to Class A shares). The higher fees mean a higher expense ratio, so
Class B shares pay correspondingly lower dividends and may have a lower net
asset value than Class Y or Class A shares of the Fund.
At the time Class B shares are sold, the underwriter may pay a commission,
from its own resources (which funds may be obtained pursuant to certain
financing arrangements established for the purpose of enabling it to pay such
commissions at the time of sale) to the broker or other financial intermediary
responsible for making the sale. Financing arrangements with respect to
commissions have been entered into with First Union.
DISTRIBUTION-RELATED AND SHAREHOLDER SERVICING-RELATED EXPENSES. Each Fund
has adopted a Rule 12b-1 plan with respect to its Class A shares under which the
Class may pay for distribution-related expenses at an annual rate which may not
exceed .75 of 1%, in the case of Evergreen Money Market, and .35 of 1% in the
case First Union Money Market, of average daily net assets attributable to the
Class. Payments with respect to Class A shares of each Fund are currently
limited to .30 of 1% of average daily net assets attributable to the Class,
which amount may be increased to the full plan rate for a Fund by the Trustees
without shareholders approval. The 12b-1 fee to be charged with respect to Class
A Shares of Evergreen Money Market, .35% of 1%, will be in place for at least
one year.
12
<PAGE>
Each Fund has also adopted a Rule 12b-1 plan with respect to its Class B
shares under which the Class may pay for distribution-related expenses at an
annual rate which may not exceed .75 of 1% of average daily net assets
attributable to the Class.
The Class B Rule 12b-1 plan for Evergreen Money Market also provides for
the payment in respect of "shareholder services," as that term is defined in the
NASD Rule (as defined below), at an annual rate which may not exceed .25 of 1%
(making total Rule 12b-1 fees for Class B shares of Evergreen Money Market
payable at a maximum annual rate of 1.00%). The Trustees of First Union Funds
have adopted a Shareholder Services Plan with respect to Class B shares of First
Union Money Market under which payments may be made to compensate organizations,
which may include FUNB-NC or its affiliates, and which may or may not be a
broker or other financial intermediary responsible for the sale of Class B
shares, for personal services rendered to Class B shareholders and/or the
maintenance of shareholder accounts, at an annual rate not to exceed .25 of 1%.
The payment of fees under the respective Rule 12b-1 plans may from time to
time be limited to the extent any amounts payable thereunder exceed the
limitations contained under Section 26(d) of Article III of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. ("NASD Rule").
The NASD Rule provides that the rate of payments of "asset based sales
charges"shall be limited to .75 of 1% of average annual net assets and, to the
extent that payments are made in respect of "shareholder services," the rate of
such payments shall be limited to .25 of 1% of average annual net assets. In
addition, the payment of such fees and the Funds' CDSCs may, from time to time,
be limited by certain other provisions of the NASD Rule.
PURCHASE AND REDEMPTION PROCEDURES
Information concerning applicable sales charges, distribution-related fees
and shareholder servicing-related fees are described above. Shares of each Fund
are sold at net asset value (plus any applicable sales charges) next determined
after receipt of a purchase order. The minimum initial purchase requirement for
both Evergreen Money Market and First Union Money Market is $1,000; there is no
minimum for subsequent purchases. Each Fund provides for telephone, mail or wire
redemption of shares at net asset value (subject, in the case of Class B shares,
to any applicable CDSC) as next determined after receipt of a redemption request
on each day the New York Stock Exchange is open. Additional information
concerning purchases and redemptions of shares, including how the Funds' net
asset values are determined, is contained in the respective Prospectuses for
each Fund. Each Fund may involuntarily redeem shareholders' accounts that have
less than $1,000 of investment funds.
EXCHANGE PRIVILEGES
Holders of shares of each Class of Evergreen Money Market currently are
permitted to exchange such shares for shares of the same Class of other funds in
the Evergreen group of funds. Holders of shares of each Class of First Union
Money Market currently are permitted to exchange such shares for shares of the
same Class of other portfolios of First Union Funds. Exchanges of Class A shares
of a Fund for Class A shares of other funds within the Evergreen Mutual Fund
complex (in the case of Evergreen Money Market) or other First Union Funds (in
the case of First Union Money Market) generally will require the payment of
applicable sales loads unless such shares derive from Class A shares of such
other funds on which a sales charge has already been paid. The current exchange
privileges, and the requirements and limitations attendant thereto, are
described in the Funds' respective Prospectuses and Statements of Additional
Information. After July 1, 1995 (or as soon thereafter as is reasonably
practicable, and subject to applicable laws), it is expected, although it cannot
be assured, that shareholders in each of the First Union Funds and all funds in
the Evergreen mutual fund complex will be permitted to exchange their shares for
shares of the same Class (to the extent available) of all portfolios of First
Union Funds and all funds in the Evergreen mutual fund complex. Although there
is no present intention to do so, the exchange privilege may be modified or
terminated at any time.
DIVIDEND POLICY
Each Fund declares income dividends daily and pays such dividends monthly.
Distributions of any net realized capital gains of a Fund will be made at least
annually. Dividends and distributions are reinvested in additional shares of the
same Class of the respective Fund, or paid in cash, as a shareholder has
elected. See the respective Prospectuses of the Funds for further information
concerning dividends and distributions.
After the Reorganization, shareholders of First Union Money Market that
have elected (or that so elect no later than June 15, 1995) to have their
dividends and/or distributions reinvested, will have dividends and/or
distributions received from
13
<PAGE>
Evergreen Money Market reinvested in shares of Evergreen Money Market.
Shareholders of First Union Money Market that have elected (or that so elect no
later than June 15, 1995), to receive dividends and/or distributions in cash
will receive dividends and/or distributions from Evergreen Money Market in cash
after the Reorganization, although they may, after the Reorganization, elect to
have such dividends and/or distributions reinvested in additional shares of
Evergreen Money Market.
Each Fund has qualified and intends to continue to qualify to be treated as
a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"). While so qualified, so long as each Fund distributes all
of its investment company taxable income and any net realized gains to
shareholders, it is expected that the Fund will not be required to pay any
federal income taxes on the amounts so distributed. A 4% nondeductible excise
tax will be imposed on amounts not distributed if a Fund does not meet certain
distribution requirements with respect to the end of each calendar year. Each
Fund anticipates meeting such distribution requirements.
RISKS
In general, investment in either of the Funds entails substantially the
same risks. The Funds invest only in securities that have remaining maturities
of 366 days (thirteen months) or less at the date of purchase. For this purpose,
floating rate or variable rate obligations (described above), which are payable
on demand, but which may otherwise have a stated maturity in excess of this
period, will be deemed to have remaining maturities of less than 397 days
pursuant to conditions established by the SEC. The Funds maintain a
dollar-weighted average portfolio maturity of ninety days or less. The Funds
follow these policies to maintain a stable net asset value of $1.00 per share,
although there is no assurance they can do so on a continuing basis. The market
value of the obligations in a Fund's portfolio can be expected to vary inversely
to changes in prevailing interest rates.
INFORMATION ABOUT THE REORGANIZATION
REASONS FOR THE REORGANIZATION
There are substantial similarities between First Union Money Market and
Evergreen Money Market. Specifically, First Union Money Market and Evergreen
Money Market have similar investment objectives and policies, and comparable
risk profiles. See, "Comparison of Investment Objectives and Policies," below.
In addition, the investment records of each Fund are comparable with Evergreen
Money Market having a somewhat better, longer term performance history. See,
"Comparative Performance Information for Each Fund." In terms of total net
assets Evergreen Money Market is slightly larger. As of March 1, 1995, First
Union Money Market had net assets of $212 million, whereas Evergreen Money
Market had net asset of $244 million.
Given the substantial similarities between the Funds, and the fact that
First Union Money Market and Evergreen Money Market are now managed by
affiliated entities and offered through certain common distribution channels,
FUNB-NC and Evergreen Asset do not believe that it makes sense to divide the
resources of the Evergreen/First Union mutual fund advisory organizations
between two substantially identical funds. This could result in both Funds being
disadvantaged due to an inability to achieve optimum size, performance levels
and the greatest possible economies of scale. There can be no assurance any
anticipated economies of scale in connection with the Reorganization will be
realized.
AGREEMENT AND PLAN OF REORGANIZATION
The following summary is qualified in its entirety by reference to the
Plan. (Exhibit A hereto).
The Plan provides that Evergreen Money Market will acquire all or
substantially all of the assets of First Union Money Market in exchange for
shares of Evergreen Money Market and the assumption by Evergreen Money Market of
certain identified liabilities of First Union Money Market on June 30, 1995 or
such later date as may be agreed upon by the parties (the "Closing Date"). Prior
to the Closing Date, First Union Money Market will endeavor to discharge all of
its known liabilities and obligations. Evergreen Money Market will not assume
any liabilities or obligations of First Union Money Market other than those
reflected in an unaudited statement of assets and liabilities of First Union
Money Market prepared as of the close of regular trading on the New York Stock
Exchange, Inc. (the "NYSE"), currently 4:00 p.m. Eastern Time, on the Closing
Date. The number of full and fractional common shares of each Class of Evergreen
Money Market to be received by First Union Money Market will be determined on
the basis of the relative net asset values per share of each respective Class of
Evergreen Money Market's shares and the net asset values attributable to each
Class of shares of First Union Money Market, computed as of the close of regular
trading on the NYSE on the Closing Date. The net asset value per share of each
14
<PAGE>
Class will be determined by dividing assets, less liabilities, in each case
attributable to the respective Class, by the total number of outstanding shares.
State Street Bank and Trust Company, the custodian for each Fund, will
compute the value of the Funds' respective portfolio securities. The method of
valuation employed will be consistent with the procedures set forth in the
Prospectuses and Statement of Additional Information of Evergreen Money Market,
Rule 22c-1 under the 1940 Act, and with the interpretations of such rule by the
SEC's Division of Investment Management.
At or prior to the Closing Date, First Union Money Market shall have
declared a dividend or dividends and distribution or distributions which,
together with all previous dividends and distributions, shall have the effect of
distributing to First Union Money Market's shareholders (in shares of First
Union Money Market, or in cash, as the shareholder has previously elected) all
of First Union Money Market's investment company taxable income for the taxable
year ending on or prior to the Closing Date (computed without regard to any
deduction for dividends paid) and all of its net capital gains realized in all
taxable years ending on or prior to the Closing Date (after reductions for any
capital loss carryforward).
As soon after the Closing Date as conveniently practicable, First Union
Money Market will liquidate and distribute pro rata to shareholders of record as
of the close of business on the Closing Date the full and fractional
Corresponding Shares of Evergreen Money Market received by First Union Money
Market. Such liquidation and distribution will be accomplished by the
establishment of accounts in the names of First Union Money Market's
shareholders on the share records of Evergreen Money Market's transfer agent.
Each account will represent the respective pro rata number of full and
fractional Corresponding Shares of Evergreen Money Market due to First Union
Money Market's shareholders. All issued and outstanding shares of First Union
Money Market, including those represented by certificates, will be canceled. The
shares of Evergreen Money Market to be issued will have no pre-emptive or
conversion rights. After such distribution and the winding up of its affairs,
First Union Money Market will be terminated.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan, including approval by First Union Money Market's
shareholders, accuracy of various representations and warranties and receipt of
opinions of counsel, including those matters referred to in "Federal Income Tax
Consequences" below. Notwithstanding approval of First Union Money Market's
shareholders, the Plan may be terminated: (a) by the mutual agreement of both
parties; or (b) at or prior to the Closing Date by either party (i) because of a
breach by the other party of any representation, warranty, or agreement
contained therein to be performed at or prior to the Closing Date if not cured
within 30 days, or (ii) because a condition to the obligation of the terminating
party has not been met and it reasonably appears that it cannot be met.
The expenses of First Union Money Market in connection with the
Reorganization (including the cost of any proxy soliciting agents), will be
borne by FUNB-NC. The expenses of Evergreen Money Market incurred in connection
with the Reorganization will be borne by Evergreen Asset. No portion of such
expenses shall be borne directly or indirectly by First Union Money Market or
its shareholders. Following the Reorganization, Evergreen Money Market will not
be assuming any liabilities or making any reimbursements in connection with the
12b-1 Plan of First Union Money Market.
