1933 Act File No. 33-16706
811-5300
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 15 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 15 X
EVERGREEN MONEY MARKET FUND
(formerly Evergreen Money Market Trust)
(Exact Name of Registrant as Specified in Charter)
2500 WESTCHESTER AVENUE, PURCHASE, NEW YORK 10577
(Address of Principal Executive Offices)
(914) 694-2020
(Registrant's Telephone Number)
James P. Wallin, Esquire,
2500 Westchester Avenue
Purchase, New York 10577
(Name and Address of Agent for Service)
Copies to:
John A. Dudley, Esquire
Sullivan & Worcester
1025 Connecticut Ave., N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective (check appropriate box)
/X/ Immediately upon filing pursuant to paragraph (b) or
/ / on (date) pursuant to paragraph (b) or
/ / 60 days after filing pursuant to paragraph (a)(i) or
/ / on (date) pursuant to paragraph (a)(i) or
/ / 75 days after filing pursuant to paragraph (a)(ii) or
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
Registrant has filed a Declaration purusant to Rule 24f-2 under the Investment
Company Act of 1940. A Rule 24f-2 Notice for Registrant's Evergreen Money Market
Fund series' last fiscal year was filed on or about October 31, 1996. A Rule
24f-2 Notice for Registrant's Evergreen the Institutional Money Market Fund
series and the Evergreen Institutional Treasury Money Market Fund series' last
fiscal years was filed on or about April 30, 1997.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No. Location in Prospectus(es)
Part A
Item 1. Cover Page Cover Page
Item 2. Synopsis and Fee Table Overview of the Fund(s);
Expense Information
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Cover Page; Description of
the Funds; General
Information
Item 5. Management of the Fund Management of the Fund(s);
General Information
Item 6. Capital Stock and Other Securities Dividends, Distributions and
Taxes; General
Information
Item 7. Purchase of Securities Being Offered Purchase and Redemption of
Shares
Item 8. Redemption or Repurchase Purchase and Redemption of
Shares
Item 9. Pending Legal Proceedings Not Applicable
Location in Statement of
Part B Additional Information
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Objectives and
Policies;Investment
Restrictions; Other
Restrictions and
Operating Policies
Item 14. Management of the Fund Management
Item 15. Control Persons and Principal Management
Holders of Securities
Item 16. Investment Advisory and Other Services Investment Adviser;
Purchase of Shares
Item 17. Brokerage Allocation Allocation of Brokerage
Item 18. Capital Stock and Other Securities Purchase of Shares
Item 19. Purchase, Redemption and Pricing of Distribution Plans; Purchase
Securities Being Offered of Shares; Net Asset Value
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Distribution Plans; Purchase
of Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
THE EVERGREEN MONEY MARKET TRUST
PART A
PROSPECTUS
<PAGE>
PROSPECTUS October 31, 1996
As amended
August 1, 1997
EVERGREEN(SM) MONEY MARKET FUNDS
Evergreen Money Market Fund
CLASS K SHARES (Evergreen tree logo)
The Evergreen Money Market Fund (the "Fund") is designed to
provide investors with current income, stability of principal and
liquidity. This Prospectus provides information regarding the Class K
shares offered by the Fund. The Fund is a series of an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Fund that a prospective investor should know
before investing. The address of the Fund is 200 Berkeley Street, Boston,
Massachusetts 02116.
A Statement of Additional Information for the Fund dated Octo-
ber 31, 1996, as amended August 1, 1997, has been filed with the Securities
and Exchange Commission and is incorporated by reference herein. The Statement
of Additional Information provides information regarding certain matters
discussed in this Prospectus and other matters which may be of interest to
investors, and may be obtained without charge by calling the Fund at
(800) 343-2898. There can be no assurance that the investment objective of the
Fund will be achieved. Investors are advised to read this Prospectus
carefully.
The shares offered by this Prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank, are not insured or
otherwise protected by the U.S. government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency and
involve investment risks.
An investment in the Fund is neither insured nor guaranteed by the U.S.
government, and there can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
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. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Keep This Prospectus For Future Reference
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUND 2
EXPENSE INFORMATION 3
DESCRIPTION OF THE FUND
Investment Objective and Policies 4
Investment Practices and Restrictions 5
MANAGEMENT OF THE FUND
Investment Adviser 6
Sub-Adviser 7
Sub-Administrator 7
Distribution Plan and Agreement 7
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 8
How to Redeem Shares 9
Exchange Privilege 10
Shareholder Services 11
Effect of Banking Laws 12
OTHER INFORMATION
Dividends, Distributions and Taxes 13
General Information 13
</TABLE>
OVERVIEW OF THE FUND
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Fund" and "Management of the Fund".
The Fund's investment adviser is Evergreen Asset Management Corp.
("Evergreen Asset") which, with its predecessors, has served as an investment
adviser to the Evergreen Funds since 1971. Evergreen Asset is a wholly-owned
subsidiary of First Union National Bank ("FUNB"). FUNB is a subsidiary of First
Union Corporation, a bank holding company in the United States.
Evergreen Money Market Fund seeks as high a level of current income as is
consistent with preserving capital and providing liquidity. The Fund will invest
only in high quality money market instruments.
The Fund seeks to maintain a stable net asset value of $1.00 per share
although no assurances can be given that such a stable net asset value will be
maintained.
There is no assurance that the investment objective of the Fund will be
achieved.
2
<PAGE>
EXPENSE INFORMATION
The purpose of the fee table is to assist investors in understanding the
costs and expenses that an investor in the Fund will bear directly or
indirectly. For further information see "Purchase and Redemption of Shares" and
"General Information -- Other Classes of Shares".
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Contingent Deferred Sales Charge (1) None
</TABLE>
The following tables show for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class K shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in Class K shares for the periods specified
assuming (i) a 5% annual return, and (ii) redemption at the end of each period.
Evergreen Money Market Fund
<TABLE>
<CAPTION>
Example(4)
Annual Operating Assuming Redemption Assuming no
Expenses(2) at End of Period Redemption
Class K Class K Class K
<S> <C> <C> <C> <C>
Management
Fees 0.47% 1 Year $ 49 $ 9
12b-1 Fees(3) 0.30% 3 Years $ 48 $ 28
Other Expenses 0.12% 5 Years $ 49 $ 49
Total 0.89% 10 Years $ 110 $ 110
</TABLE>
Amounts shown in the example should not be considered a representation of past
or future expenses. Actual expenses may be greater or less than those shown.
(1) The contingent deferred sales charge applicable to shares of any Keystone
Classic Fund exchanged for Class K shares of the Fund will carry over to the
Class K shares received in the exchange.
(2) Expense ratios shown above are estimated for the Fund's fiscal year ended
August 31, 1997. Total Annual Operating Expenses include indirectly paid
expenses. Evergreen Asset has agreed to reimburse the Fund for certain
expenses to the extent that the Fund's aggregate annual operating expenses
(including the investment adviser's fee, but excluding taxes, interest,
brokerage commissions, Rule 12b-1 distribution fees and shareholder services
fees and extraordinary expenses) exceed 1.00% of the average net assets for
any fiscal year.
(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by rules adopted by the National
Association of Securities Dealers, Inc. (the "NASD"). See "Distribution
Plan."
(4) The Securities and Exchange Commission requires use of a 5% annual return
figure for purposes of this example. Actual return for the Fund may be
greater or less than 5%.
3
<PAGE>
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
In addition to the investment policies detailed below, the Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions".
The investment objective of the Fund is to achieve as high a level of
current income as is consistent with preserving capital and providing liquidity.
This objective is a fundamental policy and may not be changed without
shareholder approval. The Fund invests in high quality money market instruments,
which are determined to be of eligible quality under Securities and Exchange
Commission ("SEC") rules and to present minimal credit risk. Under SEC rules,
eligible securities include First Tier Securities (i.e., securities rated in the
highest short-term rating category) and Second Tier Securities (i.e., securities
which are otherwise eligible but not in the First Tier). The rules prohibit the
Fund from holding more than 5% of its value in Second Tier Securities. The
Fund'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. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Agencies or instrumentalities whose
securities are supported only by the credit of the agency or instrumentality
include the Interamerican Development Bank and the International Bank for
Reconstruction and Development. These obligations are supported by appropriated
but unpaid commitments of its member countries. There are no assurances that the
commitments will be undertaken in the future.
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") or Moody's Investors Service ("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 the
investment in question, in variable amount master demand notes. For a
description of these ratings see the Statement of Additional Information.
3. Corporate debt securities and bank obligations that are rated in one
of the two highest short-term rating categories by any two of S&P, Moody's and
any other SRO (or by a single rating agency if only one of these agencies has
assigned a rating).
4. Unrated corporate debt securities, commercial paper and bank
obligations that are issued by an issuer that has outstanding a 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 paragraphs 2 or 3 above.
5. Unrated corporate debt securities, commercial paper and bank
obligations issued by domestic and foreign companies which have an outstanding
long-term debt issue rated in the top two rating categories by a SRO and
determined by the investment adviser to be of comparable quality.
6. Unrated corporate debt securities, commercial paper and bank
obligations otherwise determined by the investment adviser to be of comparable
quality.
7. Repurchase agreements with respect to the securities described in
paragraphs 1 through 6 above.
4
<PAGE>
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. These investments involve risks that are different from investments in
domestic securities. These risks may include future unfavorable political and
economic developments, possible withholding taxes, seizure of foreign deposits,
currency controls, interest limitations or other governmental restrictions which
might affect the payment of principal or interest on the securities in the
Fund's portfolio. Additionally, there may be less publicly available information
about foreign issuers.
The Fund 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 of 1933, as amended (the "Act"). Such securities are not
registered for purchase and sale by the public under the Act. The Fund has been
informed that the staff of the SEC does not consider such securities to be
readily marketable. The Fund will not invest more than 10% of its net assets in
securities which are not readily marketable (including private placement
securities) and in repurchase agreements maturing in more than seven days.
INVESTMENT PRACTICES AND RESTRICTIONS
GENERAL. The Fund invests 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 Fund maintains a dollar-weighted average portfolio
maturity of ninety days or less. The Fund follows these policies to maintain a
stable net asset value of $1.00 per share, although there is no assurance it can
do so on a continuing basis. The market value of the obligations in the Fund's
portfolio can be expected to vary inversely to changes in prevailing interest
rates. If a portfolio security is no longer of eligible quality, the Fund shall
dispose of such security in an orderly fashion as soon as reasonably
practicable, unless the Trustees determine, in light of market conditions or
other factors, that disposal of the instrument would not be in the best
interests of the Fund and its shareholders.
The ability of the Fund to meet its investment objective is necessarily
subject to the ability of the issuers of securities in which the Fund invests to
meet its payment obligations. In addition, the portfolio of the Fund will be
affected by general changes in interest rates which will result in increases or
decreases in the value of the obligations held by the Fund. Investors should
recognize that, in periods of declining interest rates, the yield of the Fund
will tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, the yield of the Fund will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to the Fund
from the continuous sale of its shares will likely be invested in portfolio
instruments producing lower yields than the balance of the Fund's portfolio,
thereby reducing the current yield of the Fund. In periods of rising interest
rates, the opposite can be expected to occur.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. 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 the Fund's
holding period. Repurchase agreements may be entered into with member banks of
the Federal Reserve System, including the Fund's custodian or "primary dealers"
(as designated by the Federal Reserve Bank of New York) in United States
government securities. The Fund will require continued maintenance of collateral
with its custodian in an amount equal to, or in excess of, the repurchase price
(including accrued interest). In the event a vendor defaults on its repurchase
obligation, the 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, the Fund might be delayed in
selling the collateral. The Fund's investment adviser will review and
continually monitor the creditworthiness of each institution with which the Fund
enters into a repurchase agreement to evaluate these risks. The Fund may not
enter into repurchase agreements if, as a result, more than 10% of the 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.
SECURITIES LENDING. In order to generate income and to offset expenses, the Fund
may lend portfolio securities to brokers, dealers and other financial
organizations and enter into reverse repurchase agreements. The Fund's
investment adviser will monitor the creditworthiness of such borrowers. Loans of
securities by the Fund, if and
5
<PAGE>
when made, may not exceed 30% of the Fund's total assets and will be
collateralized by cash, letters of credit or United States government securities
that are maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities, including accrued interest. While
such securities are on loan, the borrower will pay the Fund any income accruing
thereon, and the Fund may invest the cash collateral in portfolio securities,
thereby increasing its return. The Fund will have the right to call any such
loan and obtain the securities loaned at any time on five days' notice. Any gain
or loss in the market price of the loaned securities which occurs during the
term of the loan would affect the Fund and its investors. The Fund may pay
reasonable fees in connection with such loans.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in illiquid
securities and other securities which are not readily marketable, including
repurchase agreements with maturities longer than seven days. Securities
eligible for resale pursuant to Rule 144A under the Act, which have been
determined to be liquid, will not be considered by the Fund's investment adviser
to be illiquid or not readily marketable and, therefore, are not subject to the
aforementioned 10% limit. The inability of the Fund to dispose of illiquid or
not readily marketable investments readily or at a reasonable price could impair
the Fund's ability to raise cash for redemptions or other purposes. The
liquidity of securities purchased by the Fund which are eligible for resale
pursuant to Rule 144A will be monitored by the Fund's investment adviser on an
ongoing basis, subject to the oversight of the Trustees. In the event that such
a security is deemed to be no longer liquid, the Fund's holdings will be
reviewed to determine what action, if any, is required to ensure that the
retention of such security does not result in the Fund having more than 10% of
its net assets invested in illiquid or not readily marketable securities.
OTHER INVESTMENT POLICIES. The Fund may borrow money for temporary or emergency
purposes in amounts not in excess of 10% of the value of its total assets,
including the amount borrowed. The 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 of such borrowing in amounts up to 5% of the value of its total
assets. The Fund will not purchase any securities whenever any borrowings
(including reverse repurchase agreements) are outstanding. If the Fund enters
into a reverse repurchase agreement, it will place in a segregated custodial
account cash, United States government securities or liquid 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 the Fund may decline below the
repurchase price of those securities.
OTHER INVESTMENT RESTRICTIONS. The Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
The management of the Fund is supervised by the Trustees of the Evergreen
Money Market Trust (the "Trust"). Evergreen Asset has been retained to serve as
investment adviser to the Fund. Evergreen Asset, with its predecessors, has
served as investment adviser to the Evergreen Funds since 1971. Evergreen Asset,
a subsidiary of FUNB, is located at 2500 Westchester Avenue, Purchase, New York
10577. FUNB is a subsidiary of First Union Corporation ("First Union"), a bank
holding company in the United States.
First Union is headquartered in Charlotte, North Carolina, and had $143
billion in consolidated assets as of June 30, 1997. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States. First Union Brokerage Services, Inc., a
wholly-owned subsidiary of First Union, 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.
Evergreen Asset manages investments, provides various administrative
services and supervises the daily business affairs of the Fund, subject to the
authority of the Trustees. Evergreen Asset is entitled to receive from the Fund
an annual fee equal to .50% of average daily net assets of the Fund on the first
$1 billion in assets and .45% of average daily net assets in excess of $1
billion. However, Evergreen Asset has in the past, and may in the future,
voluntarily waive all or a portion of its fee for the purpose of reducing the
Fund's expense ratio.
6
<PAGE>
SUB-ADVISER
Evergreen Asset has entered into a sub-advisory agreement with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolio of the Fund. Lieber & Company will be reimbursed by Evergreen Asset in
connection with the rendering of services on the basis of the direct and
indirect costs of performing such services. There is no additional charge to the
Fund for the services provided by Lieber & Company. The address of Lieber &
Company is 2500 Westchester Avenue, Purchase, New York 10577. Lieber & Company
is an indirect, wholly-owned, subsidiary of First Union.
SUB-ADMINISTRATOR
BISYS Fund Services ("BISYS"), an affiliate of Evergreen Keystone
Distributor, Inc. ("EKD"), distributor for the Evergreen Keystone Funds, serves
as sub-administrator to the Fund. For its services, BISYS is entitled to receive
a fee from Evergreen Keystone Investment Services, Inc. ("EKIS") based on the
aggregate average daily net assets of all the mutual funds for which First Union
affiliates serve as investment adviser. The sub-administrator fee is calculated
in accordance with the following schedule:
<TABLE>
<CAPTION>
Sub-Administrator Fee
<S> <C>
0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% on assets in excess of $25 billion
</TABLE>
The total assets of the mutual funds for which First Union affiliates
serve as investment advisers were approximately $30.5 billion as of June 30,
1997.
DISTRIBUTION PLAN AND AGREEMENT
Distribution Plan. The Fund bears some of the expenses associated with
selling Class K shares under a distribution plan that it has adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act")
(the "Plan"). Under the Plan, the Fund may currently pay up to 0.30% of the
average daily net assets attributable to Class K shares for distribution-related
and shareholder servicing-related expenses. Of that amount, up to 0.25% may
constitute a service fee to be used to compensate organizations, which may
include the Fund's investment adviser or its affiliates, for personal services
rendered to shareholders and/or the maintenance of shareholder accounts. The
Fund may not pay any distribution or services fees during any fiscal period in
excess of the amounts set forth above.
Distribution Agreement. The Fund has also entered into a distribution
agreement (a "Distribution Agreement") with EKD. Pursuant to the Distribution
Agreement, the Fund will compensate EKD for its services as distributor up to
0.30% of the average daily net assets of the Fund.
The Distribution Agreement provides that EKD will use the distribution
fee received from the Fund for payments (i) to compensate broker-dealers or
other persons for distributing shares of the Fund, including interest and
principal payments made in respect of amounts paid to broker-dealers or other
persons that have been financed (EKD may assign its rights to receive
compensation under the Plan to secure such financings), (ii) to otherwise
promote the sale of shares of the Fund, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries for providing
administrative, accounting and other services with respect to the Fund's
shareholders. First Union or its affiliates may finance the payments made by EKD
to compensate broker-dealers or other persons for distributing shares of the
Fund.
7
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You may purchase shares of the Fund through broker-dealers, banks or
other financial intermediaries, or directly through EKD. In addition, you may
purchase shares of the Fund by mailing to that Fund, c/o Evergreen Keystone
Service Company ("EKSC"), P.O. Box 2121, Boston, Massachusetts 02106-2121, a
completed Application and a check payable to the Fund. You may also telephone
1-800-343-2898 to obtain the number of an account to which you can wire or
electronically transfer funds and then send in a completed Application. The
minimum initial investment is $1,000, which may be waived in certain situations.
Subsequent investments in any amount may be made by check, by wiring federal
funds, by direct deposit or by an electronic funds transfer.
There is no minimum amount for subsequent investments. Investments of $25
or more are allowed under the Systematic Investment Plan. Share certificates are
not issued. See the Application for more information. Only Class K shares are
offered through this Prospectus (see "General Information" -- "Other Classes of
Shares").
You may purchase Class K shares of the Fund at net asset value without an
initial sales charge. However, if Class K shares are purchased through an
exchange of shares of a Keystone Classic Fund which are subject to a contingent
deferred sales charge ("CDSC"), such CDSC will carry over to the Class K shares
acquired in the exchange transaction.
How the Funds Value Their Shares. The net asset value of the Fund's shares for
purposes of both purchases and redemptions is determined twice daily, at 12 noon
(Eastern time) and promptly after the regular close of the New York Stock
Exchange (the "Exchange") (currently 4:00 p.m. Eastern time) each business day,
i.e., any weekday exclusive of days on which the Exchange or State Street Bank
and Trust Company ("State Street") is closed. The Exchange is closed on New
Year's Day, Presidents Day, Good Friday, Martin Luther King Jr. Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net
asset value per share is calculated by taking the sum of the values of the
Fund's investments and any cash and other assets, subtracting liabilities, and
dividing by the total number of shares outstanding. All expenses, including the
fees payable to the Fund's investment adviser, are accrued daily. The securities
in the Fund's portfolio are valued on an amortized cost basis. Under this method
of valuation, a security is initially valued at its acquisition cost, and
thereafter a constant straight-line amortization of any discount or premium is
assumed each day regardless of the impact of fluctuating interest rates on the
market value of the security. The market value of the obligations in the Fund's
portfolio can be expected to vary inversely to changes in prevailing interest
rates. As a result, the market value of the obligations in the Fund's portfolio
may vary from the value determined using the amortized cost method. Securities
which are not rated are normally valued on the basis of valuations provided by a
pricing service when such prices are believed to reflect the fair value of such
securities. Other assets and securities for which no quotations are readily
available are valued at the fair value as determined in good faith by the
Trustees.
The Fund attempts to maintain its net asset value at $1.00 per share.
Under most conditions, management believes this will be possible, although there
can be no assurance that this will be achieved. Calculations are periodically
made to compare the value of the Fund's portfolio valued at amortized cost with
market values. If a deviation of 0.50% or more were to occur between the net
asset value calculated by reference to market values and the Fund's $1.00 per
share net asset value, or if there were other deviations which the Trustees of
the Trust believe would result in a material dilution to shareholders or
purchasers, the Trustees would promptly consider what action, if any, should be
initiated.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss the Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, the Fund may redeem
shares from his or her account to reimburse the Fund or the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen Keystone funds.
The Fund will not accept third party checks other than those payable directly to
a shareholder whose account has been in existence at least thirty days.
Shares of the Fund are sold at the net asset value per share next
determined after a shareholder's investment has been converted to federal funds.
Investments by federal funds wire will be effective upon receipt. Qualified
institutions may telephone orders for the purchase of Fund shares. Shares
purchased by institutions via telephone will receive the dividend declared on
that day if the telephone order is placed by 12 noon (Eastern time),
8
<PAGE>
and federal funds are received the same day by 4:00 p.m. (Eastern time).
Institutions should telephone the Fund at the telephone number on the front page
of this prospectus for additional information on same day purchases by
telephone. Investment checks received at State Street will be invested on the
date of receipt. Shareholders will begin earning dividends the following
business day.
The Application may not be used to invest in any of the prototype
retirement plans for which the Fund is an available investment. For information
about the requirements to make such investments, including copies of the
necessary application forms, please call the telephone number set forth on the
cover page of this Prospectus. The Fund cannot accept investments specifying a
certain price or date and reserves the right to reject any specific purchase
order, including orders in connection with exchanges from the other Evergreen
Keystone funds. Although not currently anticipated, the Fund reserves the right
to suspend the offer of shares for a period of time.
In addition to the discount or commission paid to broker-dealers, EKD may
from time to time pay to broker-dealers additional cash or other incentives that
are conditioned upon the sale of the specified minimum dollar amount of shares
of the Fund and/or other Evergreen Keystone funds. Such incentives will take the
form of payment for attendance at seminars, lunches, dinners, sporting events or
theater performances, or payment for travel, lodging and entertainment incurred
in connection with travel by persons associated with a broker-dealer and their
immediate family members to urban or resort locations within or outside the
United States. Such a broker-dealer may elect to receive cash incentives of
equivalent amount in lieu of such payments. EKD may also limit the availability
of such incentives to certain specified broker-dealers. EKD from time to time
sponsors promotions involving First Union Brokerage Services, Inc. ("FUBS"), an
affiliate of the Fund's investment adviser, and other selected broker-dealers,
pursuant to which incentives are paid, including gift certificates and payments
in amounts up to 1% of the dollar amount of shares of the Fund sold. Awards may
also be made based on the opening of a minimum number of accounts. Such
promotions are not being made available to all broker-dealers. Certain broker-
dealers may also receive payments from EKD or the Fund's investment adviser over
and above the usual trail commissions or shareholder servicing payments
applicable to a given Class of shares.
HOW TO REDEEM SHARES
You may "redeem" (i.e., sell) your shares in the Fund to the Fund for
cash, (at the net redemption value) on any day the Exchange is open, either
directly by writing to the Fund, c/o EKSC, or through your financial
intermediary. The amount you will receive is based on the net asset value
adjusted for fractions of a cent (less any applicable CDSC next calculated after
the Fund receives your request in proper form. Proceeds generally will be sent
to you within seven days. However, for shares recently purchased by check, the
Fund will not send proceeds until it is reasonably satisfied that the check has
been collected (which may take up to 15 days). Once a redemption request has
been telephoned or mailed, it is irrevocable and may not be modified or
canceled.
Redeeming Shares Through Your Financial Intermediary. The Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service. Certain financial intermediaries may require that
you give instructions earlier than 4:00 p.m. (Eastern time).
Redeeming Shares Directly By Mail Or Telephone. Send a signed letter of
instruction or stock power form to the Fund, c/o EKSC; the registrar, transfer
agent and dividend-disbursing agent for the Fund. Stock power forms are
available from your financial intermediary, EKSC, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
financial intermediaries, fiduciaries and surviving joint owners. Signature
guarantees are required for all redemption requests for shares with a value of
more than $50,000. Currently, the requirement for a signature guarantee has been
waived on redemptions of $50,000 or less when the account address of record has
been the same for a minimum period of 30 days. The Fund and EKSC reserve the
right to withdraw this waiver at any time. A signature guarantee must be
provided by a bank or trust company (not a Notary Public), a member firm of a
domestic stock exchange or by other financial institutions whose guarantees are
acceptable under the Securities Exchange Act of 1934 and EKSC's policies.
Shareholders may withdraw amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
Prospectus between the hours of 8:00 a.m. and 6:00 p.m. (Eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or
EKSC's offices are closed). Redemption requests received after 4:00 p.m.
(Eastern time) will be processed using the net asset value determined on the
next business day. Such redemption requests must include the shareholder's
account name, as registered with the Fund, and the account number. During
periods of drastic economic or market changes,
9
<PAGE>
shareholders may experience difficulty in effecting telephone redemptions. If
you cannot reach the Fund by telephone, you should follow the procedures for
redeeming by mail or through a broker-dealer as set forth herein. The telephone
redemption service is not made available to shareholders automatically.
Shareholders wishing to use the telephone redemption service must complete the
appropriate sections on the Application and choose how the redemption proceeds
are to be paid. Redemption proceeds will either (i) be mailed by check to the
shareholder at the address in which the account is registered or (ii) be wired
to an account with the same registration as the shareholder's account in the
Fund at a designated commercial bank.
In order to insure that instructions received by EKSC are genuine when
you initiate a telephone transaction, you will be asked to verify certain
criteria specific to your account. At the conclusion of the transaction, you
will be given a transaction number confirming your request, and written
confirmation of your transaction will be mailed the next business day. Your
telephone instructions will be recorded. Redemptions by telephone are allowed
only if the address and bank account of record have been the same for a minimum
period of 30 days. The Fund reserves the right at any time to terminate,
suspend, or change the terms of any redemption method described in this
prospectus, except redemption by mail, and to impose fees.
Except as otherwise noted, the Fund, EKSC and EKD will not assume
responsibility for the authenticity of any instructions received by any of them
from a shareholder over the Evergreen Keystone Express Line, or by telephone.
EKSC will employ reasonable procedures to confirm that instructions received
over the Evergreen Keystone Express Line or by telephone are genuine. The Fund,
EKSC and EKD will not be liable when following instructions received over the
Evergreen Keystone Express Line or by telephone that EKSC reasonably believes
are genuine.
Evergreen Keystone Express Line. The Evergreen Keystone Express Line offers you
specific fund account information and price and yield quotations as well as the
ability to do account transactions, including investments, exchanges and
redemptions. You may access the Evergreen Keystone Express Line by dialing toll
free 1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a
week.
General. The sale of shares is a taxable transaction for federal income tax
purposes. The Fund may temporarily suspend the right to redeem its shares when
(1) the Exchange is closed, other than customary weekend and holiday closings;
(2) trading on the Exchange is restricted; (3) an emergency exists and the Fund
cannot dispose of its investments or fairly determine their value; or (4) the
SEC so orders. The Fund reserves the right to close an account that through
redemption has fallen below $1,000 and has remained so for thirty days.
Shareholders will receive sixty days' written notice to increase the account
value to at least $1,000 before the account is closed. The Fund has elected to
be governed by Rule 18f-1 under the 1940 Act pursuant to which the Fund is
obligated to redeem shares solely in cash, up to the lesser of $250,000 or 1% of
the Fund's total net assets during any ninety day period for any one
shareholder.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your Class K shares for
shares of any other fund in the Keystone Classic Fund Family through your
financial intermediary, or by calling or writing EKSC, or by using the Evergreen
Keystone Express Line as described below. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received. An
exchange, that represents an initial investment in a Keystone Classic Fund, is
subject to the minimum investment and suitability requirements of each fund.
If you have obtained the appropriate prospectus, you may exchange Class K
shares that you purchased directly for shares of any fund in the Keystone
Classic Fund Family. In such an exchange, you will acquire the shares of the
Keystone Classic fund subject to any sales charge, CDSC or other fee imposed by
such fund.
You may also obtain Class K shares by exchanging them for the shares of a
Keystone Classic Fund. Such an exchange is not subject to a CDSC. However, if
the shares tendered for exchange were still subject to a CDSC, such CDSC will
carry over to the shares acquired in the exchange transaction.
10
<PAGE>
The CDSC is a declining percentage of the lesser of (1) the net asset
value of the shares you redeemed, or (2) the net asset value at time of purchase
of such shares. The CDSC is calculated according to the following schedule:
<TABLE>
<CAPTION>
Redemption Timing CDSC
<S> <C>
During the calendar year of purchase........................................................ 4.00%
During the first calendar year after the year of purchase................................... 3.00%
During the second calendar year after the year of purchase.................................. 2.00%
During the third calendar year after the year of purchase................................... 1.00%
Thereafter.................................................................................. 0.00%
</TABLE>
In determining whether a CDSC is payable and, if so, the percentage
charge applicable, the Fund will first redeem shares not subject to a CDSC and
will then redeem shares you have held the longest.
Each of the Keystone Classic Funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange order
must comply with the requirement for a redemption or repurchase order and must
specify the dollar value or number of shares to be exchanged. An exchange is
treated for federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be materially modified or
discontinued at any time by the Fund upon sixty days' notice to shareholders and
is only available in states in which shares of the fund being acquired may
lawfully be sold.
Exchanges Through Your Financial Intermediary. The Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service.
Exchanges by Telephone and Mail. Exchange requests received by the Fund after
4:00 p.m. (Eastern time) will be processed using the net asset value determined
at the close of the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach EKSC by telephone. If you wish to use the telephone
exchange service you should indicate this on the Application. As noted above,
the Fund will employ reasonable procedures to confirm that instructions for the
redemption or exchange of shares communicated by telephone are genuine. A
telephone exchange may be refused by the Fund or EKSC if it is believed
advisable to do so. Procedures for exchanging Fund shares by telephone may be
modified or terminated at any time. Written requests for exchanges should follow
the same procedures outlined for written redemption requests in the section
entitled "How to Redeem Shares," however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Fund offers the following shareholder services. For more information
about these services or your account, contact EKSC or call the toll-free number
on the front page of this prospectus. Some services are described in more detail
in the Application.
Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of the Fund with no minimum
initial investment required.
Telephone Investment Plan. You may invest not less than $50 or more than $10,000
per investment into an existing account. Telephone investment requests received
by 4:00 p.m. (Eastern time) will be credited to a shareholder's account the day
the request is received. Shares purchased under the Systematic Investment Plan
or Telephone Investment Plan may not be redeemed for ten days from the date of
investment.
Systematic Withdrawal Plan. When an account of $10,000 or more is opened or when
an existing account reaches that size, you may participate in the Systematic
Withdrawal Plan by filling out the appropriate part of the Application. Under
this plan, you may receive (or designate a third party to receive) payments in a
stated amount of at least $75, or a maximum of 1.0% per month or 3.0% per
quarter of the total net asset value of your account when the Plan was
established. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any
11
<PAGE>
applicable CDSC will be waived with respect to redemptions occurring under a
Systematic Withdrawal Plan during a calendar year to the extent that such
redemptions do not exceed 12% of (i) the initial value of the account plus (ii)
the value, at the time of purchase, of any subsequent investments. Excessive
withdrawals may decrease or deplete the value of your account.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Fund and the
other Evergreen Keystone funds available to their participants. The Fund's
investment adviser may provide compensation to organizations providing
administrative and recordkeeping services to plans which make shares of the
Evergreen Keystone funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested.
Dollar Cost Averaging. Through dollar cost averaging you can invest a fixed
dollar amount each month or each quarter in any Evergreen Keystone fund. This
results in more shares being purchased when the selected Fund's net asset value
is relatively low and fewer shares being purchased when the Fund's net asset
value is relatively high and may result in a lower average cost per share than a
less systematic investment approach.
Prior to participating in dollar cost averaging, you must establish an
account in an Evergreen Keystone fund. You should designate on the Application
(1) the dollar amount of each monthly or quarterly investment you wish to make
and (2) the Fund in which the investment is to be made. Thereafter, on the first
day of the designated month, an amount equal to the specified monthly or
quarterly investment will automatically be redeemed from your initial account
and invested in shares of the designated fund.
Two Dimensional Investing. You may elect to have income and capital gains
distributions from any class of Evergreen Keystone fund shares you own
automatically invested to purchase the same class of shares of any other
Evergreen Keystone fund. You may select this service on your Application and
indicate the Evergreen Keystone fund(s) into which distributions are to be
invested. The value of shares purchased will be ineligible for Rights of
Accumulation and Letters of Intent. See the SAI.
Tax Deferred Retirement Plans. The Fund has various retirement plans available
to eligible investors, including: Individual Retirement Accounts (IRAs);
Rollover IRAs; Simplified Employee Pension Plans (SEPs); Savings Incentive Match
Plan for Employees (SIMPLEs); Tax Sheltered Annuities; 403(b)(7) Plans (TSAs);
401(k) Plans; Keogh Plans; Profit-Sharing Plans; and Money Purchase Pension
Plans. For details, including fees and application forms, call toll free
1-800-247-4075 or write to EKSC.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Fund. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Evergreen
Asset, since it is a subsidiary of First Union, is subject to and in compliance
with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in Evergreen Asset being prevented from
continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of
the Fund by its customers. If Evergreen Asset was prevented from continuing to
provide the services called for under the investment advisory agreement, it is
expected that the Trustees would identify, and call upon the Fund's shareholders
to approve, a new investment adviser. If this were to occur, it is not
anticipated that the shareholders of the Fund would suffer any adverse financial
consequences.
12
<PAGE>
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund declares substantially all of its net income as dividends on
each business day. Such dividends are paid monthly. Net investment income, for
dividend purposes, includes accrued interest and any market discount or premium
that day, less the estimated expenses of the Fund. Gains or losses realized upon
the sale of portfolio securities are not included in net investment income, but
are reflected in the net asset value of the Fund's shares. Distributions of any
net realized capital gains will be made annually or more frequently. The amount
of dividends may fluctuate from day to day, and the dividend may be omitted on a
day where Fund expenses exceed investment income. Dividends and distributions
generally are taxable in the year in which they are paid, except any dividends
paid in January that were declared in the previous calendar quarter will be
treated as paid in the immediately preceding December.
Dividends will be automatically reinvested in full and fractional shares
of the Fund on the last business day of each month. However, shareholders who so
inform the transfer agent may have their dividends paid out in cash monthly.
Shareholders who invest by check will be credited with a dividend on the
business day following initial investment. Shareholders will receive dividends
on investments made by federal funds bank wire the same day the wire is received
provided that wire purchases are received by State Street by 12 noon (Eastern
time). Shares purchased by qualified institutions via telephone as described in
"How to Purchase Shares" will receive the dividend declared on that day if the
telephone order is placed by 12 noon (Eastern time), and federal funds are
received by 4:00 p.m. (Eastern time). All other wire purchases received after 12
noon (Eastern time) will earn dividends beginning the following business day.
Dividends accruing on the day of redemption will be paid to redeeming
shareholders except for redemptions by check and where proceeds are wired the
same day. (See "How to Redeem Shares".)
The 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, it is expected that the Fund will not
be required to pay any federal income taxes on that portion of its investment
company taxable income and any net realized capital gains it distributes to
shareholders. The Code imposes a 4% nondeductible excise tax on regulated
investment companies, such as the Fund, to the extent they do not meet certain
distribution requirements by the end of each calendar year. The Fund anticipates
meeting such distribution requirements.
Following the end of each calendar year, every shareholder of the Fund
will be sent applicable tax information and information regarding the dividends
and capital gain distributions made during the calendar year. Under current law,
the highest federal income tax rate applicable to net long-term capital gains
realized by individuals is 28%. The rate applicable to corporations is 35%.
Since the Fund's gross income is ordinarily expected to be interest income, it
is not expected that the 70% dividends-received deduction for corporations will
be applicable. Specific questions should be addressed to the investor's own tax
adviser.
The Fund is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Application, or on a separate
form supplied by State Street, that the investor's social security or taxpayer
identification number is correct and that the investor is not currently subject
to backup withholding or is exempt from backup withholding.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, the Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Fund is a separate investment series of Evergreen Money Market
Trust, a Massachusetts business trust organized in 1987.