If the Reorganization is not approved by shareholders of First Union Money
Market, the Board of Trustees of First Union Funds will continue to operate
First Union Money Market under existing arrangements, or consider other possible
courses of action, including liquidation of First Union Money Market.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is intended to qualify for federal income tax purposes
as a tax-free reorganization under section 368(a) of the Code. As a condition to
the closing of the Reorganization, First Union Money Market will receive an
opinion of counsel to the effect that, on the basis of the existing provisions
of the Code, U.S. Treasury regulations issued thereunder, current administrative
rules, pronouncements and court decisions, for federal income tax purposes, upon
consummation of the Reorganization:
(1) The transfer of substantially all of the assets of First Union
Money Market solely in exchange for shares of Evergreen Money Market and
the assumption by Evergreen Money Market of certain identified liabilities,
followed by the distribution of Evergreen Money Market's shares by First
Union Money Market in dissolution and liquidation of First Union Money
Market, will constitute a "reorganization" within the meaning of section
368(a)(1)(C) of the Code, and Evergreen Money Market and First Union Money
Market will each be a "party to a reorganization" within the meaning of
section 368(b) of the Code;
15
<PAGE>
(2) No gain or loss will be recognized by First Union Money Market on
the transfer of its assets to Evergreen Money Market (except, possibly,
with respect to certain options, futures and forward contracts, if any,
included in the assets ("Contracts")), solely in exchange for Evergreen
Money Market's shares and the assumption by Evergreen Money Market of
liabilities or upon the distribution (whether actual or constructive) of
Evergreen Money Market's shares to First Union Money Market's shareholders
in exchange for their shares of First Union Money Market;
(3) The tax basis of the assets transferred (with the possible
exception of the Contracts) will be the same to Evergreen Money Market as
the tax basis of such assets to First Union Money Market immediately prior
to the Reorganization, and the holding period of such assets (with the
possible exception of the Contracts) in the hands of Evergreen Money Market
will include the period during which the assets were held by First Union
Money Market;
(4) No gain or loss will be recognized by Evergreen Money Market upon
the receipt of the assets from First Union Money Market solely in exchange
for the shares of Evergreen Money Market and the assumption by Evergreen
Money Market of certain liabilities;
(5) No gain or loss will be recognized by First Union Money Market's
shareholders upon the issuance of the shares of Evergreen Money Market to
them, provided they receive solely such shares (including fractional
shares) in exchange for their shares of First Union Money Market; and
(6) The aggregate tax basis of the shares of Evergreen Money Market,
including any fractional shares, received by each of the shareholders of
First Union Money Market pursuant to the Reorganization will be the same as
the aggregate tax basis of the shares of First Union Money Market held by
such shareholder immediately prior to the Reorganization, and the holding
period of the shares of Evergreen Money Market, including fractional
shares, received by each such shareholder will include the period during
which the shares of First Union Money Market exchanged therefor were held
by such shareholder (provided that the shares of First Union Money Market
were held as a capital asset on the date of the Reorganization).
Opinions of counsel are not binding upon the Internal Revenue Service or
the courts. If the Reorganization is consummated but does not qualify as a
tax-free reorganization under the Code, each First Union Money Market
shareholder would recognize a taxable gain or loss equal to the difference
between his tax basis in his First Union Money Market shares and the fair market
value of the Evergreen Money Market shares he received. Shareholders of First
Union Money Market should consult their tax advisers regarding the effect, if
any, of the proposed Reorganization in light of their individual circumstances.
Tax counsel to the funds knows of no reason why the Reorganization would not
qualify as a tax-exempt Reorganization. Since the foregoing discussion only
relates to the federal income tax consequences of the Reorganization,
shareholders of First Union Money Market should also consult their tax advisers
as to state and local tax consequences, if any, of the Reorganization.
RECOMMENDATION OF THE BOARD
Based on the recommendation of FUNB-NC and Evergreen Asset, at Special
Meetings held on January 6 and March 7, 1995, the respective Boards of Trustees
of First Union Funds and the Trust considered, and each approved, the
Reorganization, including the entry by the Trust and First Union Funds into the
Plan on behalf of each Fund. Specifically, the Trustees of First Union Funds
determined that the proposed Reorganization would be in the best interests of
First Union Money Market and its shareholders and would not result in the
dilution of the interests of shareholders.
In reaching their decision to recommend shareholder approval of the
Reorganization, the Trustees of First Union Funds considered information
provided by FUNB-NC with respect to each of the factors (e.g., current asset
levels and similarities between investment objectives and policies) discussed
above in "Reasons for the Reorganization." In addition, the Trustees considered,
among other things, (i) the terms and conditions of the Reorganization; (ii)
whether the Reorganization would result in the dilution of shareholder
interests; (iii) the fact that FUNB-NC will bear the expenses incurred by First
Union Money Market in connection with the Reorganization; (iv) the fact that
Evergreen Money Market will assume all of the disclosed obligations and certain
identified liabilities of First Union Money Market; and (v) the expected federal
income tax consequences of the Reorganization.
The Trustees also considered the benefits to be derived by shareholders of
First Union Money Market from the sale of its assets to Evergreen Money Market.
In this regard, the Trustees considered the potential benefits of being
associated with a larger, more viable entity and the economies of scale that
could be realized by the participation by shareholders of First Union Money
Market in the combined fund. The Trustees of First Union Money Market considered
the relative advisory fees of both funds in their assessments of the benefits of
the Reorganization. In addition, the Trustees considered that there are
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<PAGE>
alternatives available to shareholders of First Union Money Market, including
the ability to redeem their shares, as well as the option to vote against the
Reorganization.
During their consideration of the Reorganization, the Independent Trustees
met with the other Trustees as well as separately with independent legal counsel
regarding the legal issues involved. The Trustees of Evergreen Money Market also
concluded that the proposed Reorganization would be in the best interests of
shareholders of Evergreen Money Market and that the interests of the
shareholders of Evergreen Money Market will not be diluted as a result of the
transactions contemplated by the Reorganization.
THE TRUSTEES OF FIRST UNION FUNDS RECOMMEND THAT THE SHAREHOLDERS OF FIRST
UNION MONEY MARKET APPROVE THE PROPOSED REORGANIZATION.
PRO-FORMA CAPITALIZATION
The following table shows the capitalization of Evergreen Money Market and
First Union Money Market as of March 31, 1995 and on a pro forma basis as of
that date, giving effect to the proposed acquisition of assets at net asset
value:
CAPITALIZATION OF FIRST UNION MONEY MARKET AND EVERGREEN MONEY MARKET
<TABLE>
<CAPTION>
FIRST UNION MONEY MARKET(1) EVERGREEN MONEY MARKET
CLASS Y CLASS A CLASS B CLASS Y CLASS A CLASS B
<S> <C> <C> <C> <C> <C> <C>
Net Assets............................ $25,769,694 $319,928,833 $10,017,466 $255,256,867 $766,840 $84,556
Shares Outstanding.................... 25,769,694 319,924,558 10,017,466 255,793,406 776,836 84,556
Net Asset Value per Share............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
</TABLE>
PRO-FORMA COMBINED CAPITALIZATION OF EVERGREEN MONEY MARKET (2)
<TABLE>
<CAPTION>
CLASS Y CLASS A CLASS B
<S> <C> <C> <C>
Net Assets............................... $281,026,561 $320,705,673 $10,102,022
Shares Outstanding (3)................... 281,563,100 320,701,394 10,102,022
Net Asset Value per Share................ $1.00 $1.00 $1.00
</TABLE>
(1) Net Assets and Net Asset Value per Share of First Union Money Market
represent the aggregate and per share value of First Union Money Market's
net assets which would have been transferred to Evergreen Money Market had
the Reorganization been consummated on March 31, 1995.
(2) Data does not take into account expenses incurred in the Reorganization
which will be borne by Evergreen Asset Management for Evergreen Money Market
and by FUNB for First Union Money Market.
(3) Had the Reorganization been consummated on March 31, 1995, First Union Money
Market would have received 25,769,694 Class Y, 319,924,558 Class A and
10,017,466 Class B shares of Evergreen Money Market, which would then be
available for distribution to shareholders. No assurance can be given as to
how many Evergreen Money Market Class Y, Class A and Class B shares First
Union Money Market shareholders will receive on the date that the
Reorganization takes place, and the foregoing should not be relied upon to
reflect the number of Class Y, Class A and Class B shares of Evergreen Money
Market that will actually be received on or after such date.
SHAREHOLDER INFORMATION
As of April 17, 1995, the following number of each Class of the shares of
First Union Money Market were outstanding: Class A -- 354,482,696 shares; Class
B -- 9,944,882 shares; and Class Y -- 37,283,996 shares.
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<PAGE>
The number and percent of outstanding shares of First Union Money Market
owned by the officers and Trustees of First Union Funds in the aggregate is less
than 1%. Set forth below is certain information as to each person who owned,
beneficially or of record more than 5% of each Class of First Union Money
Market's total outstanding shares as of , 1995:
CLASS A
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF CLASS
<S> <C> <C>
First Union National Bank of North Carolina 48,571 13.70%
Att: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
<CAPTION>
PERCENTAGE OF TOTAL
NAME AND ADDRESS SHARES OUTSTANDING
<S> <C>
First Union National Bank of North Carolina .01%
Att: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
</TABLE>
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF CLASS
<S> <C> <C>
First Union National Bank of Florida 113,133,449 31.92%
Att: Cap Account Dept.
One First Union Center
Charlotte, N.C. 28288
<CAPTION>
PERCENTAGE OF TOTAL
NAME AND ADDRESS SHARES OUTSTANDING
<S> <C>
First Union National Bank of Florida 31.80%
Att: Cap Account Dept.
One First Union Center
Charlotte, N.C. 28288
</TABLE>
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF CLASS
<S> <C> <C>
First Union National Bank of Virginia 19,451,023 5.49%
Att: Cap Account Dept.
One First Union Center
Charlotte, N.C. 28288
<CAPTION>
PERCENTAGE OF TOTAL
NAME AND ADDRESS SHARES OUTSTANDING
<S> <C>
First Union National Bank of Virginia 5.47%
Att: Cap Account Dept.
One First Union Center
Charlotte, N.C. 28288
</TABLE>
CLASS Y
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARE PERCENTAGE OF CLASS
<S> <C> <C>
First Union National Bank of North Carolina 37,145,649 99.63%
Att: Cap Account Dept.
One First Union Center
Charlotte, N.C. 28288
<CAPTION>
PERCENTAGGE OF
TOTAL SHARE
NAME AND ADDRESS OUTSTANDING
<S> <C>
First Union National Bank of North Carolina 9.25%
Att: Cap Account Dept.
One First Union Center
Charlotte, N.C. 28288
</TABLE>
As of April 17, 1995, the following number of each Class of the shares of
Evergreen Money Market were outstanding: Class A -- 729,323; Class B -- 84,589;
and Class Y -- 256,837,983.
As of the Record Date, the officers and Trustees of the Trust beneficially
owned as a group less than 1% of the outstanding shares of Evergreen Money
Market. To the best knowledge of the Trustees, as of the Record Date, no other
shareholder or "group" (as that term is used in Section 13(d) of the Securities
Exchange Act of 1934, the ("Exchange Act")) beneficially owned more than 5% of
Evergreen Money Market's outstanding shares.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by the
descriptions of the respective investment objectives, policies and restrictions
set forth in the respective Prospectuses and Statements of Additional
Information of the Funds. The investment objectives, policies and restrictions
of Evergreen Money Market can be found in the Prospectuses of Evergreen Money
Market under the caption "Investment Objective." Evergreen Money Market's
Prospectuses also offer an additional fund advised by Evergreen Asset. This
additional fund is not involved in the Reorganization, its investment objective,
policies and restrictions are not discussed in this Prospectus/Proxy Statement
and its shares are not offered hereby. The investment objectives, policies and
restrictions of First Union Money Market can be found in the Prospectuses of
First Union Money Market under the caption "Investment Objectives and Policies."
First Union Money Market's Prospectuses also offer two additional funds advised
by CMG. These additional portfolios are not involved in the Reorganization, and
their investment objectives, policies and restrictions are not discussed in this
Prospectus/Proxy Statement.
Both Evergreen Money Market and First Union Money Market seek to achieve a
level of current income consistent with preserving capital and providing
liquidity. While the investment objectives and policies of each Fund are
similar, as
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<PAGE>
described below, certain differences exist that could impact on the performance
of, and risks associated with, an investment in each Fund.
Rule 2a-7 Investments. Both Funds are subject to the provisions of Rule
2a-7. Securities eligible for purchase by the Funds under Rule 2a-7 include
First Tier Securities (i.e., securities rated in the highest short-term rating
category) and Second Tier Securities (i.e., securities eligible for purchase
under Rule 2a-7, which are not in the First Tier). The rule prohibits either
Fund from holding more than 5% of its value in Second Tier Securities. While
First Union Money Market follows a policy of investing in securities which are
in the highest short-term rating category of an SRO, Evergreen Money Market may,
to the extent permitted by Rule 2a-7, invest in Second Tier securities.
In addition, Rule 2a-7 has certain portfolio maturity restrictions. The
Funds may invest only in securities that have remaining maturities of 397 days
(thirteen months) or less at the date of purchase. For this purpose, floating
rate or variable rate obligations which are payable on demand, but which may
otherwise have a stated maturity in excess of this period, will be deemed to
have remaining maturities of less than 397 days pursuant to conditions
established by the SEC. The Funds also must maintain a dollar-weighted average
portfolio maturity of ninety days or less.
The Funds follow these policies to maintain a stable net asset value of
$1.00 per share, although there is no assurance they can do so on a continuing
basis. The market value of the obligations in each Fund's portfolio can be
expected to vary inversely to changes in prevailing interest rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. First Union Money Market may
purchase securities on a "when-issued" basis (i.e., for delivery beyond the
normal settlement date at a stated price and yield). First Union Money Market
generally would not pay for such securities or start earning interest on them
until they are received, but assumes the risks of ownership at the time of
purchase, not at the time of receipt. Evergreen Money Market does not currently
have a policy pertaining to investments in when-issued or delayed delivery
securities.
REPURCHASE AGREEMENTS. The Funds may enter into repurchase agreements with
member banks of the Federal Reserve System, including State Street Bank and
Trust Company, each Fund's custodian, or "primary dealers" (as designated by the
Federal Reserve Bank of New York) in United States Government securities. A
repurchase agreement is an arrangement pursuant to which a buyer purchases a
security and simultaneously agrees to resell it to the vendor at a price that
results in an agreed-upon market rate of return which is effective for the
period of time (which is normally one to seven days, but may be longer) the
buyer's money is invested in the security. The arrangement results in a fixed
rate of return that is not subject to market fluctuations during a Fund's
holding period. Each Fund requires continued maintenance of collateral with its
custodian in an amount equal to, or in excess of, the market value of the
securities, including accrued interest, which are the subject of a repurchase
agreement. In the event a vendor defaults on its repurchase obligation, a Fund
might suffer a loss to the extent that the proceeds from the sale of the
collateral were less than the repurchase price. If the vendor becomes the
subject of bankruptcy proceedings, a Fund might be delayed in selling the
collateral. Evergreen Money Market and First Union Money Market may not enter
into repurchase agreements if, as a result, more than 10% of each Fund's net
assets would be invested in repurchase agreements maturing in more than seven
days and in other securities that are not readily marketable.
REVERSE REPURCHASE AGREEMENTS AND THE BORROWING OF MONEY. Each Fund may
agree to sell portfolio securities to financial institutions such as banks and
broker-dealers and to repurchase them at a mutually agreed upon date and price
(a "reverse repurchase agreement"). At the time a Fund enters into a reverse
repurchase agreement, it will place in a segregated custodial account cash,
United States Government securities or high grade debt obligations having a
value equal to the repurchase price (including accrued interest) and will
subsequently monitor the account to ensure that such equivalent value is
maintained. Reverse repurchase agreements involve the risk that the market value
of the securities sold by a Fund may decline below the repurchase price of those
securities. Evergreen Money Market may borrow money or enter into reverse
repurchase agreements for temporary or emergency purposes only, and then in
amounts not exceeding 10% of the value of its total assets, of which no more
than 5% may be represented by reverse repurchase agreements. First Union Money
Market may borrow money directly or enter into reverse repurchase agreements as
a temporary measure for extraordinary or emergency purposes and then only in
amounts not in excess of 5% of the value of its total assets or in an amount up
to one-third of its net assets, including the amount borrowed, to meet
redemption requests without immediately selling portfolio securities. First
Union Money Market may not purchase portfolio securities if it has borrowings
outstanding that exceed 5% of its total assets while Evergreen Money Market may
not purchase portfolio securities if it has any borrowings (including reverse
repurchase agreements) outstanding.
19
<PAGE>
RESTRICTED AND ILLIQUID SECURITIES. Evergreen Money Market and First Union
Money Market may each invest up to 10% of their net assets in illiquid
securities and other securities which are not readily marketable (such as
private placement securities), including repurchase agreements with maturities
longer than seven days.
Securities not registered under the Securities Act of 1933 (the "Securities
Act") but that are eligible for resale pursuant to Rule 144A thereunder, which
have been determined to be liquid, will not be considered to be illiquid or not
readily marketable and, therefore, are not subject to the aforementioned 10%
limit on investment in illiquid securities. In addition to its investment
restrictions relating to investment in illiquid securities, First Union Money
Market restricts investment in securities subject to restrictions on resale
under the Federal securities laws to 10% of net assets.
The Funds may invest in commercial paper and other short-term corporate
obligations which meet the rating criteria specified in paragraphs 3 and 4 above
which are issued in private placements pursuant to Section 4(2) of the
Securities Act. Such securities are not registered for purchase and sale by the
public under the Securities Act. Evergreen Money Market has been informed that
the staff of the SEC does not consider such securities to be readily marketable.
SECURITIES LENDING. In order to generate income and to offset expenses, the
Funds may lend portfolio securities to brokers, dealers and other financial
organizations. Loans of securities by a Fund, if and when made, will be
collateralized by cash, U.S. government securities or, with respect to Evergreen
Money Market, letters of credit, that are maintained at all times in an amount
equal to at least 100 percent of the current market value of the loaned
securities, including accrued interest. Evergreen Money Market limits loans of
securities to 30% of its total assets. First Union Money Market may not make
loans of securities in excess of 15% of its total assets.
There is a risk that when lending portfolio securities, the securities may
not be available to a Fund on a timely basis and the Fund may, therefore, lose
the opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities files for bankruptcy or becomes insolvent,
disposition of the securities may be delayed pending court action.
CONCENTRATION OF INVESTMENTS. First Union Money Market will not invest more
than 25% of the value of its total assets in any one industry except commercial
paper issued by commercial or consumer finance companies. Evergreen Money Market
will not invest 25% or more of its total assets in the securities of issuers
conducting their principal business activities in any one industry except that
this limitation does not apply to certificates of deposit, bankers acceptances
and interest bearing savings deposits.
The foregoing covers the principal investment policies of each Fund and the
manner in which they differ. The characteristics of each investment policy and
the associated risks are described in the respective Prospectuses and Statements
of Additional Information of the Funds. Both Evergreen Money Market and First
Union Money Market have other investment policies and restrictions which are
also set forth in the respective Prospectuses and Statements of Additional
Information of the Funds.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
FORM OF ORGANIZATION
Each Fund is a separate investment series of an open-end management
investment company registered with the SEC under the 1940 Act which continuously
offers its shares to the public. Each is organized as a series of a
Massachusetts business trust and is governed by a Declaration of Trust, By-Laws
and Board of Trustees. Both are also governed by applicable Massachusetts and
federal law.
CAPITALIZATION
The beneficial interests in Evergreen Money Market are represented by an
unlimited number of transferable shares of beneficial interest with a $0.0001
par value. The beneficial interests in First Union Money Market are represented
by an unlimited number transferable shares of beneficial interest without par
value. The respective Declarations of Trust under which each Fund has been
established permits shares to be allocated into an unlimited number of series,
and classes thereof, with rights determined by the Trustees, all by the Trustees
without shareholder approval. Fractional shares may be issued. Each Fund's
shares have equal voting rights with respect to matters affecting shareholders
of all classes of each Fund, and in the case of First Union Money Market each
series of the trust under which the Fund has been established, and represent
equal proportionate interests in the assets belonging to the Funds. Shareholders
of each Fund are entitled to receive dividends and other amounts to the extent
realized by such Fund as determined by the Trustees of the Fund or trust under
which the Fund
20
<PAGE>
has been established. Shareholders of each Fund vote separately, by class, as to
matters, such as approval or amendments of Rule 12b-1 distribution plans or
amendments thereto, that affect only their particular class and, in the case of
First Union Money Market, which is a series of First Union Funds, by series as
to matters, such as approval or amendments of investment advisory agreements or
proposed reorganizations, that affect only their particular series.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders of a trust could, under certain
circumstances, be held personally liable for the obligations of the trust.
However, the respective Declarations of Trust under which the Funds operate
disclaim shareholder liability for acts or obligations of the portfolio or
series and require that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Funds or the Trustees.
The Declarations of Trust provide for indemnification out of the portfolio's or
series' property for all losses and expenses of any shareholder held personally
liable for the obligations of the portfolio or series. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
considered remote since it is limited to circumstances in which a disclaimer is
inoperative and the portfolio or series itself would be unable to meet its
obligations. A substantial number of mutual funds in the United States are
organized as Massachusetts business trusts.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
Neither Evergreen Money Market nor First Union Funds, on behalf of First
Union Money Market or any of its other series, are required to hold annual
meetings of shareholders. However, a meeting of shareholders for the purpose of
voting upon the question of removal of a Trustee must be called when requested
in writing to do so by the holders of at least 10% of the outstanding shares of
either Evergreen Money Market or First Union Funds. In addition, each is
required to call a meeting of shareholders for the purpose of electing Trustees
if, at any time, less than a majority of the Trustees then holding office were
elected by shareholders. If Trustees of either Evergreen Money Market or First
Union Funds fail or refuse to call a meeting as required by the respective
Declarations of Trust for a period of 30 days after a request in writing by
shareholders holding an aggregate of at least 10% of the shares outstanding,
then shareholders holding said 10% may call and give notice of a shareholders'
meeting. Evergreen Money Market and First Union Funds currently do not intend to
hold regular shareholder meetings. Neither Fund permits cumulative voting. A
majority of shares entitled to vote on a matter constitutes a quorum for
consideration of such matter. In either case, a majority of the shares voting is
sufficient to act on a matter (unless otherwise specifically required by the
applicable governing documents or other law, including the 1940 Act).
LIQUIDATION OR DISSOLUTION
In the event of the liquidation of the Funds the shareholders are entitled
to receive, when, and as declared by the Trustees of either Evergreen Money
Market or First Union Funds the excess of the assets belonging to the Funds or
attributable to the relevant class over the liabilities belonging to the Funds
or attributable to the relevant class. In either case, the assets so
distributable to shareholders of the Funds will be distributed among the
shareholders in proportion to the number of shares of the Funds held by them and
recorded on the books of the Funds.
LIABILITY AND INDEMNIFICATION OF TRUSTEES
The By-Laws of The Evergreen Money Market Trust provide that present and
former Trustees or officers are generally entitled to indemnification against
liabilities and expenses with respect to claims related to their position with
Evergreen Money Market unless, in the case of any liability to the Fund or its
shareholders, it shall have been determined that such Trustee or officer is
liable by reason of his willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
The Declaration of Trust of First Union Funds provides that no Trustee,
officer or agent of First Union Funds shall be personally liable to any person
for any action or failure to act, except for his own bad faith, willful
misfeasance, or gross negligence, or reckless disregard of his duties. The
Declaration of Trust of First Union Funds provide that a Trustee or officer is
entitled to indemnification against liabilities and expenses with respect to
claims related to his position, unless such Trustee or officer shall have been
adjudicated to have acted with bad faith, willful misfeasance, or gross
negligence, or in reckless disregard of his duties, or not to have acted in good
faith in the reasonable belief that his action was in the best interest of the
Fund, or, in the event of settlement, unless there has been a determination that
such Trustee or officer has engaged in willful misfeasance, bad faith, gross
negligence, or reckless disregard of his duties.
21
<PAGE>
RIGHTS OF INSPECTION
Shareholders of the Funds have the same right to inspect in Massachusetts
the governing documents, records of meetings of shareholders, shareholder lists,
share transfer records, accounts and books of the Funds as are permitted
shareholders of a corporation under the Massachusetts corporation law. The
purpose of inspection must be for interests of shareholders relative to the
affairs of the Funds.
The foregoing is only a summary of certain characteristics of the
operations of the Funds, the Declarations of Trust under which they have been
established, the By-Laws governing each Fund, and Massachusetts law. The
foregoing is not a complete description of the documents cited. Shareholders
should refer to the provisions of such respective Declarations of Trust,
By-Laws, and to Massachusetts law directly for a more thorough description.
ADDITIONAL INFORMATION
Each Fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act, and must in accordance therewith file
reports and other information including proxy material, reports and charter
documents with the SEC. These reports can be inspected and copies obtained at
the Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the Northeast Regional Office of the SEC, Seven World
Trade Center, Suite 1300, New York, New York 10048 and at the Southeast Regional
Office of the SEC, 1401 Brickwell Avenue, Suite 200, Miami, Florida 33131.
Copies of such material can also be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549 at prescribed rates.
VOTING INFORMATION CONCERNING THE MEETING
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Trustees of First Union Funds, on behalf
of First Union Money Market, to be used at the Special Meeting of Shareholders
to be held at 10:00 a.m. June 15, 1995, at the offices of First Union
Corporation, Two First Union Center, 301 S. Tryon Street, Charlotte, N.C. 28288,
and at any adjournments thereof. This Prospectus/Proxy Statement, along with a
Notice of the Meeting and a proxy card, is first being mailed to shareholders on
or about May 10, 1995. Only shareholders of record as of the close of business
on the Record Date will be entitled to notice of, and to vote at, the Meeting or
any adjournment thereof. The holders of a majority of the shares outstanding at
the close of business on the Record Date present in person or represented by
proxy will constitute a quorum for the Meeting. If the enclosed form of proxy is
properly executed and returned in time to be voted at the Meeting, the proxies
named therein will vote the shares represented by the proxy in accordance with
the instructions marked thereon. Unmarked proxies will be voted FOR the proposed
Reorganization and FOR any other matters deemed appropriate. Proxies that
reflect abstentions and "broker non-votes" (i.e., shares held by brokers or
nominees as to which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote or (ii) the broker or nominee does not
have discretionary voting power on a particular matter) will be counted as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum, but will have the effect of being counted as votes against
the Plan. A proxy may be revoked at any time on or before the Meeting by written
notice to the Secretary of First Union Funds, Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. Unless revoked, all valid proxies will be
voted in accordance with the specifications thereon or, in the absence of such
specifications, FOR approval of the Plan and the Reorganization contemplated
thereby.
Approval of the Plan will require the affirmative vote of more than 50% of
the outstanding voting securities, with all classes voting together as one
class. Each full share outstanding is entitled to one vote and each fractional
share outstanding is entitled to a proportionate share of one vote.
If the shareholders do not vote to approve the Reorganization, the Trustees
of First Union Funds will continue to operate First Union Money Market under
existing arrangements or consider other alternatives in the best interests of
the shareholders.
Proxy solicitations will be made primarily by mail, but proxy solicitations
may also be made by telephone, telegraph or personal solicitations conducted by
officers and employees of FUNB-NC, its affiliates or other representatives of
First Union Funds. Proxies are solicited by mail. The cost of solicitation will
be borne by FUNB-NC. Trustees and officers of the Funds and officers of FUNB may
also solicit proxies without compensation. Proxies may be solicited by mail, in
person or by telephone. Proxies may be recorded pursuant to telephone or
electronically transmitted instructions obtained pursuant to procedures
reasonably designed to verify that such instructions have been authorized.