The Fund does not intend to hold annual shareholder meetings; shareholder
meetings will be held only when required by applicable law. Shareholders have
available certain procedures for the removal of Trustees.
A shareholder in Class K of the Fund will be entitled to his or her share
of all dividends and distributions from the Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and,
13
<PAGE>
upon redeeming shares, will receive the then current net asset value of the
Class of shares of the Fund represented by the redeemed shares. The Trust is
empowered to establish, without shareholder approval, additional investment
series, which may have different investment objectives, and additional Classes
of shares for any existing or future series. If an additional series or Class
were established in the Fund, each share of the series or Class would normally
be entitled to one vote for all purposes. Generally, shares of each series and
Class would vote together as a single Class on matters, such as the election of
Trustees, that affect each series and Class in substantially the same manner.
Class A, Class B, Class C, Class K and Class Y shares have identical voting,
dividend, liquidation and other rights, except that each Class bears, to the
extent applicable, its own distribution expenses as well as any other expenses
applicable only to a specific class. Each Class of shares votes separately with
respect to Rule 12b-1 distribution plans and other matters for which separate
Class voting is appropriate under applicable law. Shares are entitled to
dividends as determined by the Trustees and, in liquidation of a Fund, are
entitled to receive the net assets of the Fund.
Custodian, Registrar, Transfer Agent And Dividend-Disbursing Agent. State
Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827
acts as the Fund's custodian, EKSC, a wholly-owned subsidiary of Keystone
Investment Management Company ("Keystone"), serves as the Fund's transfer agent.
EKSC is located at 200 Berkeley Street, Boston, Massachusetts 02116. EKSC is
compensated for its services as transfer agent by a fee based upon the number of
shareholder accounts maintained for the Fund.
Principal Underwriter. EKD, an affiliate of BISYS, located 125 W. 55th Street,
New York, New York 10019, is the principal underwriter of the Fund. BISYS also
provides certain sub-administrative services to Evergreen Asset in connection
with its role as investment adviser to the Fund, including providing personnel
to serve as officers of the Fund.
Other Classes of Shares. The Fund offers five classes of shares, Class A, Class
B, Class C, Class K and Class Y. Class A, B and C shares are offered through a
separate prospectus. Class Y shares are also offered through a separate
prospectus and are only available to (i) persons who at or prior to December 31,
1994, owned shares in a mutual fund advised by Evergreen Asset, (ii) certain
institutional investors and (iii) investment advisory clients of the Capital
Management Group of FUNB, Evergreen Asset, Keystone or their affiliates.
Performance Information. From time to time, the Fund may quote its yield in
advertisements or in reports to shareholders. Yield information may be useful in
reviewing the performance of the Fund and for providing a basis for comparison
with other investment alternatives. However, since net investment income of the
Fund changes in response to fluctuations in interest rates and Fund expenses,
any given yield quotation should not be considered representative of the Fund's
yields for any future period.
The method of calculating the Fund's yield is set forth in the Statement
of Additional Information.
Comparative performance information may also be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., IBC/Donoghue's Money Fund Report, Bank Rate Monitor
and other industry publications.
In marketing the Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen Keystone funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. EKD may also reprint, and use as advertising and sales
literature, articles from Evergreen Keystone Events, a quarterly magazine
provided to Evergreen Keystone fund shareholders.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declaration of Trust under which the
Fund operates provides that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
14
<PAGE>
Investment Adviser
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
Evergreen Money Market Fund
Custodian
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
Transfer Agent
Evergreen Keystone Service Company, P.O. Box 2121, Boston, Massachusetts,
02106-2121
Legal Counsel
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
Independent Accountants
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
Evergreen Money Market Fund
Distributor
Evergreen Keystone Distributor, Inc., 125 W. 55th Street, New York, New York
10019
60155 541366
<PAGE>
THE EVERGREEN MONEY MARKET TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
October 31, 1996
As Amended August 1, 1997
THE EVERGREEN MONEY MARKET FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-343-2898
Evergreen Money Market Fund ("Money Market")
Evergreen Tax Exempt Money Market Fund ("Tax Exempt")
Evergreen Pennsylvania Tax-Free Money Market Fund (formerly FFB Pennsylvania
Tax-Free Money Market Fund)("Pennsylvania") Evergreen Treasury Money Market Fund
(formerly First Union Treasury Money Market Portfolio)("Treasury") Evergreen
Institutional Money Market Fund ("Institutional Money Market") Evergreen
Institutional Tax Exempt Money Market Fund ("Institutional Tax Exempt")
Evergreen Institutional Treasury Money Market Fund ("Institutional Treasury")
This Statement of Additional Information pertains to all classes of shares of
the Funds listed above. It is not a prospectus and should be read in conjunction
with the Prospectus dated October 31, 1996, as amended August 1, 1997, for the
Fund in which you are making or contemplating an investment. The Evergreen Money
Market Funds are offered through seven separate prospectuses: one offering Class
A, Class B and Class C shares of Money Market and Class A shares of Tax Exempt
and Treasury, one offering Class K shares of Money Market, one offering Class A
shares of Pennsylvania, one offering Class Y shares of Money Market, Tax Exempt
and Treasury, one offering Class Y shares of Pennsylvania, one offering
Institutional Service shares of Institutional Money Market, Institutional Tax
Exempt and Institutional Treasury and one offering Institutional shares of
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury.
Copies of each Prospectus may be obtained without charge by calling the number
listed above.
TABLE OF CONTENTS
Investment Objectives and Policies................................ 2
Investment Restrictions........................................... 4
Certain Risk Considerations....................................... 8
Management........................................................ 8
Investment Advisers............................................... 15
Distribution Plans................................................ 19
Allocation of Brokerage........................................... 21
Additional Tax Information........................................ 22
Net Asset Value................................................... 24
Purchase of Shares................................................ 25
General Information About the Funds............................... 29
Performance Information........................................... 30
Financial Statements.............................................. 33
Appendix A - Description of Bond, Municipal Note and Commercial Paper Ratings
Appendix B - Special Considerations Relating to Investment In Pennsylvania
Municipal Issuers
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds -Investment Objectives and Policies" in
each Fund's Prospectus)
The investment objective of each Fund and a description of the securities in
which each Fund may invest is set forth under "Description of the Funds -
Investment Objectives and Policies" in the relevant Prospectus. The following
expands upon the discussion in the Prospectuses regarding certain investments of
the following Funds:
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<PAGE>
Tax Exempt, Pennsylvania and Institutional Tax Exempt
To attain its objectives, each Fund invests primarily in high quality Municipal
Obligations which have remaining maturities not exceeding thirteen months. Each
Fund maintains a dollar-weighted average portfolio maturity of 90 days or less.
For information concerning the investment quality of Municipal Obligations that
may be purchased by the Fund, see "Investment Objective and Policies" in the
Prospectus. The tax-exempt status of a Municipal Obligation is determined by the
issuer's bond counsel at the time of the issuance of the security.
For the purpose of certain requirements under the Investment Company Act of 1940
(the "1940 Act") and each Fund's various investment restrictions, identification
of the "issuer" of a municipal security depends on the terms and conditions of
the security. When the assets and revenues of a political subdivision are
separate from those of the government which created the subdivision and the
security is backed only by the assets and revenues of the subdivision, the
subdivision would be deemed to be the sole issuer. Similarly, in the case of an
industrial development bond, if that bond is backed only by the assets and
revenues of the non-governmental user, then the non-governmental user would be
deemed to be the sole issuer. If, however, in either case, the creating
government or some other entity guarantees the security, the guarantee would be
considered a separate security and would be treated as an issue of the
government or other agency.
Municipal bonds may be categorized as "general obligation" or "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
secured by the net revenue derived from a particular facility or group of
facilities or, in some cases, the proceeds of a special excise or other specific
revenue source, but not by the general taxing power. Industrial development
bonds are, in most cases, revenue bonds and do not generally carry the pledge of
the credit of the issuing municipality or public authority.
Municipal Notes. Municipal notes include, but are not limited to, tax
anticipation notes (TANs), bond anticipation notes (BANs), revenue anticipation
notes (RANs), construction loan notes and project notes. Notes sold as interim
financing in anticipation of collection of taxes, a bond sale or receipt of
other revenue are usually general obligations of the issuer. Project notes are
issued by local housing authorities to finance urban renewal and public housing
projects and are secured by the full faith and credit of the U.S. Government.
Municipal Commercial Paper. Municipal commercial paper is issued to finance
seasonal working capital needs or as short-term financing in anticipation of
longer-term debt. It is paid from the general revenues of the issuer or
refinanced with additional issuances of commercial paper or long-term debt.
Municipal Leases. Municipal leases, which may take the form of a lease or an
installment purchase or conditional sale contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications equipment
and other capital assets. Municipal leases frequently have special risks not
normally associated with general obligation or revenue bonds. Leases and
installment purchases or conditional sale contracts (which normally provide for
title to the leased asset to pass eventually to the government issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt-issuance limitations of many state constitutions and statutes
are deemed to be inapplicable because of the inclusion in many leases or
contracts of "non-appropriation" clauses that provide that the governmental
issuer has no obligation to make future payments under the lease or contract
unless money is appropriated for such purpose by the appropriate legislative
body on a yearly or other periodic basis. These types of municipal leases may be
considered illiquid and subject to the 10% limitation of investment in illiquid
securities set forth under "Investment Restrictions" contained herein. The Board
of Trustees of each Trust under which each Fund operates may adopt guidelines
and delegate to the Adviser (as defined below) the daily function of determining
and monitoring the liquidity of municipal leases. In making such determination,
the Board and the Adviser may consider such factors as the frequency of trades
for the obligations, the number of dealers willing to purchase or sell the
obligations and the number of other potential buyers and the nature of the
marketplace for the obligations, including the time needed to dispose of the
obligations and the method of soliciting offers. If the Board determines that
any municipal leases are illiquid, such leases will be subject to the
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<PAGE>
10% limitation on investments in illiquid securities.
For purposes of diversification under the 1940 Act, the identification of the
issuer of Municipal Obligations depends on the terms and conditions of the
obligation. If the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from those of the government
creating the subdivision and the obligation is backed only by the assets and
revenues of the subdivision, such subdivision would be regarded as the sole
issuer. Similarly, in the case of an industrial development bond, if the bond is
backed only by the assets and revenues of the non-governmental user, the
non-governmental user would be deemed to be the sole issuer. If in either case
the creating government or another entity guarantees an obligation, the
guarantee would be considered a separate security and be treated as an issue of
such government or entity.
As described in each Fund's Prospectus, the Fund may, under limited
circumstances, elect to invest in certain taxable securities and repurchase
agreements with respect to those securities. A Fund will enter into repurchase
agreements only with broker-dealers, domestic banks or recognized financial
institutions which, in the opinion of the Fund's Adviser, present minimal credit
risks. In the event of default by the seller under a repurchase agreement, a
Fund may have problems in exercising its rights to the underlying securities and
may incur costs and experience time delays in connection with the disposition of
such securities. The Fund's Adviser will monitor the value of the underlying
security at the time the transaction is entered into and at all times during the
term of the repurchase agreement to ensure that the value of the security always
equals or exceeds the agreed upon repurchase price. Repurchase agreements may be
considered to be loans under the 1940 Act, collateralized by the underlying
securities.
Each Fund may engage in the following investment activities:
Securities With Put Rights (or "stand-by commitments"). When a Fund
purchases Municipal Obligations it may obtain the right to resell them,
or "put" them, to the seller (a broker-dealer or bank) at an agreed
upon price within a specific period prior to their maturity date. The
Fund does not limit the percentage of its assets that may be invested
in securities with put rights.
The amount payable to a Fund by the seller upon its exercise of a put
will normally be (i) the Fund's acquisition cost of the securities
(excluding any accrued interest which the Fund paid on their
acquisition), less any amortized market premium plus any amortized
market or original issue discount during the period the Fund owned the
securities, plus (ii) all interest accrued on the securities since the
last interest payment date during the period the securities were owned
by the Fund. Absent unusual circumstances, each Fund values the
underlying securities at their amortized cost. Accordingly, the amount
payable by a broker-dealer or bank during the time a put is exercisable
will be substantially the same as the value of the underlying
securities.
A Fund's right to exercise a put is unconditional and unqualified. A
put is not transferable by the Fund, although the Fund may sell the
underlying securities to a third party at any time. Each Fund expects
that puts will generally be available without any additional direct or
indirect cost. However, if necessary and advisable, the Fund may pay
for certain puts either separately in cash or by paying a higher price
for portfolio securities which are acquired subject to such a put (thus
reducing the yield to maturity otherwise available to the same
securities). Thus, the aggregate price paid for securities with put
rights may be higher than the price that would otherwise be paid.
The acquisition of a put will not affect the valuation of the
underlying security, which will continue to be valued in accordance
with the amortized cost method. The actual put will be valued at zero
in determining net asset value. Where a Fund pays directly or
indirectly for a put, its cost will be reflected as an unrealized loss
for the period during which the put is held by that Fund and will be
reflected in realized gain or loss when the put is exercised or
expires. If the value of the underlying security increases, the
potential for unrealized or realized gain is reduced by the cost of the
put.
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<PAGE>
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
.........Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
Adviser without shareholder approval, subject to review and approval by the
Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.
1........Concentration of Assets in Any One Issuer
.........Tax Exempt, Pennsylvania, Money Market, Institutional Tax Exempt and
Institutional Money Market may not invest more than 5% of their total assets, at
the time of the investment in question, in the securities of any one issuer
other than the U.S. government and its agencies or instrumentalities, except
that up to 25% of the value of Tax Exempt's, Institutional Tax Exempt's and
Pennsylvania's total assets may be invested without regard to such 5%
limitation. For this purpose each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues industrial development bonds on behalf of a
private entity, will be regarded as a separate issuer for determining the
diversification of each Fund's portfolio.
2........Ten Percent Limitation on Securities of Any One Issuer
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market nor Institutional Tax Exempt may purchase more than 10% of any class of
securities of any one issuer other than the U.S. government and its agencies or
instrumentalities.
3........Investment for Purposes of Control or Management
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market* nor Institutional Tax Exempt* may invest in companies for the purpose of
exercising control or management.
4........Purchase of Securities on Margin
.........Neither Money Market, Pennsylvania, Tax Exempt, Treasury, Institutional
Money Market*, Institutional Tax Exempt* nor Institutional Treasury* may
purchase securities on margin, except that each Fund may obtain such short-term
credits as may be necessary for the clearance of transactions. A deposit or
payment by a Fund of initial or variation margin in connection with financial
futures contracts or related options transactions is not considered the purchase
of a security on margin.
5........Unseasoned Issuers
.........Money Market and Institutional Money Market* may not invest more than
5% of their total assets in securities of unseasoned issuers that have been in
continuous operation for less than three years, including operating periods of
their predecessors.
.........Tax Exempt and Institutional Tax Exempt* may not invest more than 5% of
their total assets in taxable securities of unseasoned issuers that have been in
continuous operation for less than three years, including operating periods of
their predecessors, except that (i) each Fund may invest in obligations issued
or guaranteed by the U.S. government and its agencies or instrumentalities, and
(ii) each Fund may invest in municipal securities.
6........Underwriting
.........Money Market, Pennsylvania, Tax Exempt, Institutional Money Market and
Institutional Tax Exempt may not engage in the business of underwriting the
securities of other issuers; provided that the purchase by Tax Exempt and
Institutional Tax Exempt of municipal securities or other permitted investments,
directly from the issuer thereof (or
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<PAGE>
from an underwriter for an issuer) and the later disposition of such securities
in accordance with the Fund's investment program shall not be deemed to be an
underwriting.
7........Interests in Oil, Gas or Other Mineral Exploration or Development
Programs
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market* nor Institutional Tax Exempt* may purchase, sell or invest in interests
in oil, gas or other mineral exploration or development programs.
8........Concentration in Any One Industry
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market nor Institutional Tax Exempt may invest 25% or more of its total assets
in the securities of issuers conducting their principal business activities in
any one industry; provided, that this limitation shall not apply to obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, or with respect to Pennsylvania, Tax Exempt and Institutional
Tax Exempt, to municipal securities and certificates of deposit and bankers'
acceptances issued by domestic branches of U.S. banks.
9........Warrants
.........Tax Exempt and Institutional Tax Exempt* may not invest more than 5% of
their total net assets in warrants, and, of this amount, no more than 2% of the
Fund's total net assets may be invested in warrants that are listed on neither
the New York nor the American Stock Exchange.
10.......Ownership by Trustees/Officers
.........Neither Money Market, Tax Exempt, Treasury, Institutional Money
Market*, Institutional Tax Exempt* nor Institutional Treasury* may purchase or
retain the securities of any issuer if (i) one or more officers or Trustees of a
Fund or its investment adviser individually owns or would own, directly or
beneficially, more than 1/2 of 1% of the securities of such issuer, and (ii) in
the aggregate, such persons own or would own, directly or beneficially, more
than 5% of such securities.
11.......Short Sales
.........Neither Money Market, Tax Exempt, Treasury, Institutional Money
Market*, Institutional Tax Exempt* nor Institutional Treasury* may make short
sales of securities or maintain a short position; except that, in the case of
Treasury, Institutional Treasury, Institutional Tax Exempt and Institutional
Money Market, at all times when a short position is open it owns an equal amount
of such securities or of securities which, without payment of any further
consideration are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short.
12.......Lending of Funds and Securities
.........Tax Exempt and Institutional Tax Exempt may not lend their funds to
other persons; however, they may purchase issues of debt securities, enter into
repurchase agreements and acquire privately negotiated loans made to municipal
borrowers.
.........Money Market and Institutional Money Market may not lend their
funds to other persons, provided that they may purchase money market
securities or enter into repurchase agreements.
.........Treasury and Institutional Treasury will not lend any of their assets,
except that they may purchase or hold U.S. Treasury obligations, including
repurchase agreements.
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market nor Institutional Tax Exempt may lend its portfolio securities, unless
the borrower is a broker, dealer or financial institution that pledges and
maintains collateral with the Fund consisting of cash, letters of credit or
securities issued or guaranteed by the U.S. government having a value at all
times not less than 100% of the current market value of the loaned securities,
including accrued interest, provided that the aggregate amount of such loans
shall not exceed 30% of the Fund's total assets (5% in the case of
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<PAGE>
Pennsylvania).
13.......Commodities
......... Money Market, Tax Exempt, Treasury*, Institutional Treasury*,
Institutional Money Market* and Institutional Tax Exempt* may not purchase, sell
or invest in commodities, commodity contracts or financial futures contracts.