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FUNB-NC will be responsible for the respective expenses of First Union
Funds incurred in connection with entering into and carrying out the
Reorganization, whether or not the Reorganization is consummated.
In the event that sufficient votes to approve the Reorganization are not
received by June 15, 1995, the persons named as proxies may propose one or more
adjournments of either or both of the Meetings to permit further solicitation of
proxies. In determining whether to adjourn the Meeting, the following factors
may be considered: the percentage of votes actually cast, the percentage of
negative votes actually cast, the nature of any further solicitation and the
information to be provided to shareholders with respect to the reasons for the
solicitation. Any such adjournment will require an affirmative vote by the
holders of a majority of the shares present in person or by proxy and entitled
to vote at the Meeting. The persons named as proxies will vote upon such
adjournment after consideration of all circumstances which may bear upon a
decision to adjourn the Meeting.
A shareholder who objects to the proposed Reorganization will not be
entitled under either Massachusetts law or the Declaration of Trust of First
Union Funds to demand payment for, or an appraisal of, his or her shares.
However, shareholders should be aware that the Reorganization as proposed is not
expected to result in recognition of gain or loss to shareholders for federal
income tax purposes and that, if the Reorganization is consummated, shareholders
will be free to redeem the shares of Evergreen Money Market which they receive
in the transaction at their then-current net asset value. Shares of First Union
Money Market may be redeemed at any time prior to the consummation of the
Reorganization.
First Union Funds does not hold annual shareholder meetings. Shareholders
wishing to submit proposals for consideration for inclusion in a proxy statement
for a subsequent shareholder meeting should send their written proposals to the
Secretary of First Union Funds at the address set forth on the cover of this
Prospectus/Proxy Statement such that they will be received by First Union Funds
in a reasonable period of time prior to any such meeting.
The votes of the shareholders of Evergreen Money Market are not being
solicited by this Prospectus/Proxy Statement and are not required to carry out
the Reorganization.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES.
Please advise First Union Money Market whether other persons are beneficial
owners of shares for which proxies are being solicited and, if so, the number of
copies of this Prospectus/Proxy Statement needed to supply copies to the
beneficial owners of the respective shares.
FINANCIAL STATEMENTS AND EXPERTS, LEGAL MATTERS
The audited financial statements of Evergreen Money Market as of August 31,
1994 and the financial highlights for the periods indicated therein, all
included in the Annual Report, have been incorporated by reference into this
Prospectus/Proxy Statement in reliance on the reports of Price Waterhouse LLP,
independent accountants for Evergreen Money Market, given on the authority of
the firm as experts in accounting and auditing.
The audited financial statements of First Union Money Market as of December
31, 1994 and the statement of operations for the year ended December 31, 1994
and changes in net assets for the two years ended December 31, 1994 and
financial highlights for the periods indicated therein have been incorporated by
reference into this Prospectus/Proxy Statement in reliance on the report of KPMG
Peat Marwick LLP, independent accountants for First Union Money Market, given on
the authority of the firm as experts in accounting and auditing.
Certain legal matters concerning the issuance of shares of Evergreen Money
Market will be passed upon by Shereff, Friedman, Hoffman & Goodman, LLP, 919
Third Avenue, New York, New York 10022.
OTHER BUSINESS
The Trustees of First Union Funds do not intend to present any other
business at the Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy will
vote thereon in accordance with their judgement.
THE BOARD OF TRUSTEES OF FIRST UNION FUNDS, ON BEHALF OF FIRST UNION MONEY
MARKET, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMEND APPROVAL OF THE PLAN, AND
ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR
OF APPROVAL OF THE PLAN.
May 2, 1995
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 21st day of March, 1995, by and between Evergreen Money Market Trust, a
Massachusetts business trust, with its principal place of business at 2500
Westchester Avenue Purchase, New York 10577 (the "Acquiring Fund"), and First
Union Funds, a Massachusetts business trust (the "First Union Trust"), with its
principal place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779, with respect to its First Union Money Market Portfolio
series (the "Selling Fund").
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368 (a)(1)(D) of the United States
Internal Revenue Code of 1986 (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of substantially all of the
assets of the Selling Fund in exchange solely for shares of beneficial interest,
par value $.0001 per share, of the Acquiring Fund (the "Acquiring Fund Shares")
and the assumption by the Acquiring Fund of certain stated liabilities of the
Selling Fund and the distribution, after the Closing Date hereinafter referred
to, of the Acquiring Fund Shares to the shareholders of the Selling Fund in
liquidation of the Selling Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are separate investment
series of open-end, registered investment companies of the management type and
the Selling Fund owns securities which generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial
interest;
WHEREAS, the Trustees of the Acquiring Fund have determined that the
exchange of substantially all of the assets of the Selling Fund for Acquiring
Fund Shares and the assumption of certain stated liabilities by the Acquiring
Fund on the terms and conditions hereinafter set forth is in the best interests
of the Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund will not be diluted as a result of the
transactions contemplated herein;
WHEREAS, the Trustees of the First Union Trust have determined that the
Selling Fund should exchange substantially all of its assets and certain of its
liabilities for Acquiring Fund Shares and that the interests of the existing
shareholders of the Selling Fund will not be diluted as a result of the
transactions contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND LIABILITIES AND
LIQUIDATION OF THE SELLING FUND
1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth and
on the basis of the representations and warranties contained herein, the Selling
Fund agrees to transfer the Selling Fund's assets as set forth in paragraph 1.2
to the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor (i) to
deliver to the Selling Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined by dividing the value of the
Selling Fund's net assets computed in the manner and as of the time and date set
forth in paragraph 2.1 by the net asset value of one Acquiring Fund Share
computed in the manner and as of the time and date set forth in paragraph 2.2
and (ii) to assume certain liabilities of the Selling Fund, as set forth in
paragraph 1.3. The determination of the number of Acquiring Fund Shares to be
delivered shall be made in such a manner as to result in the Selling Fund
receiving a number of shares of the respective classes of the Acquiring Fund as
shall permit shareholders of the Selling Fund to receive shares of a class
having the same letter designation and the same distribution-related fees,
shareholder servicing-related fees and sales charges, including contingent
deferred sales charges, if any, as the shares of the class of the Selling Fund
held by them prior to the Reorganization. Such transactions shall take place at
the closing provided for in paragraph 3.1 (the "Closing Date").
1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be acquired by
the Acquiring Fund shall consist of all property, including without limitation
all cash, securities, commodities and futures interests and dividends or
interest receivable, which is owned by the Selling Fund and any deferred or
prepaid expenses shown as an asset on the books of the Selling
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Fund on the Closing Date. The Selling Fund has provided the Acquiring Fund with
its most recent audited financial statements which contain a list of all of
Selling Fund's assets as of the date thereof. The Selling Fund hereby represents
that as of the date of the execution of this Agreement there have been no
changes in its financial position as reflected in said financial statements
other than those occurring in the ordinary course of its business in connection
with the purchase and sale of securities and the payment of its normal operating
expenses. The Selling Fund reserves the right to sell any of such securities but
will not, without the prior written approval of the Acquiring Fund, acquire any
additional securities other than securities of the type in which the Acquiring
Fund is permitted to invest. The Acquiring Fund will, within a reasonable time
prior to the Closing Date, furnish the Selling Fund with a statement of the
Acquiring Fund's investment objectives, policies and restrictions and a list of
the securities, if any, on the Selling Fund's list referred to in the second
sentence of this paragraph which do not conform to the Acquiring Fund's
investment objectives, policies, and restrictions. In the event that the Selling
Fund holds any investments which the Acquiring Fund may not hold, the Selling
Fund will dispose of such securities prior to the Closing Date. In addition, if
it is determined that the Selling Fund and the Acquiring Fund portfolios, when
aggregated, would contain investments exceeding certain percentage limitations
imposed upon the Acquiring Fund with respect to such investments, the Selling
Fund if requested by the Acquiring Fund will dispose of a sufficient amount of
such investments as may be necessary to avoid violating such limitations as of
the Closing Date.
1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to discharge
all of its known liabilities and obligations prior to the Closing Date. The
Acquiring Fund shall assume only those liabilities, expenses, costs, charges and
reserves reflected on a Statement of Assets and Liabilities of the Selling Fund
prepared on behalf of the Selling Fund, as of the Valuation Date (as defined in
paragraph 2.1), in accordance with generally accepted accounting principles
consistently applied from the prior audited period. The Acquiring Fund shall
assume only those liabilities of the Selling Fund reflected in such Statement of
Assets and Liabilities and shall not assume any other liabilities, whether
absolute or contingent, known or unknown, accrued or unaccrued, all of which
shall remain the obligation of the Selling Fund.
1.4 LIQUIDATION AND DISTRIBUTION. As soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), (a) the Selling Fund will
liquidate and distribute pro rata to the Selling Fund's shareholders of record,
determined as of the close of business on the Closing Date (the "Selling Fund
Shareholders"), the Acquiring Fund Shares received by the Selling Fund pursuant
to paragraph 1.1. and (b) the Selling Fund will thereupon proceed to dissolve as
set forth in paragraph 1.8 below. Such liquidation and distribution will be
accomplished by the transfer of the Acquiring Fund Shares then credited to the
account of the Selling Fund on the books of the Acquiring Fund, to open accounts
on the share records of the Acquiring Fund in the names of the Selling Fund
Shareholders and representing the respective pro rata number of the Acquiring
Fund Shares due such shareholders. All issued and outstanding shares of the
Selling Fund will simultaneously be canceled on the books of the Selling Fund.
The Acquiring Fund shall not issue certificates representing the Acquiring Fund
Shares in connection with such exchange.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be shown
on the books of the Acquiring Fund's transfer agent. Shares of the Acquiring
Fund will be issued in the manner described in the combined Prospectus and Proxy
Statement on Form N-14 to be distributed to shareholders of the Selling Fund as
described in Section 5.
1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the Selling
Fund is and shall remain the responsibility of the Selling Fund up to and
including the Closing Date and such later date on which the Selling Fund is
terminated.
1.8 TERMINATION. The Selling Fund shall be terminated promptly following
the Closing Date and the making of all distributions pursuant to paragraph 1.4.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
Closing Date (such time and date being hereinafter called the "Valuation Date"),
using the valuation procedures set forth in the Acquiring Fund's Declaration of
Trust and the Acquiring Fund's then current prospectus and statement of
additional information or such other valuation procedures as shall be mutually
agreed upon by the parties.
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2.2 VALUATION OF SHARES. The net asset value of each class of Acquiring
Fund Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's Declaration of Trust and
the Acquiring Fund's then current prospectus and statement of additional
information.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares of each to
be issued (including fractional shares, if any) in exchange for the Selling
Fund's assets shall be determined by dividing the value of the assets of the
Selling Fund attributable to each of its classes determined using the same
valuation procedures referred to in paragraph 2.1 by the net asset value of the
respective classes Acquiring Fund Shares determined in accordance with paragraph
2.2.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
State Street Bank and Trust Company in accordance with its regular practice in
pricing the shares and assets of the Acquiring Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The Closing Date shall be June 30, 1995 or such later
date as the parties may agree to in writing. All acts taking place at the
Closing shall be deemed to take place simultaneously as of the close of business
on the Closing Date unless otherwise provided. The Closing shall be held as of
5:00 o'clock p.m. at the offices of Evergreen Asset Management Corp., 2500
Westchester Avenue, Purchase, New York 10577, or at such other time and/or place
as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. State Street Bank & Trust Company, as
custodian for the Selling Fund (the "Custodian"), shall deliver at the Closing a
certificate of an authorized officer stating that: (a) the Selling Fund's
portfolio securities, cash, and any other assets shall have been delivered in
proper form to the Acquiring Fund on the Closing Date and (b) all necessary
taxes including all applicable Federal and state stock transfer stamps, if any,
shall have been paid, or provision for payment shall have been made, in
conjunction with the delivery of portfolio securities.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date (a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted, or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Closing Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Boston Financial Data Services, Inc., as
transfer agent for each of the Selling Fund and the Acquiring Fund shall deliver
at the Closing a certificate of an authorized officer stating that their records
contain the names and addresses of the Selling Fund Shareholders and the number
and percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of the First Union Trust, or provide evidence satisfactory
to the Selling Fund that such Acquiring Fund Shares have been credited to the
Selling Fund's account on the books of the Acquiring Fund. At the Closing each
party shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUND. The Selling Fund represents and
warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts;
(b) The Selling Fund is a separate investment series of a registered
investment company classified as a management company of the open-end type
and its registration with the Securities and Exchange Commission (the
"Commission") as an investment company under the Investment Company Act of
1940 (the "1940 Act") is in full force and effect;
(c) The current prospectus and statement of additional information of
the Selling Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended, (the "1933 Act")
and the 1940 Act and the rules and regulations of the Commission thereunder
and do not include any untrue statement of a material fact or
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omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not materially misleading;
(d) The Selling Fund is not, and the execution, delivery and
performance of this Agreement (subject to shareholder approval) will not,
result in violation of any provision of the First Union Trust's Declaration
of Trust or By-Laws or of any agreement, indenture, instrument, contract,
lease or other undertaking to which the Selling Fund is a party or by which
it is bound;
(e) The Selling Fund has no material contracts or other commitments
(other than this Agreement) which will be terminated with liability to it
prior to the Closing Date;
(f) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation, administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Selling Fund or any of its properties or
assets which, if adversely determined, would materially and adversely
affect its financial condition, the conduct of its business or the ability
of the Selling Fund to carry out the transactions contemplated by this
Agreement. The Selling Fund knows of no facts which might form the basis
for the institution of such proceedings and is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated;
(g) The financial statements of the Selling Fund at December 31, 1994
have been audited by KPMG Peat Marwick LLP, certified public accountants,
and are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been
furnished to the Acquiring Fund) fairly reflect the financial condition of
the Selling Fund as of such dates, and there are no known contingent
liabilities of the Selling Fund as of such dates not disclosed therein;
(h) Since December 31, 1994, there has not been any material adverse
change in the Selling Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Selling Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund. For the purposes of this
subparagraph (h), a decline in the net asset value of the Selling Fund
shall not constitute a material adverse change;
(i) At the Closing Date, all Federal and other tax returns and reports
of the Selling Fund required by law to have been filed by such dates shall
have been filed, and all Federal and other taxes shall have been paid so
far as due, or provision shall have been made for the payment thereof and
to the best of the Selling Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns;
(j) For each of the preceding six fiscal years of its operation the
Selling Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and has
distributed in each such year all net investment income and realized
capital gains;
(k) All issued and outstanding shares of the Selling Fund are, and at
the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Selling Fund (except that, under
Massachusetts law, Selling Fund Shareholders could, under certain
circumstances be held personally liable for obligations of the Selling
Fund). All of the issued and outstanding shares of the Selling Fund will,
at the time of the Closing Date, be held by the persons and in the amounts
set forth in the records of the transfer agent as provided in paragraph
3.4. The Selling Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of the Selling Fund shares,
nor is there outstanding any security convertible into any of the Selling
Fund shares;
(l) At the Closing Date, the Selling Fund will have good and
marketable title to the Selling Fund's assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.2 and full right, power, and
authority to sell, assign, transfer and deliver such assets hereunder, and
upon delivery and payment for such assets, the Acquiring Fund will acquire
good and marketable title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might arise under the 1933
Act, other than as disclosed to the Acquiring Fund and accepted by the
Acquiring Fund;
(m) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the Selling
Fund and, subject to approval by the Selling Fund's shareholders, this
Agreement constitutes a valid and binding obligation of the Selling Fund,
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights and to general equity principles;
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(n) The information to be furnished by the Selling Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials and other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with Federal
securities and other laws and regulations thereunder applicable thereto;
(o) The proxy statement of the Selling Fund to be included in the
Registration Statement referred to in paragraph 5.7 (other than information
therein that relates to the Acquiring Fund) will, on the effective date of
the Registration Statement and on the Closing Date, not contain any 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, in light of
the circumstances under which such statements were made, not misleading.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring Fund represents
and warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a Massachusetts business trust duly
organized, validly existing and in good standing under the laws of The
Commonwealth of Massachusetts.
(b) The Acquiring Fund is a registered as an investment company
classified as a management company of the open-end type and its
registration with the Commission as an investment company under the 1940
Act is in full force and effect;
(c) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not, result in violation of Acquiring
Fund's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquiring
Fund is a party or by which it is bound;
(e) Except as otherwise disclosed to the Selling Fund and accepted by
the Selling Fund, no material litigation, administrative proceeding or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition and the conduct of its
business or the ability of the Acquiring Fund to carry out the transactions
contemplated by this Agreement. The Acquiring Fund knows of no facts which
might form the basis for the institution of such proceedings and is not a
party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated herein;
(f) The financial statements of the Acquiring Fund at August 31, 1994,
certified by Price Waterhouse LLP, independent accountants, copies of which
have been furnished to the Selling Fund, fairly and accurately reflect the
financial condition of the Acquiring Fund as of such date in accordance
with generally accepted accounting principles consistently applied;
(g) Since August 31, 1994, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquiring Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund. For the purposes of this
subparagraph (g), a decline in the net asset value of the Acquiring Fund
shall not constitute a material adverse change;
(h) At the Closing Date, all Federal and other tax returns and reports
of the Acquiring Fund required by law then to be filed shall have been
filed, and all Federal and other taxes shown due on said returns and
reports shall have been paid or provision shall have been made for the
payment thereof and to the best of the Acquiring Fund's knowledge, no such
return is currently under audit and no assessment has been asserted with
respect to such returns;
(i) For each fiscal year of its operation the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company;
(j) All issued and outstanding Acquiring Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable (except that, under Massachusetts law, shareholders of
the Acquiring
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Fund could, under certain circumstances, be held personally liable for
obligations of the Acquiring Fund). The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares;
(k) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general equity
principles;
(l) The Acquiring Fund Shares to be issued and delivered to the
Selling Fund, for the account of the Selling Fund Shareholders, pursuant to
the terms of this Agreement will at the Closing Date have been duly
authorized and, when so issued and delivered, will be duly and validly
issued Acquiring Fund Shares, and will be fully paid and non-assessable
(except that, under Massachusetts law, shareholders of the Acquiring Fund
could, under certain circumstances, be held personally liable for
obligations of the Acquiring Fund);
(m) The information to be furnished by the Acquiring Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials and other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with Federal
securities and other laws and regulations applicable thereto;
(n) The Prospectus and Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund )
will, on the effective date of the Registration Statement and on the
Closing Date, not contain any 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, in light of the circumstances under which such
statements were made, not misleading; and
(o) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Selling Fund
each will operate its business in the ordinary course between the date hereof
and the Closing Date, it being understood that such ordinary course of business
will include customary dividends and distributions.
5.2 APPROVAL OF SHAREHOLDERS. The First Union Trust will call a meeting of
the Selling Fund Shareholders to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the transactions
contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Selling Fund covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring Fund
in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but in
any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund for
Federal income tax purposes which will be carried over by the Acquiring Fund as
a result of Section 381 of the Code, and which will be certified by the First
Union Trust's President, its Treasurer and its independent auditors.
5.7 PREPARATION OF FORM N-14 REGISTRATION STATEMENT. The Selling Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus (the "Prospectus and Proxy Statement") which will
include the Prospectus and Proxy Statement, referred to in paragraph 4.2(n), all
to be included in a Registration Statement on Form
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N-14 of the Acquiring Fund (the "Registration Statement"), in compliance with
the 1933 Act, the Securities Exchange Act of 1934, as amended, (the "1934 Act")
and the 1940 Act in connection with the meeting of the Selling Fund Shareholders
to consider approval of this Agreement and the transactions contemplated herein.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by the Acquiring Fund's President or
Vice President and its Treasurer or Assistant Treasurer, in a form reasonably
satisfactory to the Selling Fund and dated as of the Closing Date, to such
effect and as to such other matters as the Acquiring Fund shall reasonably
request; and
6.2 The Selling Fund shall have received on the Closing Date an opinion
from Shereff, Friedman, Hoffman & Goodman LLP, counsel to the Acquiring Fund,
dated as of the Closing Date, in a form reasonably satisfactory to the Selling
Fund, covering the following points:
That (a) the Acquiring Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts and has the power
to own all of its properties and assets and to carry on its business as
presently conducted; (b) the Agreement has been duly authorized, executed and
delivered by the Acquiring Fund, and, assuming that the Prospectus, Registration
Statement and Proxy Statement comply with the 1933 Act, the 1934 Act and the
1940 Act and the rules and regulations thereunder and, assuming due
authorization, execution and delivery of the Agreement by the Selling Fund, is a
valid and binding obligation of the Acquiring Fund enforceable against the
Acquiring Fund in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and to general equity principles; (c)
assuming that a consideration therefor not less than the net asset value
therefor has been paid, the Acquiring Fund Shares to be issued and delivered to
the Selling Fund on behalf of the Selling Fund Shareholders as provided by this
Agreement are duly authorized and upon such delivery will be legally issued and
outstanding and fully paid and non-assessable (except that, under Massachusetts
law, shareholders of the Acquiring Fund could, under certain circumstances, be
held personally liable for obligations of the Acquiring Fund), and no
shareholder of the Acquiring Fund has any preemptive rights in respect thereof;
(d) the execution and delivery of the Agreement did not, and the consummation of
the transactions contemplated hereby will not, result in a violation of the
Acquiring Fund's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound; (e) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the Commonwealth of Massachusetts, is required for the
consummation by the Acquiring Fund of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act and the 1940
Act, and such as may be required under state securities laws; (f) only insofar
as they relate to the Acquiring Fund, the descriptions in the Prospectus and
Proxy Statement of statutes, legal and governmental proceedings and material
contracts, if any, are accurate and fairly present the information required to
be shown; (g) such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described as required; (h)
the Acquiring Fund is a separate investment series of a Massachusetts business
trust registered as an investment company under the 1940 Act and to such
counsel's best knowledge, such registration with the Commission as an investment
company under the 1940 Act is in full force and effect; and (i) to the knowledge
of such counsel, no litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending or threatened as
to the Acquiring Fund or any of its properties or assets and the Acquiring Fund
is not a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body, which materially and adversely affects its
business, other than as previously disclosed in the Registration Statement. In
addition, such counsel shall also state that they have participated in
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conferences with officers and other representatives of the Acquiring Fund at
which the contents of the Prospectus and Proxy Statement and related matters
were discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Prospectus and Proxy Statement (except to the extent indicated
in paragraph (f) of their above opinion), on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions of the Acquiring Fund's
officers and other representatives of the Acquiring Fund), no facts have come to
their attention that lead them to believe that the Prospectus and Proxy
Statement as of its date, as of the date of the Selling Fund Shareholders'
meeting, and as of the Closing Date, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein regarding
the Acquiring Fund or necessary, in the light of the circumstances under which
they were made, to make the statements therein regarding the Acquiring Fund not
misleading. Such opinion may state that such counsel does not express any
opinion or belief as to the financial statements or any financial or statistical
data, or as to the information relating to the Selling Fund, contained in the
Prospectus and Proxy Statement or Registration Statement, and that such opinion
is solely for the benefit of the First Union Trust and the Selling Fund. Such
opinion shall contain such other assumptions and limitations as shall be in the
opinion of Shereff, Friedman, Hoffman & Goodman LLP appropriate to render the
opinions expressed therein and shall indicate, with respect to matters of
Massachusetts law that as Shereff, Friedman, Hoffman & Goodman LLP are not
admitted to the bar of Massachusetts, such opinions are based solely upon the
review of published statutes, cases and rules and regulations of the
Commonwealth of Massachusetts.
In this paragraph 6.2, references to Prospectus and Proxy Statement include
and relate to only the text of such Prospectus and Proxy Statement and not to
any exhibits or attachments thereto or to any documents incorporated by
reference therein.
[INTENTIONALLY BLANK]
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the Selling
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations, covenants and warranties of the Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Selling Fund shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by the First Union
Trust's President or Vice President and its Treasurer or Assistant Treasurer, in
form and substance satisfactory to the Acquiring Fund and, dated as of the
Closing Date, to such effect and as to such other matters as the Acquiring Fund
shall reasonably request;
7.2 The Selling Fund shall have delivered to the Acquiring Fund a statement
of the Selling Fund's assets and liabilities, together with a list of the
Selling Fund's portfolio securities showing the tax costs of such securities by
lot and the holding periods of such securities, as of the Closing Date,
certified by the Treasurer of the First Union Trust; and
7.3 The Acquiring Fund shall have received on the Closing Date an opinion
of Sullivan & Worcester counsel to the Selling Fund, in a form satisfactory to
the Acquiring Fund covering the following points:
That (a) the Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts and has the power
to own all of its properties and assets and to carry on its business as
presently conducted; (b) the Agreement has been duly authorized, executed and
delivered by the Selling Fund, and, assuming that the Prospectus, the
Registration Statement and the Prospectus and Proxy Statement comply with the
1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder
and, assuming due authorization, execution and delivery of the Agreement by the
Acquiring Fund, is a valid and binding obligation of the Selling Fund
enforceable against the Selling Fund in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and to general equity
principles; (c) the execution and delivery of the Agreement did not, and the
consummation of the transactions contemplated hereby will not, result in a
violation of the First Union Trust's Declaration of Trust or By-laws, or any
provision of any material agreement, indenture, instrument, contract, lease or
other undertaking (in each case known to such counsel) to which the Selling Fund
is a party or by which it or any of its properties may be bound or, to the
knowledge of such counsel, result in the acceleration of any obligation or the
imposition of any penalty, under any agreement, judgment, or decree to which the
Selling Fund is a party or by which it is bound; (d) to the knowledge of such
counsel, no consent, approval, authorization or order of any court or
governmental authority of the United States, or the Commonwealth of
Massachusetts is required for the consummation by the Selling Fund of the
transactions contemplated herein, except such as have been obtained under the
1933 Act, the 1934 Act and the 1940 Act, and such as may be required under state
securities laws; (e) only insofar as they relate to the Selling Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown; (f) such counsel does not know of
any legal or governmental proceedings, only insofar as they relate to the
Selling Fund existing on or before the date of mailing of the Prospectus and
Proxy Statement and the Closing Date, required to be described in the Prospectus
and Proxy Statement or to be filed as an exhibit to the Registration Statement
which are not described or filed as required; (g) the Selling Fund is a separate
investment series of a Massachusetts business trust registered as an investment
company under the 1940 Act and to such counsel's best knowledge, such
registration with the Commission as an investment company under the 1940 Act is
in full force and effect; (h) to the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Selling Fund or
any of its respective properties or assets and the Selling Fund is neither a
party to nor subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects its business
other than as previously disclosed in the Prospectus and Proxy Statement; (i)
assuming that a consideration therefor not less than the net asset value
therefor has been paid, and assuming that such shares were issued in accordance
with the terms of the Selling Fund's registration statement, or any amendment
thereto, in effect at the time of such issuance all issued and outstanding
shares of the Selling Fund are legally issued and fully paid and non-assessable
(except that, under Massachusetts law, Selling Fund Shareholders could, under
certain circumstances be held personally liable for obligations of the Selling
Fund). Such counsel shall also state that they have participated in conferences
with officers and other representatives of the Selling Fund at which the
contents of the Prospectus and Proxy Statement and related matters were
discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the
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statements contained in the Prospectus and Proxy Statement (except to the extent
indicated in paragraph (e) of their above opinion), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of the
First Union Trust's officers and other representatives of the Selling Fund), no
facts have come to their attention that lead them to believe that the Prospectus
and Proxy Statement as of its date, as of the date of the Selling Fund
Shareholders' meeting, and as of the Closing Date, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein regarding the Selling Fund or necessary, in the light of the
circumstances under which they were made, to make the statements therein
regarding the Selling Fund not misleading. Such opinion may state that such
counsel does not express any opinion or belief as to the financial statements or
any financial or statistical data, or as to the information relating to the
Acquiring Fund, contained in the Prospectus and Proxy Statement or Registration
Statement, and that such opinion is solely for the benefit of the Acquiring
Fund. Such opinion shall contain such other assumptions and limitations as shall
be in the opinion of Sullivan & Worcester appropriate to render the opinions
expressed therein.