14.......Real Estate
.........The Funds may not purchase, sell or invest in real estate or interests
in real estate, except that Money Market and Institutional Money Market may
purchase, sell or invest in marketable securities of companies holding real
estate or interests in real estate, including real estate investment trusts, Tax
Exempt and Institutional Tax Exempt may purchase municipal securities and other
debt securities secured by real estate or interests therein and Pennsylvania may
purchase securities secured by real estate or interests therein, or securities
issued by companies which invest in real estate or interests therein.
15.......Borrowing, Senior Securities, Reverse Repurchase Agreements
......... Money Market, Tax Exempt, Institutional Money Market and Institutional
Tax Exempt may not borrow money, issue senior securities or enter into reverse
repurchase agreements, except for temporary or emergency purposes, and not for
leveraging, and then in amounts not in excess of 10% of the value of the Fund's
total assets at the time of such borrowing; or mortgage, pledge or hypothecate
any assets except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of the
Fund's total assets at the time of such borrowing, provided that the Fund will
not purchase any securities at times when any borrowings (including reverse
repurchase agreements) are outstanding. The Funds will not enter into reverse
repurchase agreements exceeding 5% of the value of their total assets.
.........Pennsylvania shall not borrow money, issue senior securities, or
pledge, mortgage or hypothecate its assets, except that the Fund may borrow from
banks if immediately after each borrowing there is asset coverage of at least
300%.
.........Treasury and Institutional Treasury will not issue senior securities
except that each Fund may borrow money directly, 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 the value
of its total assets, including the amount borrowed, in order to meet redemption
requests without immediately selling portfolio instruments. Any such borrowings
need not be collateralized. Each Fund will not purchase any securities while
borrowings in excess of 5% of the total value of its total assets are
outstanding. Each Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes. Treasury and Institutional Treasury
will not mortgage, pledge or hypothecate any assets except to secure permitted
borrowings. In these cases, Treasury and Institutional Treasury may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the pledge.
16.......Options
.........Money Market, Tax Exempt, Institutional Money Market* and Institutional
Tax Exempt* may not write, purchase or sell put or call options, or combinations
thereof, except Money Market and Institutional Money Market may do so as
permitted under "Description of the Funds - Investment Objective and Policies"
in each Fund's Prospectus and Tax Exempt and Institutional Tax Exempt may
purchase securities with rights to put securities to the seller in accordance
with its investment program.
.........Pennsylvania shall not write, purchase or sell puts, calls, warrants or
options or any combination thereof, except that the Fund may purchase securities
with put or demand rights.
17.......Investment in Municipal Securities
.........Pennsylvania, Tax Exempt and Institutional Tax Exempt may not invest
more than 20% of its total assets in securities other than municipal securities
(as described under "Description of Funds - Investment Objectives and Policies"
in each Fund's Prospectus),
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<PAGE>
unless extraordinary circumstances dictate a more defensive posture.
18.......Investment in Money Market Securities
.........Money Market may not purchase any securities other than money market
instruments(as described under "Description of Funds - Investment Objectives and
Policies" in the Fund's Prospectus).
19.......Investing in Securities of Other Investment Companies
.........Treasury*, Money Market*, Pennsylvania*, Tax Exempt*, Institutional
Treasury*, Institutional Money Market* and Institutional Tax Exempt* will
purchase securities of investment companies only in open-market transactions
involving customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation or
acquisition of assets. It should be noted that investment companies incur
certain expenses such as management fees and therefore any investment by the
Funds in shares of another investment company would be subject to such duplicate
expenses.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
CERTAIN RISK CONSIDERATIONS
There can be no assurance that a Fund will achieve its investment objective and
an investment in the Fund involves certain risks which are described under
"Description of the Funds - Investment Objectives and Policies" in each Fund's
Prospectus.
MANAGEMENT
The age, address and principal occupation of the Trustees and executive officers
of Evergreen Investment Trust (formerly First Union Funds), The Evergreen
Municipal Trust, Evergreen Tax Free Trust (formerly FFB Funds Trust) and
Evergreen Money Market Trust (each a "Trust" and collectively the "Trusts"),
during the past five years are set forth below:
Laurence B. Ashkin (68), 180 East Pearson Street, Chicago, IL-Trustee. Real
estate developer and construction consultant since 1980; President of Centrum
Equities since 1987 and Centrum Properties, Inc. since 1980.
Foster Bam (70), Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.
James S. Howell (72), 4124 Crossgate Road, Charlotte, NC-Chairman of the
Evergreen Group of Mutual Funds and Trustee. Retired Vice President of Lance
Inc. (food manufacturing); Chairman of the Distribution Comm. Foundation for the
Carolinas from 1989 to 1993.
Gerald M. McDonnell (57), 821 Regency Drive, Charlotte, NC-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
Thomas L. McVerry (58), 4419 Parkview Drive, Charlotte, NC-Trustee. Director of
Carolina Cooperative Federal Credit Union since 1990 and Rexham Corporation from
1988 to 1990; Vice President of Rexham Industries, Inc. (diversified
manufacturer) from 1989 to 1990. Vice President-Finance and Resources, Rexham
Corporation from 1979 to 1990.
William Walt Pettit* (41), Holcomb and Pettit, P.A., 227 West Trade St.,
Charlotte, NC-Trustee. Partner in the law firm Holcomb and Pettit, P.A. since
1990.
Russell A. Salton, III, M.D. (49), 205 Regency Executive Park, Charlotte, NC-
Trustee. Medical Director, U.S. Healthcare of Charlotte, North Carolina since
1996; President, Primary Physician Care from 1990 to 1996.
Michael S. Scofield (53), 212 S. Tryon Street Suite 980, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since 1969.
Robert J. Jeffries (73), 2118 New Bedford Drive, Sun City Center, FL-Trustee
Emeritus.
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<PAGE>
Corporate consultant since 1967.
John J. Pileggi (37), 230 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Consultant to BISYS Fund Services since 1996. Senior Managing
Director, Furman Selz LLC since 1992, Managing Director from 1984 to 1992.
George O. Martinez (37), 3435 Stelzer Road, Columbus, OH-Secretary. Senior Vice
President/Director of Administration and Regulatory Services, BISYS Fund
Services since April 1995. Vice President/Assistant General Counsel, Alliance
Capital Management from 1988 to 1995.
The officers listed above hold the same positions with forty-two investment
companies offering a total of seventy-three investment funds within the
Evergreen Keystone mutual fund complex. Messrs. Howell, Salton and Scofield are
Trustees of all forty-two investment companies. Messrs. McDonnell, McVerry and
Pettit are Trustees of forty-one of the investment companies (excluded is
Evergreen Variable Trust). Messrs. Ashkin, Bam are Trustees of forty of the
investment companies (excluded are Evergreen Variable Trust and Evergreen
Investment Trust.) Mr. Jeffries has been serving as a Trustee Emeritus of eleven
of the investment companies since January 1, 1996 (excluded are Evergreen
Variable Trust, Evergreen Investment Trust, as well as the Keystone group of
mutual funds).
- ----------
* Mr. Pettit may be deemed to be an "interested person" within the meaning of
the 1940 Act.
The officers of the Trusts are all officers and/or employees of or consultants
to The BISYS Group ("BISYS"), except for Mr. Pileggi, who is a consultant to
BISYS. BISYS is an affiliate of Evergreen Keystone Distributor, Inc. ("EKD"),
the distributor of each Class of shares of each Fund.
The Funds do not pay any direct remuneration to any officer or Trustee who is an
"affiliated person" of either First Union National Bank, Evergreen Asset
Management Corp., Keystone Investment Management Company or their affiliates.
See "Investment Adviser." Currently, none of the Trustees is an "affiliated
person" as defined in the 1940 Act. Evergreen Investment Trust, Evergreen Money
Market Trust and The Evergreen Municipal Trust pay each Trustee who is not an
"affiliated person" an annual retainer and a fee per meeting attended, plus
expenses. The Evergreen Tax Free Trust pays each Trustee who is not an
"affiliated person" a fee per meeting attended, plus expenses, as follows:
Name of Fund Annual Retainer Meeting Fee
Evergreen Investment Trust - $15,000* $2,000*
Treasury
Evergreen Money Market Trust - **
Money Market $100
Institutional Money Market $100
Institutional Treasury $100
The Evergreen Municipal Trust - **
Tax Exempt $100
Institutional Tax Exempt $100
Evergreen Tax Free Trust - -0-
Pennsylvania $100
- ---------------------------
* The annual retainer and the per meeting fee paid by Evergreen Investment Trust
to each Trustee are allocated among its fourteen series.
** $4,000, allocated among the Evergreen Money Market Trust (which offers three
investment series) and The Evergreen Municipal Trust (which offers five
investment series).
In addition:
(1) Each non-affiliated Trustee is paid a fee of $500 for each special
telephonic meeting in which he participates, regardless of the number
of Funds for which the meeting is called.
(2) The Chairman of the Board of the Evergreen group of mutual funds is
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<PAGE>
paid an annual retainer of $5,000, and the Chairman of the Audit
Committee is paid an annual retainer of $2,000. These retainers are
allocated among all the funds in the Evergreen group of mutual funds,
based upon assets.
(3) Each member of the Audit Committee is paid an annual retainer of $500.
(4) Any individual who has been appointed as a Trustee Emeritus of one or
more funds in the Evergreen group of mutual funds is paid one-half of
the fees that are payable to regular Trustees.
Set forth below for each of the Trustees is the aggregate compensation paid
to such Trustees by each of Evergreen Investment Trust, The Evergreen Municipal
Trust, Evergreen Money Market Trust and by Evergreen Tax Free Trust for the
one-year period ended February 28, 1997.
AGGREGATE COMPENSATION FROM TRUST
<TABLE>
<CAPTION>
Total
Compensation
Evergreen The From Trusts
Money Evergreen Evergreen Evergreen & Fund
Name of Market Municipal Investment Tax Free Complex Paid
Trustee Trust Trust Trust Trust to Trustees
<S> <C> <C> <C> <C> <C>
Laurence Ashkin $4,853 $4,119 $ 0 $1,017 $33,621
Foster Bam 4,553 3,719 0 817 30,921
James S. Howell 4,690 4,196 27,817 1,009 66,000
Gerald M.
McDonnell 3,845 3,417 23,927 806 53,300
Thomas L.
McVerry 4,377 3,941 26,637 1,006 59,500
William Walt
Pettit 3,993 3,724 25,459 1,009 57,000
Russell A.
Salton, III, M.D. 3,993 3,724 25,458 1,009 61,000
Michael S.
Scofield 4,070 3,750 25,458 1,009 61,102
Robert Jeffries* 1,867 1,523 0 411 13,305
- --------------------
</TABLE>
* Robert J. Jeffries has been serving as a Trustee Emeritus since January 1,
1996.
As of the date of this Statement of Additional Information, the officers
and Trustees of each of the Trusts as a group owned less than 1% of the
outstanding shares of any of the Funds.
Set forth below is information with respect to each person, who, to each
Fund's knowledge, owned beneficially or of record more than 5% of a class of
each Fund's total outstanding shares and their aggregate ownership of the Fund's
total outstanding shares as of June 30, 1997 (for Money Market, Tax Exempt and
Treasury) and as of April 30, 1997 (for Pennsylvania, Institutional Money
Market, Institutional Tax Exempt and Institutional
Treasury).
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9
<TABLE>
<CAPTION>
Name of % of
Name and Address* Fund/Class No. of Shares Class
- ------------------ ---------- ------------- ------
<S> <C> <C> <C>
First Union National Bank Money Market/A 643,789,855 27.02%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union National Bank Money Market/A 158,684,261 6.66%
Trust Accounts
Attn: Ginny Batten CMG 1151-2
401 Tryon Street 3rd Fl.
Charlotte, NC 28202-1911
FUNB Money Market/A 303,558,794 12.74%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
FUNB Money Market/A 250,842,296 10.53%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
FUNB Money Market/A 126,683,997 5.32%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union National Bank Money Market/Y 218,527,368 37.47%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151-2
401 S Tryon Street
Charlotte, NC 28202-1911
Pitcairn Trust C. Money Market/Y 43,272,979 7.42%
One Pitcairn Place
Jenkintown, PA 19046
Evergreen "Y" Fund Money Market/Y 39,929,465 6.85%
Reinvest Account
C/O FUNB-NC For Customers
One First Union Center
301 South College St.
Charlotte, NC 28288-0601
FUNB Tax-Exempt/A 202,940,580 30.57%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
FUNB Tax-Exempt/A 144,582,220 21.78%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
FUNB Tax-Exempt/A 41,969,118 6.32%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-1164
First Union National Bank Tax-Exempt/A 69,558,638 10.48%
Trust Accounts
Attn: Ginny Batten CMG 1151-2
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<PAGE>
301 S. Tryon Street, 3rd Floor
Charlotte, NC 28202-1911
FUNB Tax-Exempt/A 35,610,682 5.36%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-1164
First Union National Bank Tax-Exempt/Y 38,867,553 9.79%
Trust Accounts
Attn: Ginny Batten
CMG-1151-2
401 S. Tryon Street, 3rd Floor
Charlotte, NC 28202-1911
Evergreen Tax-Exempt Money Tax Exempt/Y 45,351,226 11.43%
Market "Y" Shr Fund Cash A/C
C/O FUNB for Customers
One First Union Center
301 South College St.
Charlotte, NC 28288-0601
Evergreen Tax-Exempt Money Tax Exempt/Y 22,263,599 5.61%
Market "Y" Shr Fund Cash A/C
C/O FUNB for Customers
One First Union Center
301 South College St.
Charlotte, NC 28288-0601
First Union National Bank Treasury/A 660,907,180 27.23%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28202-1910
FUNB Treasury/A 471,137,573 19.41%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-1164
FUNB Treasury/A 239,004,367 9.85%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
FUNB Treasury/A 205,832,508 8.48%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
FUNB Treasury/A 147,199,520 6.06%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union National Bank Treasury/Y 576,673,827 90.31%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28202-0002
Johnathan B. Detwiller Pennsylvania/Y 2,932,014 8.83%/4.65%
P.O. Box 69
Phoenixville, PA 19460-0069
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<PAGE>
First Union National Bank Pennsylvania/Y 10,379,554 31.27%/16.46%
Trust Accounts
Attn: Ginny Batten CMG 11512
301 S. Tryon Street
Charlotte, NC 28202-0001
Agnes C. Kim Pennsylvania/Y 2,335,497 7.04%/3.70%
760 Conshohocken State Rd.
Gladuyne, PA 19035-1416
FUNB Pennsylvania/Y 21,890,603 73.32%/34.72%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
Hans P. Utsch Pennsylvania/A 3,648,793 12.22%/5.79%
Susan Utsch JT WROS
819 Church Road
Wayne, PA 19087-4714
First Union National Bank Inst MMkt/I 454,069,389 91.95%/29.21%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
First Union National Bank Inst MMkt/IS 263,973,048 39.74%/22.79%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
Ivax Corporation Inst MMkt/IS 40,411,193 6.08%/3.49%
Attn: Jason White
4400 Biscayne Blvd. 7th Floor
Miami, FL 33137-3212
First Union National Bank Inst Tx-Ex MM/I 155,276,582 100.00%/91.72%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
First Union National Bank Inst Tx-Ex MM/IS 13,616,585 97.12%/8.04%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
First Union National Bank Inst Treas MM/I 527,222,486 99.33%/59.21%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
First Union National Bank Inst Treas MM/I 277,915,322 77.27%/31.21%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
</TABLE>
First Union National Bank and its affiliates act in various capacities
for numerous accounts. As a result of its ownership on June 30, 1997, 90.31% of
Class Y shares and 71.03% of Class A shares of Treasury Money Market Fund,
44.32% of Class Y and 62.27% of Class A shares of Money Market Fund and 26.83%
of Class Y shares and 74.51% of Class A shares of Tax Exempt Money Market Fund
and on April 30, 1997 31.27% and 73.32%, respectively, of Class Y and Class A
shares of Pennsylvania Money Market Fund,, First Union National Bank may be
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<PAGE>
deemed to "control" those Funds as that term is defined in the 1940 Act.
INVESTMENT ADVISERS
(See also "Management of the Funds" in each Fund's Prospectus)
The investment adviser of Money Market and Tax Exempt is Evergreen Asset
Management Corp., a New York corporation, with offices at 2500 Westchester
Avenue, Purchase, New York ("Evergreen Asset" or the "Adviser"). Evergreen Asset
is owned by First Union National Bank ("FUNB") which, in turn, is a subsidiary
of First Union Corporation ("First Union"), a bank holding company headquartered
in Charlotte, North Carolina. The investment adviser of Treasury, Institutional
Treasury, Institutional Money Market, Institutional Tax Exempt and Pennsylvania
is FUNB which provides investment advisory services through its Capital
Management Group ("CMG").
The Directors of Evergreen Asset are Richard K. Wagoner and Barbara I. Colvin.
The executive officers of Evergreen Asset are Stephen A. Lieber, Chairman and
Co-Chief Executive Officer, Nola Maddox Falcone, President and Co-Chief
Executive Officer, and Theodore J. Israel, Jr., Executive Vice President.
The partnership interests in Lieber, a New York general partnership, were owned
by Lieber I Corp. and Lieber II Corp., which are both wholly owned subsidiaries
of FUNB.
Prior to January 1, 1996, First Fidelity Bank, N.A. acted as investment adviser
to Pennsylvania.
Under its Investment Advisory Agreement with each Fund, each Adviser has agreed
to furnish reports, statistical and research services and recommendations with
respect to each Fund's portfolio of investments. In addition, each Adviser
provides office facilities to the Funds and performs a variety of administrative
services. Each Fund pays the cost of all of its other expenses and liabilities,
including expenses and liabilities incurred in connection with maintaining their
registration under the Securities Act of 1933, as amended, and the 1940 Act,
printing prospectuses (for existing shareholders) as they are updated, state
qualifications, mailings, brokerage, custodian and stock transfer charges,
printing, legal and auditing expenses, expenses of shareholder meetings and
reports to shareholders. Notwithstanding the foregoing, each Adviser will pay
the costs of printing and distributing prospectuses used for prospective
shareholders.