In this paragraph 7.3, references to Prospectus and Proxy Statement include
and relate to only the text of such Prospectus and Proxy Statement and not to
any exhibits or attachments thereto or to any documents incorporated by
reference therein.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Selling Fund in accordance with the provisions of the First Union Trust's
Declaration of Trust and By-Laws and certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor
the Selling Fund may waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date the Commission shall not have issued an unfavorable
report under Section 25(b) of the 1940 Act, nor instituted any proceeding
seeking to enjoin the consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act and no action, suit or other
proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein;
8.3 All required consents of other parties and all other consents, orders
and permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities. including
any necessary "no-action" positions of and exemptive orders from such Federal
and state authorities) to permit consummation of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Selling Fund, provided
that either party hereto may for itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act;
8.5 The Selling Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the Selling Fund Shareholders all of the Selling Fund's investment company
taxable income for all taxable years ending on or prior to the Closing Date
(computed without regard to any deduction for dividends paid) and all of its net
capital gain realized in all taxable years ending on or prior to the Closing
Date (after reduction for any capital loss carryforward);
8.6 The parties shall have received a favorable opinion of Sullivan &
Worcester, addressed to the Acquiring Fund and the Selling Fund substantially to
the effect that for Federal income tax purposes:
(a) The transfer of substantially all of the Selling Fund assets in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of certain identified liabilities of the Selling Fund followed by the
distribution of the
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Acquiring Fund's shares to the Selling Fund in dissolution and liquidation of
the Selling Fund, will constitute a "reorganization" within the meaning of
Section 368(a)(1)(D) of the Code and the Acquiring Fund and the Selling Fund
will each be a "party to a reorganization" within the meaning of Section 368(b)
of the Code; (b) no gain or loss will be recognized by the Acquiring Fund upon
the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
identified liabilities of the Selling Fund; (c) no gain or loss will be
recognized by the Selling Fund upon the transfer of the Selling Fund assets to
the Acquiring Fund in exchange for the Acquiring Fund Shares and the assumption
by the Acquiring Fund of certain identified liabilities of the Selling Fund or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Selling Fund Shareholders in exchange for their shares of the Selling
Fund; (d) no gain or loss will be recognized by Selling Fund Shareholders upon
the exchange of their Selling Fund shares for the Acquiring Fund Shares in
liquidation of the Selling Fund; (e) the aggregate tax basis for the Acquiring
Fund Shares received by each Selling Fund Shareholder pursuant to the
Reorganization will be the same as the aggregate tax basis of the Selling Fund
shares held by such shareholder immediately prior to the Reorganization, and the
holding period of the Acquiring Fund Shares to be received by each Selling Fund
Shareholder will include the period during which the Selling Fund shares
exchanged therefor were held by such shareholder (provided the Selling Fund
shares were held as capital assets on the date of the Reorganization); and (f)
the tax basis of the Selling Fund assets acquired by the Acquiring Fund will be
the same as the tax basis of such assets to the Selling Fund immediately prior
to the Reorganization, and the holding period of the assets of the Selling Fund
in the hands of the Acquiring Fund will include the period during which those
assets were held by the Selling Fund. Notwithstanding anything herein to the
contrary, neither the Acquiring Fund nor the Selling Fund may waive the
conditions set forth in this paragraph 8.6.
8.7 The Acquiring Fund shall have received from KPMG Peat Marwick LLP a
letter addressed to the Acquiring Fund dated on the Closing Date, in form and
substance satisfactory to the Acquiring Fund, to the effect that (i) they are
independent certified public accountants with respect to the Selling Fund within
the meaning of the 1933 Act and the applicable published rules and regulations
thereunder; (ii) in their opinion, the audited financial statements and the per
share data and ratios contained in the section entitled Financial Highlights and
provided in accordance with Item 3 of Form N-1A (the "Per Share Data") of the
Selling Fund included in or incorporated by reference into the Registration
Statement and Prospectus and Proxy Statement and previously reported on by them
comply as to form in all material respects with the applicable accounting
requirements of the l933 Act and the published rules and regulations thereunder;
(iii) on the basis of limited procedures agreed upon by the Acquiring Fund and
described in such letter (but not an examination in accordance with generally
accepted auditing standards) consisting of a reading of any unaudited pro forma
financial statements included in the Registration Statement and Prospectus and
Proxy Statement, and inquiries of appropriate officials of the First Union Trust
responsible for financial and accounting matters, nothing came to their
attention which caused them to believe that (A) such unaudited pro forma
financial statements do not comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder, or (B) said unaudited pro forma financial statements are
not fairly presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited financial
statements; (iv) on the basis of limited procedures agreed upon by the Acquiring
Fund and described in such letter (but not an examination in accordance with
generally accepted auditing standards), the Capitalization Table appearing in
the Registration Statement and Prospectus and Proxy Statement, has been obtained
from and is consistent with the accounting records of the Selling Fund; and (v)
on the basis of limited procedures agreed upon by the Acquiring Fund and
described in such letter (but not an examination in accordance with generally
accepted auditing standards), the pro forma financial statements which are
included in the Registration Statement and Prospectus and Proxy Statement, were
prepared based on the valuation of the Selling Fund's assets in accordance with
the Acquiring Fund's Declaration of Trust and the Acquiring Fund's then current
prospectus and statement of additional information pursuant to procedures
customarily utilized by the Acquiring Fund in valuing its own assets (such
procedures having been previously described to KPMG Peat Marwick LLP in writing
by the Acquiring Fund).
In addition, the Acquiring Fund shall have received from KPMG Peat Marwick
LLP a letter addressed to the Acquiring Fund dated on the Closing Date, in form
and substance satisfactory to the Acquiring Fund, to the effect that on the
basis of limited procedures agreed upon by the Acquiring Fund (but not an
examination in accordance with generally accepted auditing standards) (i) the
data utilized in the calculations of the projected expense ratio appearing in
the Registration Statement and Prospectus and Proxy Statement agree with
underlying accounting records of the Selling Fund or to written estimates by
Selling Fund's management and were found to be mathematically correct; and (ii)
the calculation of net asset value per share of the Selling Fund as of the
Valuation Date was determined in accordance with generally accepted accounting
practices and the portfolio valuation practices of the Acquiring Fund.
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8.8 The Selling Fund shall have received from Price Waterhouse LLP a letter
addressed to the Selling Fund dated on the Closing Date, in form and substance
satisfactory to the Selling Fund, to the effect that (i) they are independent
certified public accountants with respect to the Acquiring Fund within the
meaning of the 1933 Act and the applicable published rules and regulations
thereunder; (ii) in their opinion, the audited financial statements and the per
share data and ratios contained in the section entitled Financial Highlights and
provided in accordance with Item 3 of Form N-1A (the "Per Share Data") of the
Acquiring Fund included in or incorporated by reference into the Registration
Statement and Prospectus and Proxy Statement and previously reported on by them
comply as to form in all material respects with the applicable accounting
requirements of the l933 Act and the published rules and regulations thereunder;
(iii) on the basis of limited procedures agreed upon by the Selling Fund and
described in such letter (but not an examination in accordance with generally
accepted auditing standards) consisting of a reading of any unaudited pro forma
financial statements included in the Registration Statement and Prospectus and
Proxy Statement, and inquiries of appropriate officials of the Acquiring Fund
responsible for financial and accounting matters, nothing came to their
attention which caused them to believe that (A) such unaudited pro forma
financial statements do not comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder, or (B) said unaudited pro forma financial statements are
not fairly presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited financial
statements; and (iv) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus and Proxy Statement, has been
obtained from and is consistent with the accounting records of the Acquiring
Fund.
In addition, the Selling Fund shall have received from Price Waterhouse LLP
a letter addressed to the Selling Fund dated on the Closing Date, in form and
substance satisfactory to the Selling Fund, to the effect that on the basis of
limited procedures agreed upon by the Selling Fund (but not an examination in
accordance with generally accepted auditing standards) the data utilized in the
calculations of the projected expense ratio appearing in the Registration
Statement and Prospectus and Proxy Statement agree with underlying accounting
records of the Acquiring Fund and the Selling Fund or to written estimates by
each Fund's management and were found to be mathematically correct.
8.9 The Acquiring Fund and the Selling Fund shall also have received from
KPMG Peat Marwick LLP a letter addressed to the Acquiring Fund and the Selling
Fund, dated on the Closing Date in form and substance satisfactory to the Funds,
setting forth the Federal income tax implications relating to Capital Loss
Carryforwards (if any) of the Selling Fund and the related impact, if any, of
the proposed transfer of all or substantially all of the assets of the Selling
Fund to the Acquiring Fund and the ultimate dissolution of the Selling Fund,
upon the shareholders of the Selling Fund.
ARTICLE IX
BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund and the Selling Fund each represents and warrants to
the other that there are no brokers or finders entitled to receive any payments
in connection with the transactions provided for herein.
9.2 (a) Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Acquiring Fund will
be borne by Evergreen Asset Management Corp. The expenses of the transactions
contemplated by this Agreement incurred by the Selling Fund will be borne by
First Union National Bank of North Carolina. Such expenses include, without
limitation, (i) expenses incurred in connection with the entering into and the
carrying out of the provisions of this Agreement; (ii) expenses associated with
the preparation and filing of the Registration Statement under the 1933 Act
covering the Acquiring Fund Shares to be issued pursuant to the provisions of
this Agreement; (iii) registration or qualification fees and expenses of
preparing and filing such forms as are necessary under applicable state
securities laws to qualify the Acquiring Fund Shares to be issued in connection
herewith in each state in which the Selling Fund Shareholders are resident as of
the date of the mailing of the Prospectus and Proxy Statement to such
shareholders; (iv) postage; (v) printing; (vi) accounting fees; (vii) legal
fees; and (viii) solicitation cost of the transactions. (b) Consistent with the
provisions of paragraph 1.3, the Selling Fund, prior to the Closing Date, shall
pay for or include in the audited statement of assets and liabilities prepared
pursuant to paragraph 1.3 all of its known and reasonably estimated expenses
associated with the transactions contemplated by this Agreement.
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ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party has
made any representation, warranty or covenant not set forth herein and that the
Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
(a) of a breach by the other of any representation, warranty or agreement
contained herein to be performed at or prior to the Closing Date, if not cured
within 30 days; or
(b) a condition herein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will not or
cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund or the Selling Fund, the First Union Trust or their respective
Trustees or officers, to the other party or its, Trustees or officers, but each
shall bear the expenses incurred by it incidental to the preparation and
carrying out of this Agreement as provided in paragraph 9.2.
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Selling
Fund and the Acquiring Fund: provided, however, that following the meeting of
the Selling Fund Shareholders called by the First Union Trust pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Selling Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
ARTICLE XIII
NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, overnight courier or certified mail addressed to
THE ACQUIRING FUND
Evergreen Money Market Trust
2500 Westchester Avenue
Purchase, New York 10577
Attention: Joseph J. McBrien, Esq.
OR TO THE SELLING FUND
First Union Funds
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Attention: Peter J. Germain, Esq.
A-13
<PAGE>
ARTICLE XIV
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5 It is expressly agreed to that the obligations of the Selling Fund and
the Acquiring Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Acquiring Fund or
the First Union Trust, personally, but bind only the trust property of the
Selling Fund and the Acquiring Fund, as provided in the Declarations of Trust of
the Acquiring Fund and the First Union Trust. The execution and delivery of this
Agreement have been authorized by the Trustees of the Acquiring Fund and the
First Union Trust on behalf of the Acquiring Fund and the Selling Fund,
respectively, and signed by authorized officers of the Acquiring Fund and the
First Union Trust, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officers shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Acquiring Fund
and the First Union Trust as provided in their Declarations of Trust.
FIRST UNION FUNDS
on behalf of First Union Money Market
Portfolio
By: /s/ EDWARD GONZALES
NAME: EDWARD GONZALES
TITLE: PRESIDENT
(Seal)
THE EVERGREEN MONEY MARKET TRUST
on behalf of The Evergreen Money Market
Fund
By: /s/ JOHN J. PILEGGI
NAME: JOHN J. PILEGGI
TITLE: PRESIDENT
A-14
STATEMENT OF ADDITIONAL INFORMATION
May 2, 1995
Transfer of substantially all of the assets and certain identified
liabilities of
FIRST UNION MONEY MARKET PORTFOLIO, a portfolio of
FIRST UNION FUNDS
by and in exchange for the shares of
THE EVERGREEN MONEY MARKET FUND, a series of
THE EVERGREEN MONEY MARKET TRUST
This Statement of Additional Information relates specifically to the
proposed transfer of substantially all of the assets and certain identified
liabilities of First Union Money Market Portfolio ("First Union Money Market"),
a portfolio of First Union Funds, by and in exchange for the shares of The
Evergreen Money Market Fund, a series of The Evergreen Money Market Trust
("Evergreen Money Market"). This Statement of Additional Information consists of
this cover page and the documents described below, each of which is
incorporated by reference herein:
(1) Statement of Additional Information of First Union Money Market dated
February 28, 1995 (Post-Effective Amendment No. 39 to the Registration
Statement of First Union Funds on Form N-1A; File No. 2-94560);
(2) Annual Report for First Union Money Market for the fiscal year ended
December 31, 1994;
(3) Statement of Additional Information of Evergreen Money Market dated January
3, 1995;
(4) Annual Report for Evergreen Money Market for the fiscal year ended August
31, 1994 (Post-Effective Amendment No. 9 to its Registration Statement on
Form N-1A; File No. 33-16706).
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Proxy Statement/ Prospectus of Evergreen Money
Market dated May 2, 1995, which has been filed with the Securities and Exchange
Commission and can be obtained, without charge, by writing to Evergreen Money
Market at 2500 Westchester Avenue, Purchase, New York, 10577, or by calling
toll-free 1-800-[807-2940]. This Statement of Additional Information has been
incorporated into the Proxy Statement/ Prospectus.
STATEMENT OF ADDITIONAL INFORMATION
THE EVERGREEN MONEY MARKET TRUST
Table of Contents
-----------------
Cover Page Cover Page
Financial Statements 1
Evergreen Money Market Trust
Pro Forma Combining Financial Statements (unaudited)
Portfolio of Investments
December 31, 1994
- ----------------------------------------
<TABLE>
<CAPTION>
Evergreen Money First Union Money
Market Trust Market Fund Pro Forma Combined
------------------------ ------------------------- ------------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
------------------------ ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Bankers' Acceptances - 11.4%
Bank of Tokyo, Ltd.
5.08%, 2/13/95 .............................. $ 1,600,000 $ 1,590,292 $1,600,000 $ 1,590,292
5.21%, 3/7/95 .............................. 2,900,000 2,872,719 2,900,000 2,872,719
6.42%, 4/18/95 .............................. 4,000,000 3,923,673 4,000,000 3,923,673
Banque Nationale de Paris, 6.25%, 4/6/95 ...... 1,000,000 983,507 1,000,000 983,507
Barclays Bank PLC
5.05%, 1/4/95 ............................... 1,100,000 1,099,537 1,100,000 1,099,537
5.54%, 2/3/95 ............................... 1,000,000 994,922 1,000,000 994,922
5.15%, 2/27/95 .............................. 4,000,000 3,967,383 4,000,000 3,967,383
6.25%, 4/7/95 ............................... 1,000,000 983,333 1,000,000 983,333
6.30%, 4/13/95 .............................. 500,000 491,075 500,000 491,075
6.30%, 4/14/95 .............................. 500,000 490,988 500,000 490,988
Dai-Ichi Kangyo Bank, Ltd., 6.40%, 4/7/95 ..... 1,200,000 1,179,520 1,200,000 1,179,520
First Alabama Bank, Ltd., 6.20%, 2/27/95 ...... 5,000,000 4,950,917 5,000,000 4,950,917
Fuji Bank of Chicago, 5.41%, 1/17/95 .......... 5,000,000 4,987,978 5,000,000 4,987,978
Industrial Bank of Japan, 6.40%, 4/3/95 ....... 1,000,000 983,644 1,000,000 983,644
Mitsubishi Bank, Ltd., 5.13%, 2/21/95 ......... 5,000,000 4,963,663 5,000,000 4,963,663
Sanwa Bank Ltd., 5.98%, 2/10/95 ............... 5,300,000 5,264,784 5,300,000 5,264,784
Societe Generale
6.41%, 4/3/95 ............................... 2,569,044 2,526,961 2,569,044 2,526,961
6.45%, 4/24/95 .............................. 843,880 826,795 843,880 826,795
State Street Bank & Trust Co.,
5.50%, 2/2/95 ............................... 2,404,053 2,392,300 2,404,053 2,392,300
------------ ------------
Total Bankers' Acceptances
(Cost $45,473,991) ....................... 45,473,991 45,473,991
------------ ------------
Certificate of Deposit - 1.3%
First Alabama Bank, Ltd., 6.00%, 1/24/95 ......
(Cost $5,000,000) $ 5,000,000 $ 5,000,000 5,000,000 5,000,000
----------- ------------
*Commercial Paper - 69.8%
Bank Holding Companies - 9.2%
BHF Finance Corp. (DE) Inc., 5.53%, 2/6/95 .... 7,700,000 7,657,419 7,700,000 7,657,419
Canadian Imperial Holdings Inc.,
5.49%, 1/31/95 ............................. 10,000,000 9,954,250 10,000,000 9,954,250
Commerzbank U.S. Finance Inc.,
5.10%, 3/7/95 .............................. 1,900,000 1,882,504 1,900,000 1,882,504
Internationale Nederlanden (U.S.)
Funding Corp.,
5.10%, 2/2/95 .............................. 2,000,000 1,990,933 2,000,000 1,990,933
Norwest Corp., 5.62%, 2/21/95 ................. 7,000,000 6,944,268 7,000,000 6,944,268
Santander Finance (DE) Inc., 5.35%, 1/17/95 ... 8,000,000 7,980,978 8,000,000 7,980,978
------------ ------------
Total ...................................... 36,410,352 36,410,352
------------ ------------
Chemicals - 3.1%
U.S. Borax Chemical Corp., 5.52%, 2/6/95 ...... 7,600,000 7,558,048 7,600,000 7,558,048
WMX Technologies Inc., 5.22%, 5/12/95 ......... 5,000,000 4,905,025 5,000,000 4,905,025
------------ ------------
Total ...................................... 12,463,073 12,463,073
------------ ------------
Diversified - 5.3%
Citizens Utilities Co., 5.60%, 2/7/95 ......... 3,200,000 3,181,582 3,200,000 3,181,582
Nichimen America Inc., 6.05%, 1/9/95 .......... 10,000,000 9,986,556 10,000,000 9,986,556
Sumitomo Corp. of America, 6.30%, 3/31/95 ..... 6,400,000 6,300,320 6,400,000 6,300,320
Xerox Corp, 6.05%, 1/10/95 .................... 1,550,000 1,547,656 1,550,000 1,547,656
------------ ------------
Total ...................................... 21,016,114 21,016,114
------------ ------------
Finance - 20.4%
Allianz of America Finance Corp.,
5.12%, 2/13/95 ............................... 4,000,000 3,975,538 4,000,000 3,975,538
American Honda Finance Corp.,
6.00%, 1/24/95 ............................... 5,000,000 4,980,833 5,000,000 4,980,833
Beta Financing, Inc., 5.80%, 9/7/95 ........... 4,000,000 3,998,633 4,000,000 3,998,633
B.I. Funding Inc., 6.14%, 2/7/95 .............. 5,600,000 5,564,661 5,600,000 5,564,661
Cargill Financial Services Corp.,
5.05%, 2/10/95 ............................... 10,000,000 9,943,889 10,000,000 9,943,889
The Trustees of Columbia University in
the City of New York, 5.73%, 2/2/95 ........... 10,000,000 9,949,067 10,000,000 9,949,067
Falcon Asset Securitization Corp.,
6.05%, 1/5/95 ............................... 3,500,000 3,497,647 3,500,000 3,497,647
Heller International Corp.
6.10%, 2/13/95 .............................. 6,000,000 5,956,283 6,000,000 5,956,283
6.25%, 2/13/95 .............................. 2,000,000 1,985,069 2,000,000 1,985,069
Mitsubishi International Corp.,
5.55%, 2/2/95 ............................... 5,600,000 5,572,373 5,600,000 5,572,373
Orix America, Inc., 5.52%, 1/12/95 ............ 4,000,000 3,993,253 4,000,000 3,993,253
Sanwa Business Credit Corp., 5.90%, 2/2/95 .... 10,000,000 9,947,556 10,000,000 9,947,556
Texas Department of Commerce (Taxable),
6.03%, 1/5/95 ............................... 6,900,000 6,895,377 6,900,000 6,895,377
Vesey STR Short Term Income, 5.50%, 1/6/95 .... 5,000,000 4,996,181 5,000,000 4,996,181
------------ ------------ ------------
Total ................................. 59,311,922 21,944,438 81,256,360
------------ ------------ ------------
<PAGE>
<CAPTION>
Evergreen Money First Union Money
Market Trust Market Fund Pro Forma Combined
---------------------------- -------------------------- ------------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
---------------------------- -------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
*Commercial Paper - (continued)
Food & Beverages - 2.5%
PepsiCo Inc., 5.50%, 2/6/95 ................. $ 10,000,000 $ 9,945,000 $ 10,000,000 $ 9,945,000
----------- -----------
Funding Corporations - 8.6%
Allomon Funding Corp., 5.50%, 1/10/95 ....... $ 2,465,000 $ 2,461,611 2,465,000 2,461,611
Allomon Funding Corp., 5.78%, 2/3/95 ........ 2,500,000 2,486,754 2,500,000 2,486,754
Dynamic Funding Corp., 6.17%, 2/6/95 ........ 4,347,000 4,320,179 4,347,000 4,320,179
Enterprise Funding Corp., 5.48%, 1/9/95 ..... 5,000,000 4,993,911 5,000,000 4,993,911
Nicollet Funding Corp., 6.11%, 1/6/95 ....... 5,000,000 4,995,757 5,000,000 4,995,757
PNC Funding Corp., 5.60%, 4/17/95 ........... 5,000,000 4,917,556 5,000,000 4,917,556
Ranger Funding Corp., 5.80%, 2/15/95 ........ 5,000,000 4,963,750 5,000,000 4,963,750
Sapphire Funding Corp., 6.08%, 1/4/95 ....... 5,000,000 4,997,467 5,000,000 4,997,467
----------- ------------
Total ...................................... 34,136,985 34,136,985
----------- ------------
Healthcare - 2.3%
American Home Products Corp.,
6.20%, 5/22/95 .............................
A.H. Robbins Co., Inc.
6.09%, 2/2/95 .............................. 475,000 472,429 475,000 472,429
5.82%, 2/7/95 .............................. 2,300,000 2,286,242 2,300,000 2,286,242
6.00%, 2/7/95 .............................. 1,400,000 1,391,366 1,400,000 1,391,366
----------- --------- ------------
Total ..................................... 4,150,037 4,878,583 9,028,620
----------- --------- ------------
Insurance - 2.1%
Chubb Capital Corp., 5.23%, 5/15/95 ........... 8,475,000 8,310,015 8,475,000 8,310,015
----------- ------------
Machinery, Autos & Equipment - 7.2%
American Honda Finance Corp., 5.80%, 2/3/95 ... 5,000,000 4,973,417 5,000,000 4,973,417
BMW US Capital Corp., 5.78%, 2/13/95 .......... 8,300,000 8,242,698 8,300,000 8,242,698
Cooperative Association of Tractor
Dealers Inc., 5.80%, 2/8/95 ................. 1,000,000 993,878 1,000,000 993,878
Mitsubishi Motors Credit of America Inc.
5.75%, 1/3/95 ............................... 3,140,000 3,138,997 3,140,000 3,138,997
5.75%, 1/18/95 .............................. 1,500,000 1,495,927 1,500,000 1,495,927
Whirlpool Financial Corp.