The method of computing the investment advisory fee for each Fund is described
in such Fund's Prospectus. The advisory fees paid by each Fund for the three
most recent fiscal periods reflected in its registration statement are set forth
below:
TAX EXEMPT Year Ended Year Ended Year Ended
8/31/96 8/31/95 8/31/94
Advisory Fee $5,540,924 $2,329,035 $2,126,246
Waiver (1,243,131) (558,942) (1,256,653)
----------- --------- -----------
Net Advisory Fee $4,297,793 $1,770,093 $ 869,593
=========== ========== ===========
MONEY MARKET Six Months Year Ended Year Ended Year Ended
Ended 2/28/97 8/31/96 8/31/95 8/31/94
Advisory Fee $6,061,353 $8,346,173 $1,831,518 $1,245,513
Waiver 1,255,415 (2,427,423) (732,723) (974,438)
--------- --------- ----------- ----------
Net Advisory Fee 4,805,938 $5,918,750 $1,098,795 $ 271,075
========= ========== ========== ===========
PENNSYLVANIA Six Months Year Ended Year Ended
Ended 8/31/96* 2/29/96 2/28/95
Advisory Fee $148,591 $312,440 $ 85,049
Waiver (59,186) (241,213) (85,049)
-------- --------- ---------
Net Advisory Fee $89,405 $ 71,227 0
======== ========= =========
TREASURY Year Ended Eight Months Year Ended
8/31/96 Ended 12/31/94
8/31/95**
Advisory Fee $8,857,503 $2,814,251 $2,549,955
Waiver (2,109,068) (1,258,611) (1,948,237)
---------- --------- ----------
Net Advisory Fee $6,748,435 $1,555,640 $ 601,718
========== ========== ==========
INSTITUTIONAL MONEY Period From 11/19/96
MARKET Through 2/28/97
Advisory Fee $337,302
Waiver (337,302)
---------
Net Advisory Fee 0
=========
INSTITUTIONAL TAX Period From 11/20/96
EXEMPT Through 2/28/97
Advisory Fee $ 77,430
Waiver (77,430)
---------
Net Advisory Fee 0
=========
INSTITUTIONAL TREASURY Period From 11/20/96
Through 2/28/97
Advisory Fee $199,136
Waiver (199,136)
---------
Net Advisory Fee 0
=========
--------------------
* The Fund changed its fiscal year from February 28 to August 31.
** The Fund changed its fiscal year from December 31 to August 31.
Expense Limitations
Evergreen Asset as Adviser to Money Market and Tax Exempt has, pursuant to each
Investment Advisory Agreement, agreed to reimburse each Fund to the extent that
any of these Funds' aggregate operating expenses (including the Adviser's fee,
but excluding interest, taxes, brokerage commissions, and extraordinary
expenses, and for such Funds' Class A, Class B, Class C and Class K shares, as
applicable, Rule 12b-1 distribution fees and shareholder servicing fees payable)
exceed 1.00% of their average net assets for any fiscal year. FUNB as Adviser to
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury
has voluntarily agreed to reimburse each Fund to the extent that any of these
Funds' aggregate operating expenses (including the Adviser's fee, but excluding
interest, taxes, brokerage commissions, and extraordinary expenses, and for such
Funds Institutional Service shares Rule 12b-1 distribution fees and shareholder
servicing fees payable) exceed 0.20 of 1.00% of their average net assets for any
fiscal year for
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<PAGE>
Institutional shares and 0.45 of 1.00% for Institutional Service shares.
The Investment Advisory Agreements are terminable, without the payment of any
penalty, on sixty days' written notice, by a vote of the holders of a majority
of each Fund's outstanding shares, or by a vote of a majority of each Trust's
Trustees or by the respective Adviser. The Investment Advisory Agreements will
automatically terminate in the event of their assignment. Each Investment
Advisory Agreement provides in substance that the Adviser shall not be liable
for any action or failure to act in accordance with its duties thereunder in the
absence of willful misfeasance, bad faith or gross negligence on the part of the
Adviser or of reckless disregard of its obligations thereunder. The Investment
Advisory Agreements with respect to Money Market and Tax Exempt, dated June 30,
1994, were each last approved by the Trustees of each Trust on June 17, 1997,
and will continue from year to year provided that such continuance is approved
annually by a vote of a majority of the Trustees of each Trust including a
majority of those Trustees who are not parties thereto or "interested persons"
(as defined in the 1940 Act) of any such party, cast in person at a meeting duly
called for the purpose of voting on such approval or a majority of the
outstanding voting shares of each Fund. With respect to Treasury, the Investment
Advisory Agreement dated February 28, 1985 and amended from time to time
thereafter was last approved by the Trustees on June 17, 1997, and it will
continue from year to year with respect to each Fund provided that such
continuance is approved annually by a vote of a majority of the Trustees
including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities of the Fund. With respect to Pennsylvania, the
Investment Advisory Agreement dated January 1, 1996 was first approved by the
shareholders of the Fund on December 12, 1995 and will continue until January 1,
1998 and from year to year with respect to the Fund provided that such
continuance is approved annually by a vote of a majority of the Trustees
including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities of the Fund. With respect to Institutional Money
Market, Institutional Tax Exempt and Institutional Treasury, the Investment
Advisory Agreements dated September 30, 1996 were approved by each Fund's
initial shareholder on September 30, 1996, and will continue in effect until
September 30, 1998, and thereafter from year to year provided that their
continuance is approved annually by a vote of a majority of the Trustees of each
Trust including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities of each Fund.
Certain other clients of each Adviser may have investment objectives and
policies similar to those of the Funds. Each Adviser (including the sub-adviser)
may, from time to time, make recommendations which result in the purchase or
sale of a particular security by its other clients simultaneously with a Fund.
If transactions on behalf of more than one client during the same period
increase the demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity. It is the
policy of each Adviser to allocate advisory recommendations and the placing of
orders in a manner which is deemed equitable by the Adviser to the accounts
involved, including the Funds. When two or more of the clients of the Adviser
(including one or more of the Funds) are purchasing or selling the same security
on a given day from the same broker-dealer, such transactions may be averaged as
to price.
Although the investment objectives of the Funds are not the same, and their
investment decisions are made independently of each other, they rely upon the
same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions occur, the Adviser
attempts to allocate the securities, both as to price and quantity, in
accordance with a method deemed equitable to each Fund and consistent with their
different investment objectives. In some cases, simultaneous purchases or sales
could have a beneficial effect, in that the ability of one Fund to participate
in volume transactions may produce better executions for that Fund.
Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to permit
purchase and sales transactions to be effected between each Fund and the other
registered investment
21327
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<PAGE>
companies for which either Evergreen Asset or FUNB acts as investment adviser or
between the Fund and any advisory clients of Evergreen Asset, FUNB or Lieber &
Company ("Lieber"). Each Fund may from time to time engage in such transactions
but only in accordance with these procedures and if they are equitable to each
participant and consistent with each participant's investment objectives.
Prior to July 1, 1995, Federated Administrative Services, a subsidiary of
Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. For the fiscal year ended August 31, 1996, the fiscal period ended August
31, 1995 and the fiscal year ended December 31, 1994, Treasury incurred
$1,255,724, $601,034 and $462,002, respectively, in administrative service
costs.
Prior to January 19, 1996, Furman Selz LLC acted as administrator for
Pennsylvania. For the fiscal period ended January 18, 1996 and the fiscal years
ended February 28, 1995 and 1994 Furman Selz LLC waived its entire
administrative fee.
Evergreen Keystone Investment Services, Inc. ("EKIS") serves as administrator to
the Funds and is entitled to receive a fee based on the average daily net assets
of each Fund at a rate based on the total assets of the mutual funds for which
any affiliate of FUNB serves as investment adviser, calculated daily and payable
monthly at the following annual rates: .050% on the first $7 billion; .035% on
the next $3 billion; .030% on the next $5 billion; .020% on the next $10
billion; .015% on the next $5 billion; and .010% on assets in excess of $30
billion. BISYS, an affiliate of EKD, distributor for the Evergreen Keystone
group of mutual funds, serves as sub-administrator to the Funds and is entitled
to receive a fee from EKIS calculated on the average daily net assets of the
Funds at a rate based on the total assets of the mutual funds for which any
affiliate of FUNB serves as investment adviser, calculated in accordance with
the following schedule: .0100% of the first $7 billion; .0075% on the next $3
billion; .0050% on the next $15 billion; .0040% on assets in excess of $25
billion. The total assets of the mutual funds for which FUNB affiliates serve as
investment adviser were approximately $30.5 billion as of June 30, 1997.
DISTRIBUTION PLANS
Reference is made to "Management of the Funds - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A shares of Money Market, Tax Exempt, Treasury,
Pennsylvania, Institutional Service shares of Institutional Treasury,
Institutional Money Market and Institutional Tax Exempt, and for Money Market,
its Class B shares, Class C shares and Class K shares are charged as class
expenses, as accrued. The distribution fees attributable to the Class B shares
and Class C shares are designed to permit an investor to purchase such shares
through broker-dealers without the assessment of a front-end sales charge, while
at the same time permitting the Distributor to compensate broker-dealers in
connection with the sale of such shares. In this regard the purpose and function
of the combined contingent deferred sales charge and distribution services fee
on the Class B shares and the Class C shares, are the same as those of the
front-end sales charge and distribution fee with respect to the Class A shares
in that in each case the sales charge and/or distribution fee provide for the
financing of the distribution of the Fund's shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each Fund with
respect to each of its Class A, Institutional Service, Class B, Class C and
Class K shares, as applicable, (to the extent that each Fund offers such
classes) (each a "Plan" and collectively, the "Plans"), the Treasurer of each
Fund reports the amounts expended by the Fund under the Plan and the purposes
for which such expenditures were made to the Trustees of each Trust for their
review on a quarterly basis. Also, each Plan provides that the selection and
nomination of the Independent Trustees are committed to the discretion of such
Independent Trustees then in office.
Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the Securities and Exchange Commission
make payments for distribution services to the Distributor; the latter may in
turn pay part or all of such compensation to brokers or other persons for their
distribution assistance.
Each Plan continues in effect from year to year only if approved at least
annually by each Trust's Board of Trustees or by a vote of a majority of each
Fund's outstanding shares (as
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16
<PAGE>
defined in the 1940 Act). In either case, by the vote of a majority of each
Trust's Independent Trustees who have no direct or indirect financial interest
in the operation of the Plan or any agreement related. Each Distribution
Agreement will continue in effect from year to year, if the Board of Trustees
approves such continuance annually in the same manner as the Advisory Agreement.
On October 1, 1996 Institutional Money Market, Institutional Tax Exempt and
Institutional Treasury commenced the offering of each Fund's Institutional
Service shares. Each Plan with respect to such Funds became effective on August
1, 1996 and was initially approved by the sole shareholder of each Fund on
September 30, 1996 and by the unanimous vote of the Trustees of each Trust,
including the disinterested Trustees voting separately, at a meeting called for
that purpose and held on August 1, 1996. The Distribution Agreements between
each Fund and the Distributor, pursuant to which distribution fees are paid
under the Plans by each Fund with respect to its Institutional Service shares
were also approved at the August 1, 1996 meeting by the unanimous vote of the
disinterested Trustees voting separately. Each Plan and Distribution Agreement
will continue in effect for successive twelve-month periods provided, however,
that such continuance is specifically approved at least annually by the Trustees
of each Trust or by vote of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that Class and, in either case, by a
majority of the Trustees of the Trust who are not parties to the Distribution
Agreement or interested persons, as defined in the 1940 Act, of any such party
(other than as Trustees of the Trust) and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related
thereto.
The Plans permit the payment of fees to brokers and others for distribution and
shareholder-related administrative services and to broker-dealers, depository
institutions, financial intermediaries and administrators for administrative
services as to each Fund's Class A, Institutional Service, Class B, Class C and
Class K shares, as applicable. The Plans are designed to (i) stimulate brokers
to provide distribution and administrative support services to the Funds and
holders of each Fund's Class A, Institutional Service, Class B, Class C and
Class K shares as applicable and (ii) stimulate administrators to render
administrative support services to the Funds and holders of such shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding each
Fund's Class A, Institutional Service, Class B, Class C and Class K shares as
applicable; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as the Fund
reasonably requests for its Class A, Institutional Service, Class B, Class C and
Class K shares, as applicable.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of shares of a Fund, (i) no
distribution fees (other than current amounts accrued but not yet paid) would be
owed by the Fund to the Distributor with respect to that Class or Classes of
shares, and (ii) the Fund would not be obligated to pay the Distributor for any
amounts expended under the Distribution Agreement not previously recovered by
the Distributor from distribution services fees in respect of such Class or
Classes of shares through deferred sales charges. However, the Distributor will
ask the Trust's Independent Trustees to take whatever action they deem
appropriate under the circumstances with respect to payment of Advances.
Any change in the Distribution Plan that would materially increase the
distribution expenses of the Fund provided for in the Distribution Plan requires
shareholder approval. Otherwise, the Distribution Plan may be amended by votes
of each Trust's (1) Board of Trustees and (2) Independent Trustees cast in
person at a meeting called for the purpose of voting on such amendment.
Any Plan or Distribution Agreement may be terminated (a) by a Fund without
penalty at any time by a majority vote of the holders of the outstanding voting
securities of the Fund, voting separately by Class or by a majority vote of the
Independent Trustees, or (b) by the Distributor. To terminate any Distribution
Agreement, any party must give the other parties 60 days' written notice; to
terminate a Plan only, the Fund need give no notice to the Distributor. Any
Distribution Agreement will terminate automatically in
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17
<PAGE>
the event of its assignment.
Fees Paid Pursuant to Distribution Plans. Treasury, Money Market, Tax Exempt and
Pennsylvania incurred the following distribution service fees:
Treasury. For the fiscal year ended August 31, 1996, $6,381,827 on behalf of
Class A shares.
Money Market. For the six months ended February 28, 1997, $2,698,374 on behalf
of Class A shares and $39,539 on behalf of Class B shares.
Tax Exempt. For the fiscal year ended August 31, 1996, $1,898,665 on behalf of
Class A shares.
Pennsylvania. For the six months ended August 31, 1996 (commencement of
operations), $24,476 on behalf of Class A shares.
For the period from November 19, 1996 through February 28, 1997, Institutional
Money Market, Institutional Tax Exempt and Institutional Treasury paid EKD, the
Distributor, fees of $297,918, $11,834 and $165,813, respectively pursuant to
the Distribution Plans.
ALLOCATION OF BROKERAGE
Decisions regarding each Fund's portfolio are made by its Adviser, subject to
the supervision and control of the Trustees. Orders for the purchase and sale of
securities and other investments are placed by employees of the Adviser, all of
whom, in the case of Evergreen Asset, are associated with Lieber. In general,
the same individuals perform the same functions for the other funds managed by
the Adviser. A Fund will not effect any brokerage transactions with any broker
or dealer affiliated directly or indirectly with the Adviser unless such
transactions are fair and reasonable, under the circumstances, to the Fund's
shareholders. Circumstances that may indicate that such transactions are fair or
reasonable include the frequency of such transactions, the selection process and
the commissions payable in connection with such transactions.
It is anticipated that most purchase and sale transactions involving fixed
income securities will be with the issuer or an underwriter or with major
dealers in such securities acting as principals. Such transactions are normally
on a net basis and generally do not involve payment of brokerage commissions.
However, the cost of securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriter. Purchases or sales from
dealers will normally reflect the spread between bid and ask prices.
In selecting firms to effect securities transactions, the primary consideration
of each Fund shall be prompt execution at the most favorable price. A Fund will
also consider such factors as the price of the securities and the size and
difficulty of execution of the order. If these objectives may be met with more
than one firm, the Fund will also consider the availability of statistical and
investment data and economic facts and opinions helpful to the Fund. To the
extent that receipt of these services for which the Adviser or its affiliates
might otherwise have paid, it would tend to reduce their expenses.
Under Section 11(a) of the Securities Exchange Act of 1934, as amended, and the
rules adopted thereunder by the Securities and Exchange Commission, Lieber may
be compensated for effecting transactions in portfolio securities for a Fund on
a national securities exchange provided the conditions of the rules are met.
Each Fund advised by Evergreen Asset has entered into an agreement with Lieber
authorizing Lieber to retain compensation for brokerage services. In accordance
with such agreement, it is contemplated that Lieber, a member of the New York
and American Stock Exchanges, will, to the extent practicable, provide brokerage
services to the Fund with respect to substantially all securities transactions
effected on the New York and American Stock Exchanges. In such transactions, a
Fund will seek the best execution at the most favorable price while paying a
commission rate no higher than that offered to other clients of Lieber or that
which can be reasonably expected to be offered by an unaffiliated broker-dealer
having comparable execution capability in a similar transaction. However, no
Fund will engage in transactions in which Lieber would be a principal. While no
Fund advised by Evergreen Asset contemplates any ongoing arrangements with other
brokerage firms, brokerage business may be given from time to time to other
firms. In addition, the Trustees have adopted procedures pursuant to Rule 17e-1
under the 1940 Act to ensure that all brokerage transactions with Lieber, as an
affiliated broker-dealer, are fair and reasonable.
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<PAGE>
Any profits from brokerage commissions accruing to Lieber as a result of
portfolio transactions for the Fund will accrue to FUNB and to its ultimate
parent, First Union. The Investment Advisory Agreements do not provide for a
reduction of the Adviser's fee with respect to any Fund by the amount of any
profits earned by Lieber from brokerage commissions generated by portfolio
transactions of the Fund.
ADDITIONAL TAX INFORMATION
(See also "Taxes" in the Prospectus)
Each Fund has qualified and intends to continue to qualify, for and elect the
tax treatment applicable to regulated investment companies ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
(Such qualification does not involve supervision of management or investment
practices or policies by the Internal Revenue Service.) In order to qualify as a
regulated investment company, a Fund must, among other things, (a) derive at
least 90% of its gross income from dividends, interest, payments with respect to
proceeds from securities loans, gains from the sale or other disposition of
securities or foreign currencies and other income (including gains from options,
futures or forward foreign contracts) derived with respect to its business of
investing in such securities; (b) derive less than 30% of its gross income from
the sale or other disposition of securities, options, futures or forward
contracts (other than those on foreign currencies), or foreign currencies (or
options, futures or forward contracts thereon) that are not directly related to
the RIC's principal business of investing in securities (or options and futures
with respect thereto) held for less than three months; and (c) diversify its
holdings so that, at the end of each quarter of its taxable year, (i) at least
50% of the market value of the Fund's total assets is represented by cash, U.S.
government securities and other securities limited in respect of any one issuer,
to an amount not greater than 5% of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its total assets is invested in the securities of any one issuer (other
than U.S. government securities and securities of other regulated investment
companies). By so qualifying, a Fund is not subject to Federal income tax if it
timely distributes its investment company taxable income and any net realized
capital gains. A 4% nondeductible excise tax will be imposed on a Fund to the
extent it does not meet certain distribution requirements by the end of each
calendar year. Each Fund anticipates meeting such distribution requirements.
Dividends paid by a Fund from investment company taxable income generally will
be taxed to the shareholders as ordinary income. Investment company taxable
income includes net investment income and net realized short-term gains (if
any). Any dividends received by a Fund from domestic corporations will
constitute a portion of the Fund's gross investment income.
Distributions of the excess of net long-term capital gain over net short-term
capital loss are taxable to shareholders (who are not exempt from tax) as
long-term capital gain, regardless of the length of time the shares of a Fund
have been held by such shareholders. Short-term capital gains distributions are
taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.
Distributions of investment company taxable income and any net short-term
capital gains will be taxable as ordinary income as described above to
shareholders (who are not exempt from tax), whether made in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share of a Fund on the reinvestment date.
Distributions by each Fund result in a reduction in the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then
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receive what is in effect a return of capital upon the distribution which will
nevertheless be taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a taxable gain
or loss depending on its basis in the shares. Such gains or losses will be
treated as a capital gain or loss if the shares are capital assets in the
investor's hands and will be a long-term capital gain or loss if the shares have
been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported by each
shareholder on his or her Federal income tax return. Each shareholder should
consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers to a Fund
and to certify as to its correctness and certain other shareholders may be
subject to a 31% Federal income tax backup withholding requirement on dividends,
distributions of capital gains and redemption proceeds paid to them by the Fund.
If the withholding provisions are applicable, any such dividends or capital gain
distributions to these shareholders, whether taken in cash or reinvested in
additional shares, and any redemption proceeds will be reduced by the amounts
required to be withheld. Investors may wish to consult their own tax advisers
about the applicability of the backup withholding provisions.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to Federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations for Tax Exempt, Pennsylvania and Institutional Tax
Exempt
To the extent that a Fund distributes exempt interest dividends to a
shareholder, interest on indebtedness incurred or continued by such shareholder
to purchase or carry shares of the Fund is not deductible. Furthermore, entities
or persons who are "substantial users" (or related persons) of facilities
financed by "private activity" bonds (some of which were formerly referred to as
"industrial development" bonds) should consult their tax advisers before
purchasing shares of the Fund. "Substantial user" is defined generally as
including a "non-exempt person" who regularly uses in its trade or business a
part of a facility financed from the proceeds of industrial development bonds.
The percentage of the total dividends paid by a Fund with respect to any taxable
year that qualifies as exempt interest dividends will be the same for all
shareholders of the Fund receiving dividends with respect to such year. If a
shareholder receives an exempt interest dividend with respect to any share and
such share has been held for six months or less, any loss on the sale or
exchange of such share will be disallowed to the extent of the exempt interest
dividend amount.
NET ASSET VALUE
The following information supplements that set forth in each Fund's Prospectus
under the subheading "How to Buy Shares - How the Funds Value Their Shares" in
the Section entitled "Purchase and Redemption of Shares."
The public offering price of shares of a Fund is its net asset value. On each
Fund business day on which a purchase or redemption order is received by a Fund
and trading in
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the types of securities in which a Fund invests might materially affect the
value of Fund shares, the per share net asset value of each such Fund is
computed in accordance with the Declaration of Trust and By-Laws governing each
Fund twice daily, at 12 noon Eastern time and as of the next close of regular
trading on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m.
Eastern time) by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding. A Fund business
day is any weekday, exclusive of national holidays on which the Exchange is
closed and Good Friday. Each Fund's securities are valued at amortized cost.
Under this method of valuation, a security is initially valued at its
acquisition cost and, thereafter, a constant straight line amortization of any
discount or premium is assumed each day regardless of the impact of fluctuating
interest rates on the market value of the security. If accurate quotations are
not available, securities will be valued at fair value determined in good faith
by the Board of Trustees.
PURCHASE OF SHARES
The following information supplements that set forth in each Fund's Prospectus
under the heading "Purchase and Redemption of Shares - How To Buy Shares."
General
Shares of each Fund will be offered on a continuous basis at a price equal to
their net asset value plus a front-end or contingent deferred sales charges or
with a contingent deferred sales charge (the "deferred sales charge
alternative") as described below. Class Y and Institutional shares which, as
described below, are not offered to the general public or which, in the case of
Institutional shares, are only available to investors having certain
relationships with the Adviser of its affiliates, are offered without any
front-end or contingent deferred sales charges. Shares of each Fund are offered
on a continuous basis through (i) investment dealers that are members of the
National Association of Securities Dealers, Inc. and have entered into selected
dealer agreements with the Distributor ("selected dealers"), (ii) depository
institutions and other financial intermediaries or their affiliates, that have
entered into selected agent agreements with the Distributor ("selected agents"),
or (iii) the Distributor. For Money Market, Tax Exempt, Pennsylvania and
Treasury, the minimum for initial investments is $1,000; there is no minimum for
subsequent investments. For Institutional Money Market, Institutional Tax Exempt
and Institutional Treasury, the minimum amount for initial investments is
$1,000,000; there is no minimum for subsequent investments. The subscriber may
use the Share Purchase Application available from the Distributor for his or her
initial investment. Sales personnel of selected dealers and agents distributing
a Fund's shares may receive differing compensation for selling Class A,
Institutional Service, Class B, Class C or Class K shares.
Investors may purchase shares of a Fund in the United States either through
selected dealers or agents or directly through the Distributor. A Fund reserves
the right to suspend the sale of its shares to the public in response to
conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be executed at the
public offering price equal to the net asset value next determined, as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day. In the case of orders for purchase of shares placed through selected
dealers or agents, the applicable public offering price will be the net asset
value as so determined, but only if the selected dealer or agent receives the
order prior to the close of regular trading on the Exchange and transmits it to
the Distributor prior to its close of business that same day (normally 5:00 p.m.
Eastern time). The selected dealer or agent is responsible for transmitting such
orders by 5:00 p.m. If the selected dealer or agent fails to do so, the
investor's right to that day's closing price must be settled between the
investor and the selected dealer or agent. If the selected dealer or agent
receives the order after the close of regular trading on the Exchange, the price
will be based on the net asset value determined as of the close of regular
trading on the Exchange on the next day it is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may place
orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Application. Payment for shares
purchased by telephone can be made only by Electronic Funds Transfer from a bank
account maintained by the shareholder at a
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bank that is a member of the National Automated Clearing House Association
("ACH"). If a shareholder's telephone purchase request is received before 3:00
p.m. New York time on a Fund business day, the order to purchase shares is
automatically placed the same Fund business day for non-money market funds, and
two days following the day the order is received for money market funds, and the
applicable public offering price will be the public offering price determined as
of the close of business on such business day. Full and fractional shares are
credited to a subscriber's account in the amount of his or her subscription. As
a convenience to the subscriber, and to avoid unnecessary expense to a Fund,
stock certificates are not issued for any class of shares of any Fund, although
such shares remain in the shareholder's account on the records of a Fund. This
facilitates later redemption and relieves the shareholder of the responsibility
for and inconvenience of lost or stolen certificates.
Alternative Purchase Arrangements
The Funds issue the following classes of shares:
Pennsylvania, Money Market, Tax Exempt, and Treasury: Class A shares;
Money Market: Class B and Class C shares;
Money Market: Class K shares;
Pennsylvania, Money Market, Tax Exempt and Treasury: Class Y shares, which are
offered only to (a) persons who at or prior to December 30, 1994, owned shares
in a mutual fund advised by Evergreen Asset, (b) certain investment advisory
clients of the Advisers and its affiliates, and (c) institutional investors;
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury:
Institutional Service shares; and Institutional Money Market, Institutional Tax
Exempt and Institutional Treasury: Institutional shares.
The classes of shares each represent an interest in the same portfolio of
investments of the Fund, have the same rights and are identical in all respects,
except that (1) only Class A, Class B, Class C, Class K and Institutional
Service shares are subject to a Rule 12b-1 distribution fee, (II) Class B, Class
C and, under certain conditions, class K shares bear the expense of the deferred
sales charge, (III) Class B and Class C shares bear the expense of a higher Rule
12b-1 distribution services fee than Class A shares and higher transfer agency
costs, (IV) with the exception of Class Y shares, each Class of each Fund has
exclusive voting rights with respect to provisions of the Rule 12b-1 Plan
pursuant to which its distribution services fee is paid which relates to a
specific Class and other matters for which separate Class voting is appropriate
under applicable law, provided that, if the Fund submits to a simultaneous vote
of Class A, Class B, Class C and Class K shareholders an amendment to the Rule
12b-1 Plan that would materially increase the amount to be paid thereunder with
respect to any class of shares, the Class A shareholders, the Class B
shareholders, the Class C shareholders and the Class K shareholdes will vote
separately by Class, and (VI) only the Class B shares are subject to a
conversion feature. Each Class has different exchange privileges and certain
different shareholder service options available.
The alternative purchase arrangements permit an investor to choose the method of
purchasing shares that is most beneficial. Class A and Class K shares are
subject to a lower distribution services fee and, accordingly, pay
correspondingly higher dividends per share than Class B and Class C shares.
The Trustees have determined that currently no conflict of interest exists
between or among the Class A, Class B, Class C, Class K and Class Y shares of
Money Market, Tax Exempt, Pennsylvania and Treasury, as applicable, and the
Institutional Service and Institutional shares of Institutional Money Market,
Institutional Tax Exempt and Institutional Treasury. On an ongoing basis, the
Trustees, pursuant to their fiduciary duties under the 1940 Act and state laws,
will seek to ensure that no such conflict arises.
CLASS A SHARES
Class A shares of the Funds can be purchased at net asset value without an
initial sales charge. Certain broker-dealers or other financial institutions may
impose a fee in connection with purchases at net asset value.
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CLASS B SHARES--DEFERRED SALES CHARGE ALTERNATIVE
Investors choosing the deferred sales charge alternative purchase Class B shares
at the public offering price equal to the net asset value per share of the Class
B shares on the date of purchase without the imposition of a sales charge at the
time of purchase. The Class B shares are sold without a front-end sales charge
so that the full amount of the investor's purchase payment is invested in the
Fund initially.
Proceeds from the contingent deferred sales charge are paid to the Distributor
and are used by the Distributor to defray the expenses of the Distributor
related to providing distribution-related services to the Fund in connection
with the sale of the Class B shares, such as the payment of compensation to
selected dealers and agents for selling Class B shares.
The combination of the contingent deferred sales charge and the distribution
services fee enables the Fund to sell the Class B shares without a sales charge
being deducted at the time of purchase. The higher distribution services fee
incurred by Class B shares will cause such shares to have a higher expense ratio
and to pay lower dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed within six
years after the month of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.
In determining the contingent deferred sales charge applicable to a redemption,
it will be assumed, that the redemption is first of any Class A shares in the
shareholder's Fund account, second of Class B shares held for over six years or
Class B shares acquired pursuant to reinvestment of dividends or distributions
and third of Class B shares held longest during the six-year period.
To illustrate, assume that an investor purchased 1,000 Class B shares at $1 per
share (at a cost of $1,000) and, during such time, the investor has acquired 100
additional Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 500 Class B shares, 100 Class B
shares will not be subject to charge because of dividend reinvestment.
Therefore, of the $500 of the shares redeemed $400 of the redemption proceeds
(400 shares x $1 original purchase price) will be charged at a rate of 4.0% (the
applicable rate in the second year after purchase for a contingent deferred
sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares (i)
following the death or disability, as defined in the Code, of a shareholder, or
(ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
Conversion Feature. At the end of the period ending seven years after the end of
the calendar month in which the shareholder's purchase order was accepted, Class
B shares will automatically convert to Class A shares and will no longer be
subject to a higher distribution services fee imposed on Class B shares. Such
conversion will be on the basis of the relative net asset values of the two
classes, without the imposition of any sales load, fee or other charge. The
purpose of the conversion feature is to reduce the distribution services fee
paid by holders of Class B shares that have been outstanding long enough for the
Distributor to have been compensated for the expenses associated with the sale
of such shares.
For purposes of conversion to Class A, Class B shares purchased through the
reinvestment of dividends and distributions paid in respect of 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, an equal pro-rata portion of the Class B
shares in the sub-account will also convert to Class A.
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The conversion of Class B shares to Class A shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution services fee and transfer agency costs with respect to
Class B shares does not result in the dividends or distributions payable with
respect to other Classes of a Fund's shares being deemed "preferential
dividends" under the Code, and (ii) the conversion of Class B shares to Class A
shares does not constitute a taxable event under Federal income tax law. The
conversion of Class B shares to Class A shares may be suspended if such an
opinion is no longer available at the time such conversion is to occur. In that
event, no further conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee for an indefinite
period which may extend beyond the period ending seven years after the end of
the calendar month in which the shareholder's purchase order was accepted.
CLASS C SHARES--LEVEL-LOAD ALTERNATIVE
Investors choosing the level load sales charge alternative purchase Class C
shares at the public offering price equal to the net asset value per share of
the Class C shares on the date of purchase without the imposition of a front-end
sales charge. However, you will pay a 1.0% contingent deferred sales charge if
you redeem shares during the first year after the month of purchase. No charge
is imposed in connection with redemptions made more than one year from the month
of purchase. Class C shares are sold without a front-end sales charge so that
the Fund will receive the full amount of the investor's purchase payment and
after the first year without a contingent deferred sales charge so that the
investor will receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. Class C shares do not convert to any other Class
shares of the Fund. Class C shares incur higher distribution services fees than
Class A shares, and will thus have a higher expense ratio and pay
correspondingly lower dividends than Class A shares.
CLASS K SHARES
Class K shares of Money Market can be purchased at net asset value without an
initial sales charge or contingent deferred sales charge.
GENERAL INFORMATION ABOUT THE FUNDS
(See also "Other Information - General Information" in each Fund's Prospectus)
Capitalization and Organization
Evergreen Money Market Fund, Evergreen Institutional Money Market Fund and
Evergreen Institutional Treasury Money Market Fund are each separate series of
Evergreen Money Market Trust, a Massachusetts business trust. Evergreen Tax
Exempt Money Market Fund and Evergreen Institutional Tax Exempt Money Market
Fund are each separate series of The Evergreen Municipal Trust, a Massachusetts
business trust. The Evergreen Treasury Money Market Fund (which prior to July 7,
1995 was known as the First Union Treasury Money Market Portfolio) is a separate
series of Evergreen Investment Trust, a Massachusetts business trust. On July 7,
1995, First Union Funds changed its name to Evergreen Investment Trust. The
Evergreen Pennsylvania Tax Free Money Market Fund is a separate series of
Evergreen Tax Free Trust. Evergreen Tax Free Trust (formerly known as FFB Funds
Trust) is a Massachusetts business trust which was organized on December 4,
1985. Each Trust is governed by a board of trustees. Unless otherwise stated,
references to the "Board of Trustees" or "Trustees" in this Statement of
Additional Information refer to the Trustees of all the Trusts.
Each Fund, other than Pennsylvania, Institutional Money Market, Institutional
Tax Exempt and Institutional Treasury may issue an unlimited number of shares of
beneficial interest with a $0.0001 par value. Pennsylvania, may issue an
unlimited number of shares of beneficial interest with a $.001 par value. All
shares of these Funds have equal rights and privileges. Each share is entitled
to one vote, to participate equally in dividends and distributions declared by
the Funds and on liquidation to their proportionate share of the assets
remaining after satisfaction of outstanding liabilities. Shares of these Funds
are fully paid, nonassessable and fully transferable when issued and have no
pre-emptive, conversion or exchange rights. Fractional shares have
proportionally the same rights, including voting rights, as are provided for a
full share.
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury
may issue an unlimited number of shares of beneficial interest with $0.001 par
value. Each of these Funds
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has two classes of shares, Institutional Service Shares and Institutional Shares
with identical voting, dividend, liquidation and other rights, except that the
Institutional Service Shares bear distribution expenses and have exclusive
voting rights with respect to their Distribution Plans.
Under each Trust's Declaration of Trust, each Trustee will continue in office
until the termination of the Fund or his or her earlier death, incapacity,
resignation or removal. Shareholders can remove a Trustee upon a vote of
two-thirds of the outstanding shares of beneficial interest of the Trust.
Vacancies will be filled by a majority of the remaining Trustees, subject to the
1940 Act. As a result, normally no annual or regular meetings of shareholders
will be held, unless otherwise required by the Declaration of Trust of each
Trust or the 1940 Act.
Shares have noncumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of Trustees can elect 100% of the
Trustees if they choose to do so and in such event the holders of the remaining
shares so voting will not be able to elect any Trustees.
The Trustees of each Trust are authorized to reclassify and issue any unissued
shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
more Funds. Any issuance of shares of another series or class would be governed
by the 1940 Act and the law of the Commonwealth of Massachusetts. If shares of
another series of a Trust were issued in connection with the creation of
additional investment portfolios, each share of the newly created portfolio
would normally be entitled to one vote for all purposes. Generally, shares of
all portfolios would vote as a single series on matters, such as the election of
Trustees, that affected all portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.
In addition any Fund may, in the future, create additional classes of shares
which represent an interest in the same investment portfolio. Except for the
different distribution related and other specific costs borne by such additional
classes, they will have the same voting and other rights described for the
existing classes of each Fund.
Procedures for calling a shareholders meeting for the removal of the Trustees of
each Trust, similar to those set forth in Section 16(c) of the 1940 Act, will be
available to shareholders of each Fund. The rights of the holders of shares of a
series of a Fund may not be modified except by the vote of a majority of the
outstanding shares of such series.
Distributor
Evergreen Keystone Distributor, Inc. (the "Distributor"), 125 W. 55th Street,
New York, New York 10019, serves as each Fund's principal underwriter, and as
such may solicit orders from the public to purchase shares of any Fund. The
Distributor is not obligated to sell any specific amount of shares and will
purchase shares for resale only against orders for shares. Under the agreement
between each Fund and the Distributor, each Fund has agreed to indemnify the
Distributor, in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder, against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
Counsel
Sullivan & Worcester LLP, Washington, D.C., serves as counsel to the Funds.
Independent Auditors
Price Waterhouse LLP has been selected to be the independent auditors of Money
Market, Tax Exempt, Institutional Money Market, Institutional Treasury and
Institutional Tax Exempt.
KPMG Peat Marwick LLP has been selected to be the independent auditors of
Treasury and Pennsylvania.