5.45%, 1/10/95 .............................. 5,000,000 4,993,187 5,000,000 4,993,187
5.55%, 2/6/95 ............................... 5,000,000 4,972,250 5,000,000 4,972,250
----------- ------------
Total ...................................... 28,810,354 28,810,354
----------- ------------
Natural Gas - 0.5%
Wisconsin Gas Co., 5.125%, 2/1/95 ............. 2,000,000 1,991,174 2,000,000 1,991,174
----------- ------------
Oil - 0.6%
Pemex Capital Inc., 6.05%, 1/27/95 ............ 2,500,000 2,489,076 2,500,000 2,489,076
----------- ------------
Pipelines - 2.4%
Colonial Pipeline Co., 5.52%, 2/3/95 .......... 9,500,000 9,451,930 9,500,000 9,451,930
----------- ------------
Real Estate - 3.1%
Copley Financing Corp., 6.03%, 1/6/95 ......... 8,300,000 8,293,049 8,300,000 8,293,049
SRD Finance Inc., 6.00%, 1/19/95 .............. 4,000,000 3,988,000 4,000,000 3,988,000
----------- ------------
Total ...................................... 12,281,049 12,281,049
----------- ------------
Securities - 1.2%
Merrill Lynch & Co., Inc., 5.40%, 1/17/95 ..... 5,000,000 4,988,000 5,000,000 4,988,000
----------- ------------
Travel and Tourism - 1.3%
Accor S A Banque of Paris, 5.52%, 1/23/95 ..... 5,000,000 4,983,133 5,000,000 4,983,133
------------ ----------- ------------
Total Commercial Paper
(Cost $277,561,235) ..................... 206,630,096 70,931,139 277,561,235
------------ ----------- ------------
Variable Rate Issues - 6.0%
Bank One Milwaukee, NA, WI, 5.82%, 3/22/95 .... 3,000,000 2,999,641 3,000,000 2,999,641
CIT Group Holdings Inc., 5.70%, 9/18/95 ....... 4,000,000 3,996,256 4,000,000 3,996,256
FCC National Bank Wilmington, DEL,
6.53%%, 1/6/95 .............................. 3,000,000 3,000,000 3,000,000 3,000,000
First Boston Group, Inc., 5.83%, 8/25/95 ...... 5,000,000 5,000,000 5,000,000 5,000,000
General Electric Capital Corp.,
5.84%, 11/21/95 ........................... 5,000,000 4,999,112 5,000,000 4,999,112
Salomon Brothers, Inc., 6.20%, 6/12/95 ........ 4,000,000 4,000,000 4,000,000 4,000,000
----------- ------------
Total Variable Rate Issues
(Cost $23,995,009) ........................ 23,995,009 23,995,009
----------- ------------
Corporate Notes - 2.8%
American Express Co., 11.95%, 1/15/95 ......... 2,000,000 2,006,019 2,000,000 2,006,019
American General Finance Corp.,
6.25%, 4/14/95 ............................ 1,000,000 1,002,982 1,000,000 1,002,982
Citicorp, 7.20%, 2/15/95 ...................... 3,000,000 3,006,895 3,000,000 3,006,895
Morgan (J.P.) & Co., Inc., 5.375%, 1/21/95 .... 2,000,000 1,998,182 2,000,000 1,998,182
Super Value Store, 5.875%, 11/15/95 ........... 3,000,000 2,954,080 3,000,000 2,954,080
----------- ------------
Total Corporate Notes (Cost $10,968,158) ... 10,968,158 10,968,158
----------- ------------
<PAGE>
<CAPTION>
Evergreen Money First Union Money
Market Trust Market Fund Pro Forma Combined
------------------------ ------------------------- ------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
------------------------ ------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Municipal Security - 1.0%
Metrocrest Hospital Authority, 6.118%
(Series A), 1/20/95 .......................... $ 4,000,000 $ 3,987,084 $ 4,000,000 $ 3,987,084
(Cost $3,987,084) ------------ ------------
**Repurchase Agreement - 0.2%
Donaldson, Lufkin & Jenrette
Securities Corp., 5.875%, ............... 750,000 750,000
dated 12/30/94, due 1/3/95 ................. 750,000 750,000
(Cost $750,000) ----------- -----------
Mutual Fund Shares - 0.4% value)
Lehman Prime Value
(at net asset value) (Cost $1,717,556)........ 1,717,556 1,717,556 1,717,556 1,717,556
------------ ------------
U.S. Government Agency Obligations - 2.8%
Federal National Mortgage Association
5.93%, 1/9/95 .............................. $ 1,175,000 $ 1,173,452 1,175,000 1,173,452
5.28%, 6/30/95 ............................. 10,000,000 9,736,000 10,000,000 9,736,000
------------ ------------
Total U.S. Government Agency Obligations
(Cost $10,909,452).......................... 10,909,452 10,909,452
------------ ------------ ------------
Total Investments (Cost $380,362,485)- 95.7% . 263,013,539 117,348,946 380,362,485+
Other Assets & Liabilities-Net - 4.3% ........ 16,586,986 535,624 17,122,610
------------ ------------ ------------
Total Net Assets - 100.0% .................... $279,600,525 $117,884,570 $397,485,095
============ ============ ============
<FN>
- -----------------------
*Each issue shows the rate of discount at the
time of purchase for discount
issues, or the coupon for interest bearing issues.
**The repurchase agreement is fully collateralized
by U.S. government and/or agency obligations
based on market prices at the date of
the portfolio.
+Also represents cost for federal tax purposes.
(See Notes which are an integral part of the Pro Forma Financial Statements)
</FN>
</TABLE>
Evergreen Money Market Trust
Pro Forma Combining Financial Statements (unaudited)
Statement of Assets and Liabilities
December 31, 1994
<TABLE>
<CAPTION>
Evergreen Money First Union Money Pro Forma
Market Trust Market Fund Adjustments Combined
-------------- -------------------- ----------- ------------
<S> <C> <C> <C> <C>
Assets:
Investments in securities,
at amortized cost $ 263,013,539 $117,348,946 $ 380,362,485
Cash 1,309,904 266,050 1,575,954
Interest receivable -- 491,940 491,940
Receivable for Fund shares sold 19,706,899 282,401 19,989,300
Prepaid expenses 35,457 -- 35,457
------------- ------------ ----------- -------------
Total assets 284,065,799 118,389,337 402,455,136
------------- ------------ ----------- -------------
Liabilities:
Payable for Fund shares redeemed. 4,271,344 334,115 4,605,459
Dividends payable ............... 32,734 134,444 167,178
Accrued expenses ................ 86,867 36,208 123,075
Accrued Advisory fees ........... 74,329 -- 74,329
------------- ------------ ----------- -------------
Total liabilities .......... 4,465,274 504,767 4,970,041
------------- ------------ ----------- -------------
Net Assets ...................... $ 279,600,525 $117,884,570 $397,485,095
------------- ------------ ----------- -------------
------------- ------------ ----------- -------------
Net Assets consist of:
Paid-in capital ................. $ 280,139,669 $117,884,570 $398,024,239
------------- ------------ ----------- -------------
Accumulated net realized on loss
investment transactions ........ (539,144) -- (539,144)
------------- ------------ ----------- -------------
Total ...................... $279,600,525 $117,884,570 $397,485,095
------------- ------------ ----------- -------------
------------- ------------ ----------- -------------
Maximum Offering Price Per Share:
Class A Investment Shares ....... $1.00 $1.00 $1.00
----- ----- ----- -----
Class B Investment Shares ....... $1.00 $1.00 $1.00
----- ----- ----- -----
Class Y Investment Shares ....... $1.00 $1.00 $1.00
----- ----- ----- -----
Net Assets:
Class A Investment Shares ....... $1 $ 95,759,773 $ 95,759,774
------------- ------------ ----------- -------------
Class B Investment Shares ....... $1 $ 10,403,018 $ 10,403,019
------------- ------------ ----------- -------------
Class Y Investment Shares ....... $ 279,600,523 $ 11,721,779 $ 291,322,302
------------- ------------ ----------- -------------
Shares of Beneficial
Interest Outstanding:
Class A ......................... 1 95,759,773 95,759,774
------------- ------------ ----------- -------------
Class B ......................... 1 10,403,018 10,403,019
------------- ------------ ----------- -------------
Class Y ......................... 280,139,667 11,721,779 291,861,446
------------- ------------ ----------- -------------
</TABLE>
(See Notes which are an integral part of the Pro Forma Financial Statements)
Evergreen Money Market Trust
Pro Forma Combining Financial Statements (unaudited)
Statement of Operations
Year ended December 31, 1994
<TABLE>
<CAPTION>
Evergreen First Union
Money Market Money Market Pro Forma
Trust Fund Adjustments Combined
------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Investment Income:
Interest income ..................................................... $ 12,562,331 $ 4,704,152 -- $ 17,266,483
------------ ------------ ---------- ------------
Expenses:
Investment advisory fee ............................................. 1,460,049 372,483 159,636 (1) 1,992,168
Trustees' fees ...................................................... 20,433 1,679 (1,679)(2) 20,433
Administrative personnel and services fees .......................... -- 89,751 (89,751)(1) 0
Custodian and portfolio accounting fees ............................. 69,857 71,257 (36,615)(3) 104,499
Transfer and dividend disbursing agent fees and expenses ............ 356,256 121,282 -- 477,538
Distribution services fee---Class A Investment Shares ............... -- 278,313 -- 278,313
Distribution services fee---Class B Investment Shares ............... -- 32,226 -- 32,226
Shareholder service fees---Class B Investment Shares ............... -- 5,830 -- 5,830
Fund share registration costs ....................................... 85,834 27,151 (27,151)(2) 85,834
Professional fees ................................................... 71,001 12,063 (12,063)(2) 71,001
Printing and postage ................................................ 37,525 10,670 -- 48,195
Insurance premiums .................................................. 14,258 7,259 (7,259)(2) 14,258
Miscellaneous ....................................................... 29,028 5,491 (5,491)(2) 29,028
------------ ------------ ---------- ------------
Total expenses ...................................................... 2,144,241 1,035,455 (20,373) 3,159,323
Deduct-
Waiver of investment advisory fee .............................. 952,068 283,063 63,762 (4) 1,298,893
Waiver of distribution services fee---Class A Investment Shares. -- 92,772 -- 92,772
------------ ------------ ---------- ------------
Net expenses ........................................................ 1,192,173 659,620 (84,135) 1,767,658
------------ ------------ ---------- ------------
Net investment income ............................................... 11,370,158 4,044,532 84,135 15,498,825
------------ ------------ ---------- ------------
------------ ------------ ---------- ------------
Net realized loss on investments .................................... (539,144) -- -- (539,144)
------------ ------------ ---------- ------------
Net increase in net assets resulting from operations ................ $ 10,831,014 $ 4,044,532 $ 84,135 $ 14,959,681
------------ ------------ ---------- ------------
------------ ------------ ---------- ------------
<FN>
(See Notes which are an integral part of the Pro Forma Financial Statements)
(1) Reflects an increase in investment advisory fee and a
decrease in administrative personnel and service fees based on the surviving
Fund's fee schedule.
(2) Reflects elimination of duplicate service fees.
(3) Based on surviving Fund's contract in effect for custodian and portfolio
accounting services.
(4) Reflects an increase in waiver of investment advisory fee based on the
surviving Fund's voluntary advisory fee waiver in effect for the year
ended December 31, 1994.
</FN>
</TABLE>
<PAGE>
Evergreen Money Market Trust
Notes to Pro Forma Combining Financial Statements (Unaudited)
1. Basis of Combination - The Pro forma Statement of Assets and Liabilities,
including the Portfolio of Investments, and the related Statement of Operations
("Pro forma Statements") reflect the accounts of Evergreen Money Market Trust
("Evergreen") and First Union Money Market Fund ("First Union") at December 31,
1994 and for the year then ended.
The Pro forma Statements give effect to the proposed transfer of all assets and
liabilities of First Union in exchange for shares of Evergreen. The Pro forma
Statements do not reflect the expense of either Fund in carrying out its
obligations under the Agreement and Plan of Reorganization. The actual fiscal
year end of the combined Fund will be August 31, the fiscal year end of
Evergreen.
The Reorganization will be accomplished through the acquisition of substantially
all of the assets of First Union by Evergreen, and the assumption by Evergreen
of certain identified liabilities of First Union. Thereafter there will be a
distribution of such shares of Evergreen to shareholders of First Union in
liquidation of and subsequent termination of First Union. The information
contained herein is based on the experience of each fund for the period ended
December 31, 1994 and is designed to permit shareholders of First Union to
evaluate the financial effect of the proposed Reorganization. The expenses of
Evergreen in connection with the Reorganization (including the cost of any proxy
soliciting agents), will be borne by Evergreen Asset. The expenses of First
Union incurred in connection with the Reorganization will be borne by FUNB-NC.
No portion of such expenses shall be borne directly indirectly by First Union or
its shareholders.
The Pro forma Statements should be read in conjunction with the historical
financial statements of each Fund included in or incorporated by reference in
the Statement of Additional Information.
2. Shares of Beneficial Interest - The pro forma net asset value per share
assumes the issuance of additional shares of Evergreen Class A, Class B and
Class Y which would have been issued at December 31, 1994 in connection with the
proposed reorganization. The amount of additional shares assumed to be issued
was calculated based on the December 31, 1994 net assets of First Union
($117,884,570) and the net asset value per share of Evergreen of $1.
The pro forma shares outstanding of 398,024,239 consist of 117,884,570
additional shares to be issued in the proposed reorganization, as calculated
above, plus 280,139,669 shares of Evergreen outstanding as of December 31, 1994.
3. Pro Forma Operations - The Pro Forma Statement of Operations assumes similar
rates of gross investment income for the investments of each Fund. Accordingly,
the combined gross investment income is equal to the sum of each Fund's gross
investment income. Pro forma operating expenses include the actual expenses of
the Funds and the combined Fund, with certain expenses adjusted to reflect the
expected expenses of the combined entity. The investment advisory fee has been
charged to the combined Fund based on the fee schedule in effect for Evergreen
at the combined level of average net assets for the year ended December 31,
1994. In accordance with the fee schedule in effect for Evergreen, Evergreen
Asset Management Corp. (the "Adviser"), will reimburse the combined Fund to the
extent that the Fund's aggregate annual operating expenses (including the
advisory fee but excluding interest, taxes, brokerage commissions, Rule 12b-1
distribution fees and shareholder service fees, and extraordinary expenses)
exceed 1.00% of the average net assets for any fiscal year. Additionally, the
Adviser may, at its discretion, waive its fee or reimburse the Fund for certain
of its expenses in order to reduce the Fund's expense ratio. An adjustment has
been made to the combined Fund's expenses to increase the waiver of investment
advisory fee based on the voluntary advisory fee waiver in effect for Evergreen
(0.326% of average net assets) for the year ended December 31, 1994. The Adviser
may, at its discretion, revise or cease this voluntary fee waiver at any time.