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PERFORMANCE INFORMATION
YIELD CALCULATIONS
Each Fund may quote a "Current Yield" or "Effective Yield" from time to time.
The Current Yield is an annualized yield based on the actual total return for a
seven-day period. The Effective Yield is an annualized yield based on a
compounding of the Current Yield. These yields are each computed by first
determining the "Net Change in Account Value" for a hypothetical account having
a share balance of one share at the beginning of a seven-day period ("Beginning
Account Value"), excluding capital changes. The Net Change in Account Value will
generally equal the total dividends declared with respect to the account.
The yields are then computed as follows:
Current Yield = Beginning Account Value x 365/7
Effective Yield = (1 + Total Dividend for 7 days) 365/7-1 Tax Equivalent Yield =
Effective Yield
- ----------------------
1 - Fed Tax rate + [state Tax Rate - (state Tax Rate x Fed Tax Rate]
Yield fluctuations may reflect changes in a Fund's net investment income, and
portfolio changes resulting from net purchases or net redemptions of the Fund's
shares may affect the yield. Accordingly, a Fund's yield may vary from day to
day, and the yield stated for a particular past period is not necessarily
representative of its future yield. Since the Funds use the amortized cost
method of net asset value computation, it does not anticipate any change in
yield resulting from any unrealized gains or losses or unrealized appreciation
or depreciation not reflected in the yield computation, or change in net asset
value during the period used for computing yield. If any of these conditions
should occur, yield quotations would be suspended. A Fund's yield is not
guaranteed, and the principal is not insured.
Yield information is useful in reviewing a Fund's performance, but because
yields fluctuate, such information cannot necessarily be used to compare an
investment in a Fund's shares with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed or guaranteed fixed yield
for a stated period of time. Shareholders should remember that yield is a
function of the kind and quality of the instruments in the Funds' investment
portfolios, portfolio maturity, operating expenses and market conditions.
It should be recognized that in periods of declining interest rates the yields
will tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates the yields will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new money to a Fund from the
continuous sale of its shares will likely be invested in instruments producing
lower yields than the balance of the Fund's investments, thereby reducing the
current yield of the Fund. In periods of rising interest rates, the opposite can
be expected to occur.
The current yield and effective yield of each Fund (and for Tax Exempt,
Institutional Tax Exempt and Pennsylvania, the tax equivalent yield) for the
seven-day period ended February 28, 1997 for each Class of shares offered by the
Funds is set forth in the table below. The table assumes a Federal tax rate of
36% for Tax Exempt and Institutional Tax Exempt, and a combined Federal and
state tax rate for Pennsylvania of 37.8%.
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Current Effective Tax Equivalent
Yield Yield Yield
Money Market
Class A 4.86% 4.98% N/A
Class B 4.16% 4.25% N/A
Class C N/A N/A N/A
Class Y 5.16% 5.28% N/A
Tax Exempt
Class A 2.97% 3.01% 4.70%
Class Y 3.27% 3.32% 5.19%
Treasury
Class A 4.61% 4.72% N/A
Class Y 4.91% 5.04% N/A
Pennsylvania
Class A 2.89% 2.93% 4.71%
Class Y 3.03% 3.08% 4.95%
Institutional Tax Exempt
Institutional 3.24% 3.34% 5.22%
Institutional Service 2.99% 3.08% 4.81%
Institutional Money Market
Institutional 5.36% 5.57% N/A
Institutional Service 5.10% 5.30% N/A
Institutional Treasury
Institutional 5.35% 5.38% N/A
Institutional Service 5.10% 5.12% N/A
GENERAL
From time to time, a Fund may quote its performance in advertising and other
types of literature as compared to the performance of the Bank Rate Monitor
National Index which publishes weekly average rates of 50 leading bank and
thrift institution money market deposit accounts. A Fund's performance may also
be compared to those of other mutual funds having similar objectives. This
comparative performance would be expressed as a ranking prepared by Lipper
Analytical Services, Inc., Donoghue's Money Fund Report or similar independent
services monitoring mutual fund performance. A Fund's performance will be
calculated by assuming, to the extent applicable, reinvestment of all capital
gains distributions and income dividends paid. Any such comparisons may be
useful to investors who wish to compare a Fund's past performance with that of
its competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker or to each
Adviser at the address or telephone number shown on the front cover of this
Statement of Additional Information. This Statement of Additional Information
does not contain all the information set forth in the Registration Statement
filed by the Trusts with the Securities and Exchange Commission under the
Securities Act of 1933. Copies of the Registration Statement may be obtained at
a reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
FINANCIAL STATEMENTS
The financial statements of Money Market, Tax Exempt, Treasury, Pennsylvania,
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury
appearing in their most current fiscal year Annual Report to shareholders and
the report thereon of the independent auditors appearing therein, namely Price
Waterhouse LLP (in the case of Money Market, Tax Exempt, Institutional Money
Market, Institutional Tax Exempt and Institutional Treasury) or KPMG Peat
Marwick LLP (in the case of Pennsylvania and Treasury) are incorporated by
reference in this Statement of Additional Information. The Semi-Annual Report of
Money
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Market is also incorporated herein by reference.
You may obtain a copy of each Fund's Annual Report without charge by writing to
EKSC, P.O. Box 2121, Boston, Massachusetts 02106-2121, or by calling EKSC toll
free at 1-800-343-2898.
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APPENDIX "A"
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Group ("S&P"). An S&P corporate or municipal bond
rating is a current assessment of the credit worthiness of an obligor with
respect to a specific obligation. This assessment of credit worthiness may take
into consideration obligors such as guarantors, insurers or lessees. The debt
rating is not a recommendation to purchase, sell or hold a security, inasmuch as
it does not comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished to S&P's by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with the ratings and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or withdrawn as a
result of changes in, unavailability of such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in the event
of bankruptcy, reorganization or their arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
any principal.
AA - Debt rated AA also qualifies as high quality debt obligations. Capacity to
pay interest and repay principal is very strong and in the majority of instances
they differ from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than is higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB - rating.
B - Debt rated B has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC - Debt rated CCC has a currently indefinable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of
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interest and repayment of principal. In the event of adverse business, financial
or economic conditions, it is not likely to have the capacity to pay interest
and repay principal. The CCC rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied B or B- rating.
CC - The rating CC is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.
C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1 - The rating C1 is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in payment default. It is used when interest payments or
principal payments are not made on a due date even if the applicable grace
period has not expired, unless S&P's believes that such payments will be made
during such grace periods; it will also be used upon a filing of a bankruptcy
petition if debt service payments are jeopardized. Plus (+) or Minus (-) - To
provide more detailed indications of credit quality, the ratings from AA to CCC
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
NR - indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P's does not rate
a particular type of obligation as a matter of policy. Debt obligations of
issuers outside the United States and its territories are rated on the same
basis as domestic corporate and municipal issues. The ratings measure the credit
worthiness of the obligor but do not take into account currency exchange and
related uncertainties.
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings) are
generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states may impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies,
insurance companies and fiduciaries generally.
Moody's Investors Service ("Moody's"). A brief description of the applicable
Moody's rating symbols and their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Some bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. NOTE: Bonds within the above
categories which possess the strongest investment attributes are designated by
the symbol "1" following the rating.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal
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payments may be very moderate and thereby not well safeguarded during good and
bad times over the future. Uncertainty of position characterizes bonds in this
class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Duff & Phelps, Inc.: AAA-- highest credit quality, with negligible risk factors;
AA -- high credit quality, with strong protection factors and modest risk, which
may vary very slightly from time to time because of economic conditions;
A--average credit quality with adequate protection factors, but with greater and
more variable risk factors in periods of economic stress. The indicators "+" and
"-" to the AA and A categories indicate the relative position of a credit within
those rating categories.
Fitch Investors Service L.P.: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with very strong ability to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulnerable to adverse changes in economic
conditions and circumstances. The indicators "+" and "-" to the AA, A and BBB
categories indicate the relative position of credit within those rating
categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
o Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
o Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.) Note rating symbols
are as follows:
o SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
o SP-2 Satisfactory capacity to pay principal and interest.
o SP-3 Speculative capacity to pay principal and interest.
Moody's Short-Term Loan Ratings - Moody's ratings for state and municipal
short-term obligations will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of major
importance in bond risk are of lesser importance over the short run. Rating
symbols and their meanings follow:
o MIG 1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
o MIG 2 - This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
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o MIG 3 - This designation denotes favorable quality. All security elements are
accounted for but this is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
o MIG 4 - This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk. COMMERCIAL
PAPER RATINGS
Moody's: Commercial paper rated "Prime" carries the smallest degree of
investment risk. The modifiers 1, 2, and 3 are used to denote relative strength
within this highest classification.
S&P: "A" is the highest commercial paper rating category utilized by Standard &
Poor's Ratings Group which uses the numbers 1+, 1, 2 and 3 to denote relative
strength within its "A" classification.
Duff & Phelps, Inc.: Duff 1 is the highest commercial paper rating category
utilized by Duff & Phelps which uses + or - to denote relative strength within
this classification. Duff 2 represents good certainty of timely payment, with
minimal risk factors. Duff 3 represents satisfactory protection factors, with
risk factors larger and subject to more variation.
Fitch Investors Service L.P.: F-1+ -- denotes exceptionally strong credit
quality given to issues regarded as having strongest degree of assurance for
timely payment; F-1 -- very strong, with only slightly less degree of assurance
for timely payment than F-1+; F-2 -- good credit quality, carrying a
satisfactory degree of assurance for timely payment.
APPENDIX B
Special Considerations Relating to Investment In Pennsylvania Municipal Issuers
GENERAL
The Commonwealth of Pennsylvania, the fifth most populous state,
historically has been identified as a heavy industry state, although that
reputation has changed with the decline of the coal, steel and railroad
industries and the resulting diversification of the Commonwealth's industrial
composition. The major new sources of growth are in the service sector,
including trade, medical and health services, educational and financial
institutions. Manufacturing has fallen behind in both the service sector and the
trade sector as a source of employment in Pennsylvania. The Commonwealth is the
headquarters for 58 major corporations. Pennsylvania's average annual
unemployment rate for the years 1990 has generally not been more than one
percent greater or lesser than the nation's annual average unemployment rate.
The seasonally adjusted unemployment rate for Pennsylvania for March, 1997 was
5.1% and for the United States for March, 1997 was 5.2%. The population of
Pennsylvania, 12,056 million people in 1996 according to the U.S. Bureau of the
Census, represents an increase from the 1987 estimate of 11,811 million. Per
capita income in Pennsylvania for 1995 of $23,558 was higher than the per capita
income of the United States of $23,208. . The Commonwealth's General Fund, which
receives all tax receipts and most other revenues and through which debt service
on all general obligations of the Commonwealth are made, closed fiscal years
ended June 30, 1994, June 30, 1995 and June 30, 1996 with positive fund balances
of $892,940, $688,304 and $635,182, respectively.
DEBT
The Commonwealth may incur debt to rehabilitate areas affected by
disaster, debt approved by the electorate, debt for certain capital projects
(for projects such as highways, public improvements, transportation assistance,
flood control, redevelopment assistance, site development and industrial
development) and tax anticipation debt payable in the fiscal year of issuance.
The Commonwealth had outstanding general obligation debt of $5,054 million at
June 30, 1996. The Commonwealth is not permitted to fund deficits between fiscal
years with any form of debt. All year-end deficit balances must be funded within
the succeeding fiscal year's budget. At March 11, 1996, all outstanding general
obligation bonds of the
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Commonwealth were rated AA- by Standard & Poor's Corporation and A-1 by Moody's
Investors Service, Inc. (see Appendix A). There can be no assurance that these
ratings will remain in effect in the future. Over the five-year period ending
June 30, 2001, the Commonwealth has projected that it will issue notes and bonds
totaling $2,325 million and retire bonded debt in the principal amount of $2,239
million.
Certain agencies created by the Commonwealth have statutory
authorization to incur debt for which Commonwealth appropriations to pay debt
service thereon are not required. As of December 31, 1996, total combined debt
outstanding for these agencies was $8,356 million. The debt of these agencies is
supported by assets of, or revenues derived from, the various projects financed
and is not an obligation of the Commonwealth. Some of these agencies, however,
are indirectly dependent on Commonwealth appropriations. The only obligations of
agencies in the Commonwealth that bear a moral obligation of the Commonwealth
are those issued by the Pennsylvania Housing Finance Agency ("PHFA"), a
state-created agency which provides housing for lower and moderate income
families, and The Hospitals and Higher Education Facilities Authority of
Philadelphia (the "Hospital Authority"), an agency created by the City of
Philadelphia to acquire and prepare various sites for use as intermediate care
facilities for the mentally retarded.
LOCAL GOVERNMENT DEBT
Numerous local government units in Pennsylvania issue general
obligation (i.e., backed by taxing power) debt, including counties, cities,
boroughs, townships and school districts. School district obligations are
supported indirectly by the Commonwealth. The issuance of non-electoral general
obligation debt is limited by constitutional and statutory provisions. Electoral
debt, i.e., that approved by the voters, is unlimited. In addition, local
government units and municipal and other authorities may issue revenue
obligations that are supported by the revenues generated from particular
projects or enterprises. Examples include municipal authorities (frequently
operating water and sewer systems), municipal authorities formed to issue
obligations benefitting hospitals and educational institutions, and industrial
development authorities, whose obligations benefit industrial or commercial
occupants. In some cases, sewer or water revenue obligations are guaranteed by
taxing bodies and have the credit characteristics of general obligations debt.
LITIGATION
Pennsylvania is currently involved in certain litigation where adverse
decisions could have an adverse impact on its ability to pay debt service. For
example, in BABY NEAL V. COMMONWEALTH, the American Civil Liberties Union filed
a lawsuit against the Commonwealth seeking an order that would require the
Commonwealth to provide additional funding for child welfare services. COUNTY OF
ALLEGHENY V. COMMONWEALTH OF PENNSYLVANIA involves litigation regarding the
state constitutionality of the statutory scheme for county funding of the
judicial system. In PENNSYLVANIA ASSOCIATION OF RURAL AND SMALL SCHOOLS V.
CASEY, the constitutionality of Pennsylvania's system for funding local school
districts has been challenged. No estimates for the amount of these claims are
available.
OTHER FACTORS
The performance of the obligations held by the Fund issued by the
Commonwealth, its agencies, subdivisions and instrumentalities are in part tied
to state-wide, regional and local conditions within the Commonwealth and to the
creditworthiness of certain non- Commonwealth related obligers, depending upon
the Pennsylvania Fund's portfolio mix at any given time. Adverse changes to the
state-wide, regional or local economies or changes in government may adversely
affect the creditworthiness of the Commonwealth, its agencies and
municipalities, and certain other non-government related obligers of
Pennsylvania tax-free obligations (e.g., a university, a hospital or a corporate
obligor). The City of Philadelphia, for example, experienced severe financial
problems which impaired its ability to borrow money and adversely affected the
ratings of its obligations and their marketability. Conversely, some obligations
held by the Fund will be almost exclusively dependent on the creditworthiness of
one underlying obligor, such as a project occupant or provider of credit or
liquidity support.
<PAGE>
THE EVERGREEN MONEY MARKET TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. The unaudited financial statements listed below are incorporated by
reference to the Registrant's Semi-Annual report dated February 28,
1997:
EVERGREEN MONEY MARKET FUND
Statement of Investments February 28, 1997
Statement of Assets and Liabilities February 28, 1997
Statement of Operations For the six months
ended February 28, 1997
Statement of Changes in Net Assets For the period ended
February 28, 1997
Financial Highlights
Class A and B Shares For the period of January 4,
1995 through August 31, 1995,
the year ended August 31, 1996
and the six months ended
February 28, 1997
Class Y Shares For each of the years in the
two-year period ended October
31, 1993, for the ten months
ended August 31, 1994, for
each of the years in the two-
year period ended August 31,
1996 and the six months ended
February 28, 1997
Notes to Financial Statements
The audited financial statements listed below are incorporated by
reference to the Registrant's Annual report dated August 31, 1996:
EVERGREEN MONEY MARKET FUND
Statement of Investments August 31, 1996
Statement of Assets and Liabilities August 31, 1996
Statement of Operations For the year
ended August 31, 1996
Statement of Changes in Net Assets For the year ended
August 31, 1996
Financial Highlights
Class A and B Shares For the period of January 4,
1995 through August 31, 1995
and the year ended
August 31, 1996
Class Y Shares For each of the years in the
two-year period ended October
31, 1993, for the ten months
ended August 31, 1994 and for
each of the years in the two-
year period ended August 31,
1996
Notes to Financial Statements
Report of Independent Auditors
The audited financial statements listed below are incorporated by
reference to the Registrant's Annual Report dated February 28, 1997:
EVERGREEN INSTITUTIONAL MONEY MARKET FUND
(For Institutional Service Shares and Institutional Shares)
Statement of Investments February 28, 1997
Statement of Assets and Liabilities February 28, 1997
Statement of Operations For the period ended
February 28, 1997
Statements of Changes in Net Assets For the period ended
February 28, 1997
Financial Highlights
Institutional Shares For the period ended February
28, 1997
Institutional Service Shares For the period ended February
28, 1997
Notes to Financial Statements
Report of Independent Accountants April 28, 1997
EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND
(For Institutional Service Shares and Institutional Shares)
Statement of Investments February 28, 1997
Statement of Assets and Liabilities February 28, 1997
Statement of Operations For the period ended
February 28, 1997
Statements of Changes in Net Assets For the period ended
February 28, 1997
Financial Highlights
Institutional Shares For the period ended February
28, 1997
Institutional Service Shares For the period ended February
28, 1997
Notes to Financial Statements
Report of Independent Accountants April 28, 1997
b. Exhibits
Number Description
1(A) Amended and Restated Declaration of Trust(1)
1(B) Form of Instrument providing for the Establishment
and Designation of Classes(1)
1(C) Form Amendment to Declaration of Trust
and Certification of Designation(2)
2 By-Laws(3)
3 None
4 Instruments Defining Rights of Shareholders(1)(3)
5(A) Investment Advisory Agreement(2)
5(B) Investment Subadvisory Agreement(1)
6 Distribution Agreement(4)
7 None
8 Custodian Agreement(5)
9 None
10 Opinion of Counsel(6)
11 Consent of Price Waterhouse LLP, independent accountants(7)
Consent of KPMG Peat Marwick LLP, independent accountants(7)
12 None
13 None
14 None
15 Rule 12b-1 Distribution Plan(4)
16 None
17 Financial Data Schedules(7)
18 Multiple Class Plan(7)
- - --------------------------
(1) Incorporated by reference to Post-effective Amendment No. 9
to Registration Statement No. 33-16706 (the "Registration
Statement") filed December 10, 1994.
(2) Incorporated by reference to Post-effective Amendment No. 12
the Registration Statement filed September 11, 1996.
(3) Incorporated by reference to the Registration Statement filed
August 4, 1987.
(4) Filed herewith.
(5) Incorporated by reference to Post-effective Amendment No. 6
to the Registration Statement filed March 8, 1993.
(6) Opinion of Counsel relating to shares of the Money Market Fund is
incorporated by reference to the Fund's Form 24f-2 filed on or
about October 31, 1996.
Opinion of Counsel relating to shares of the Institutional Money
Market Fund and the Institutional Treasury Money Market Fund is
incorporated by reference to the Funds' Form 24f-2 filed on or
about April 30, 1997.
(7) Incorporated by reference to Post-Effective Amendment No. 14 to
the Registration Statement filed May 20, 1997.
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities (as of April 30, 1997)
(1) (2)
Number of Record
Title of Class Shareholders
Evergreen Money Market Fund
Class Y Shares of Beneficial Interest ($0.0001 par value) 12,033
Class A Shares of Beneficial Interest ($0.0001 par value) 18,824
Class B Shares of Beneficial Interest ($0.0001 par value) 474
Evergreen Institutional Money Market Fund
Institutional Shares ($0.0001 par value) 10
Institutional Service Shares ($0.0001 par value) 60
Evergreen Institutional Treasury Money Market Fund
Institutional Shares ($0.001 par value) 5
Institutional Service Shares ($0.0001 par value) 22
Item 27. Indemnification
Provisions for the indemnification of Registrant's Trustees and
Officers are contained in Article XI of the Registrant's By-Laws.
Provisions for the indemnification of Evergreen Keystone Distributor,
Inc., Registrant's principal underwriter, are contained in Item 4 of the
Distribution Agreement, a copy of the form of which is filed herewith and is
incorporated by reference herein.
Item 28. Business or Other Connections of Investment Adviser
(a) For a description of the other business of the investment adviser, see
the section entitled "Management of the Funds-Investment Adviser" in Part A.
The Directors and principal executive officers of First Union National
Bank, parent of the Registrants's investment adviser and sub-adviser, are set
forth in the following tables:
FIRST UNION NATIONAL BANK
BOARD OF DIRECTORS
Edward E. Crutchfield
Anthony P. Terracciano
John R. Georgius
Marion A. Cowell, Jr.
Robert T. Atwood
All of the Directors are located at the following address:
First Union National Bank, 301 South College Street,
Charlotte, NC 28288
FIRST UNION NATIONAL BANK
EXECUTIVE OFFICERS
Edward E. Crutchfield, Chairman & CEO, First Union Corporation
John R. Georgius, Vice Chairman, First Union Corporation
Marion A. Cowell, Jr., Secretary and EVP, First Union Corporation
Robert T. Atwood, EVP & CFO, First Union Corporation
Anthony P. Terracciano, President, First Union Corporation
All of the Executive Officers are located at the following
address: First Union National Bank, 301 South College Street,
Charlotte, NC 28288
Item 29. Principal Underwriters
Evergreen Keystone Distributor, Inc.(formerly known as Evergreen Funds
Distributor, Inc.) The Director and principal executive officers are:
Director Michael C. Petrycki
Officers Lynn J. Mangum Chairman/CEO
Robert J. McMullan Executive Vice President/Treasurer
J. David Huber President
Kevin J. Dell Vice President/General Counsel/Secretary
Mark J. Rybarczyk Senior Vice President
Dennis Sheehan Senior Vice President
Mark Dillon Senior Vice President
George Martinez Senior Vice President
D'Ray Moore Vice President
Dale Smith Vice President
Michael Burns Vice President
Bruce Treff Assistant Secretary
Annamaria Porcaro Assistant Secretary
Evergreen Keystone Distributor, Inc. acts as Distributor for the
following registered investment companies or separate series thereof:
Evergreen Latin America Fund
Evergreen Trust:
Evergreen Fund
Evergreen Aggressive Growth Fund
Evergreen Income and Growth Fund (formerly Evergreen Total Return Fund)
Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
Evergreen Money Market Trust:
Evergreen Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen American Retirement Trust:
Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
Evergreen Municipal Trust:
Evergreen Tax Exempt Money Market Fund
Evergreen Short-Intermediate Municipal Fund
Evergreen Florida High Income Municipal Bond Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Equity Trust:
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Global Leaders Fund
Evergreen Foundation Trust:
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Investment Trust:
Evergreen Emerging Markets Growth Fund
Evergreen International Equity Fund
Evergreen Balanced Fund
Evergreen Value Fund
Evergreen Utility Fund
Evergreen Short-Intermediate Bond Fund
Evergreen U.S. Government Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen High Grade Tax Free Fund
Evergreen Treasury Money Market Fund
Evergreen Lexicon Trust:
Evergreen Intermediate Term Government Securities Fund
Evergreen Intermediate Term Bond Fund
Evergreen Tax Free Trust:
Evergreen Pennsylvania Tax Free Money Market Fund
Evergreen New Jersey Tax Free Income Fund
Evergreen Variable Trust:
Evergreen VA Fund
Evergreen VA Growth and Income Fund
Evergreen VA Foundation Fund
Evergreem VA Global Leaders Fund
Evergreen VA Strategic Income Fund
Evergreen VA Aggressive Growth Fund
<PAGE>
Keystone Balanced Fund II
Keystone Capital Preservation and Income Fund
Keystone Fund for Total Return
Keystone Global Opportunities Fund
Keystone Global Resources and Development Fund
Keystone Intermediate Term Bond Fund
Keystone Omega Fund
Keystone Small Company Growth Fund II
Keystone State Tax Free Fund:
Florida Tax Free Fund
Massachusetts Tax Free Fund
Pennsylvania Tax Free Fund
New York Insured Tax Free Fund
Keystone State Tax Free Fund- Series II:
California Insured Tax Free Fund
Missouri Tax Free Fund
Keystone Strategic Income Fund
Keystone Tax Free Income Fund
Keystone Quality Bond Fund (B-1)
Keystone Diversified Bond Fund (B-2)
Keystone High Income Bond Fund (B-4)
Keystone Balanced Fund (K-1)
Keystone Strategic Growth Fund (K-2)
Keystone Growth and Income Fund (S-1)
Keystone Small Company Growth Fund (S-4)
Keystone Institutional Adjustable Rate Fund
Keystone Institutional Trust
Keystone International Fund Inc.
Keystone Precious Metals Holdings, Inc.
Keystone Tax Free Fund
<PAGE>
Item 30. Location of Accounts and Records
Accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder
are maintained at the offices of the Registrant's Custodian, State Street Bank
and Trust Company, 2 Heritage Drive, North Quincy, Massachusetts 02171, the
offices of Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase,
New York 10577, the office of First Union National Bank, 301 South College
Street, Charlotte, North Carolina 28288, or the offices of Keystone Investment
Management Company and Evergreen Keystone Service Company, 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
Item 31. Management Services
All management-related service contracts entered into by Registrant are
discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
Registrant hereby undertakes to comply with the provision of Section
16(c) of the 1940 Act with respect to the removal of Trustees and the
calling of special shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for the effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) and the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in The City of New
York, State of New York, on the 1st day of August, 1997.
EVERGREEN MONEY MARKET TRUST
/s/ John J. Pileggi
by-----------------------------
John J. Pileggi, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 15 to the Registration Statement has been
signed below by the following persons in the capacities indicated and on the 1st
day of August, 1997.
Signatures Title Date
- ------------ ----- ----
- ------------------------ President August 1, 1997
John J. Pileggi
- ------------------------ Trustee August 1, 1997
Foster Bam
by James P. Wallin
Attorney - In - Fact
/s/ Laurence B. Ashkin*
- - ----------------------- Trustee August 1, 1997
Laurence B. Ashkin
by James P. Wallin
Attorney - In - Fact
/s/James S. Howell*
- - ----------------------- Trustee August 1, 1997
James S. Howell
by James P. Wallin
Attorney - In - Fact
/s/Gerald M. McDonnell*
- - ----------------------- Trustee August 1, 1997
by James P. Wallin
Attorney - In - Fact
/s/Thomas L. McVerry*
- - ----------------------- Trustee August 1, 1997
Thomas L. McVerry
by James P. Wallin
Attorney - In - Fact
/s/William Walt Pettit*
- - ----------------------- Trustee August 1, 1997
William Walt Pettit
by James P. Wallin
Attorney - In - Fact
/s/Russell A. Salton, III, M.D.*
- - ------------------------------ Trustee August 1, 1997
Russell A. Salton, III, M.D
by James P. Wallin
Attorney - In - Fact
/s/Michael S. Scofield*
- - ----------------------- Trustee August 1, 1997
Michael S. Scofield
by James P. Wallin
Attorney - In - Fact
*By: /s/ James P. Wallin
-------------------------
James P. Wallin**
Attorney-in-Fact
**James P. Wallin, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named individuals pursuant to powers of attorney
duly executed by such persons filed as part of the Registration Statement to
Registran'ts previous filings on Form N-1A.
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
6 Distribution Agreement
15 12b-1 Distribution Plan
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 1st day of January, 1997, by and between The
Evergreen Money Market Trust (the "Trust") and Evergreen Keystone Distributor,
Inc. ("EKD").
WHEREAS, The Trust has adopted one or more Plans of Distribution with
respect to certain Classes of shares of its separate investment series (each a
"Plan", or collectively the "Plans") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act") which Plans authorize the Trust
on behalf of the Funds to enter into agreements regarding the distribution of
such Classes of shares (the "Shares") of the separate investment series of the
Trust (the "Funds") set forth on Exhibit A; and
WHEREAS, the Trust has agreed that Evergreen Keystone Distributor, Inc.
(the "Distributor"), a Delaware corporation, shall act as the distributor of the
Shares; and
WHEREAS, the Distributor agrees to act as distributor of the Shares for
the period of this Distribution Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the agreements hereinafter
contained, it is agreed as follows:
1. SERVICES AS DISTRIBUTOR-
1.1. The Distributor agrees to use appropriate efforts to promote each
Fund and to solicit orders for the purchase of Shares and will undertake such
advertising and promotion as it believes reasonable in connection with such
solicitation The services to be performed hereunder by the Distributor are
described in more detail in Section 7 hereof. . In the event that the Trust
establishes additional investment series with respect to which it desires to
retain Evergreen Funds Distributor, Inc. to act as distributor for one or more
Classes hereunder, it shall promptly notify the Distributor in writing. If the
Distributor is willing to render such services it shall notify the Trust in
writing whereupon such portfolio shall become a Fund and its designated Classes
of shares of beneficial interest shall become Shares hereunder.
1.2. All activities by the Distributor and its agents and employees as
the distributor of Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made or
adopted pursuant to the 1940 Act by the Securities and Exchange Commission (the
"Commission") or any securities association registered under the Securities
Exchange Act of 1934, as amended.
1.3 In selling the Shares, the Distributor shall use its best efforts
in all respects duly to conform with the requirements of all Federal and state
laws relating to the sale of such securities. Neither the Distributor, any
selected dealer or any other person is authorized by the Trust to give any
information or to make any representations, other than those contained in the
Trust's registration statement (the "Registration Statement") or related Fund
prospectus and statement of
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additional information ("Prospectus and Statement of Additional Information")
and any sales literature specifically approved by the Trust.
1.4 The Distributor shall adopt and follow procedures, as approved by
the officers of the Trust, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
1.5. The Distributor will transmit any orders received by it for
purchase or redemption of Shares to the transfer agent and custodian for the
applicable Fund.
1.6 The Distributor shall provide persons acceptable to the Trust to
serve as officers of the Trust.
1.7. Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of Shares until such time as those officers deem it advisable to accept
such orders and to make such sales.
1.8. The Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others. The
Distributor shall offer and sell Shares only to such selected dealers as are
members, in good standing, of the NASD.
1.9 The Distributor agrees to adopt compliance standards, in a form
satisfactory to the Trust, governing the operation of the multiple class
distribution system under which Shares are offered.
2. DUTIES OF THE TRUST.
2.1. The Trust agrees at its own expense to execute any and all
documents and to furnish, at its own expense, any and all information and
otherwise to take all actions that may be reasonably necessary in connection
with the qualification of Shares for sale in such states as the Trust and the
Distributor may designate.
2.2. The Trust shall furnish from time to time, for use in connection
with the sale of Shares such information with respect to the Funds and the
Shares as the Distributor may reasonably request; and the Trust warrants that
any such information shall be true and correct. Upon request, the Trust shall
also provide or cause to be provided to the Distributor: (a) unaudited
semi-annual statements of each Fund's books and accounts, (b) quarterly earnings
statements of each Fund, (c) a monthly itemized list of the securities in each
Fund, (d) monthly balance sheets as soon as practicable after the end of each
month, and (e) from time to time such additional. information regarding each
Fund's financial condition as the Distributor may reasonably request.
2
<PAGE>
3. REPRESENTATIONS OF THE TRUST.
3.1. The Trust represents to the Distributor that it is registered
under the 1940 Act and that the Shares of each of the Funds have been registered
under the Securities Act of 1933, as amended (the "Securities Act"). The Trust
will file such amendments to its Registration Statement as may be required and
will use its best efforts to ensure that such Registration Statement remains
accurate.
4. INDEMNIFICATION.
4.1. The Trust shall indemnify and hold harmless the Distributor, its
officers and Directors and each person, if any, who controls the Distributor
within the meaning of Section 15 of the Securities Act against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith), which the
Distributor or such controlling person may incur under the Securities Act or
under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in the
Registration Statement, as from time to time amended or supplemented, any
prospectus or annual or interim report to shareholders of the Trust, or arising
out of or based upon any omission, or alleged omission, to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, unless such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Trust in connection therewith by
or on behalf of the Distributor; provided, however, that in no case (i) is the
indemnity of the Trust in favor of the Distributor and any such controlling
persons to be deemed to protect such Distributor or any such controlling persons
thereof against any liability to the Trust or its security holders to which the
Distributor, its officers and Directors or any such controlling persons would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of their duties or by reason of the reckless
disregard of their obligations and duties under this Agreement; or (ii) is the
Trust to be liable under its indemnity agreement contained in this paragraph
with respect to any claim made against the Distributor or any such controlling
persons, unless the Distributor or such controlling persons, as the case maybe,
shall have notified the Trust in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon the Distributor or such controlling persons
(or after the Distributor or such controlling persons shall have received notice
of such service on any designated agent), but failure to notify the Trust of any
such claim shall not relieve it from any liability which it may have to the
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Trust will be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit, shall bear
3
<PAGE>
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant
or-defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust shall promptly notify the Distributor of the
commencement of any litigation or proceeding against it or any of its officers
or directors in connection with the issuance or sale of any of the shares.
4.2. The Distributor shall indemnify and hold harmless the Trust and
each of its directors and officers and each person, if any, who controls the
Trust against any loss, liability, claim, damage or expense described in the
foregoing indemnity contained in paragraph 4.1, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Trust in writing by or on behalf of the Distributor
for use in connection with the Registration Statement, as from time to time
amended, or the annual or interim reports to shareholders. In case any action
shall be brought against the Trust or any persons so indemnified, in respect of
which indemnity may be sought against the Distributor, the Distributor shall
have the rights and duties given to the Trust, and the Trust and each person so
indemnified shall have the rights and duties given to the Distributor by the
provisions of paragraph 4.1.
5. OFFERING OF SHARES.
5.1. None of the Shares shall be offered by either the Distributor or
the Trust under any of the provisions of this Agreement, and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Trust, if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current prospectus and statement of
additional information as required by Section 10(b) (2) of the Securities Act,
as amended, is not on file with the Commission; provided, however, that nothing
contained in this paragraph 5.1 shall in any way restrict or have any
application to or bearing upon the Trust's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the prospectus of each Fund
or the Trust's prospectus or Declaration of Trust.
6. AMENDMENTS TO REGISTRATION STATEMENT AND OTHER MATERIAL EVENTS.
6.1. The Trust agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor: (a) of any
request or action taken by the Commission which is material to the Distributor's
obligations hereunder or (b) any material fact of which the Trust becomes aware
which affects the Distributor's obligations hereunder.
For purposes of this section, informal requests by or acts of the Staff
of the Commission shall not be deemed actions of or requests by the Commission.
4
<PAGE>
7. COMPENSATION OF DISTRIBUTOR.
7.1. (a) As promptly as possible after the first Business Day (as
defined in the Prospectus) of each month this Agreement is in effect, the Trust
shall compensate the Distributor for its distribution services rendered during
the previous month (but not prior to the Commencement Date); by making payment
to the Distributor in the amounts set forth on Exhibit A annexed hereto with
respect to each Class of Shares of each Fund to which this Agreement is
applicable. The compensation by the Trust of the Distributor is authorized
pursuant to the Plan or Plans adopted by the Trust pursuant to Rule 12b-l under
the 1940 Act.
(b) Under this Agreement, the Distributor shall: (i) make
payments to securities dealers and others engaged in the sale of Shares; (ii)
make payments of principal and interest in connection with the financing of
commission payments made by the Distributor in connection with the sale of
Shares (iii) incur the expense of obtaining such support services, telephone
facilities and shareholder services as may reasonably be required in connection
with its duties hereunder; (iv) formulate and implement marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (v)
prepare, print and distribute sales literature; (vi) prepare, print and
distribute Prospectuses of the Funds and reports for recipients other than
existing shareholders of the Funds; and (vii) provide to the Trust such
information, analyses and opinions with respect to marketing and promotional
activities as the Trust may, from time to time, reasonably request.
(c) The Distributor shall prepare and deliver reports to the
Treasurer of the Trust on a regular, at least monthly, basis, showing the
distribution expenditures incurred by the Distributor in connection with its
services rendered pursuant to this Agreement and the Plan and the purposes
therefor, as well as any supplemental reports as the Trustees, from time to
time, may reasonably request.
(d) The Distributor may retain as a sales charge the difference
between the current offering price of Shares, as set forth in the current
prospectus for each Fund, and net asset value, less any reallowance that is
payable in accordance with the sales charge schedule in effect at any given time
with respect to the Shares.
(e) The Distributor may retain any contingent deferred sales
charge ("CDSCs") payable with respect to the redemption of any Shares, provided
however, that any CDSCs received by the Distributor shall first be applied by
the Distributor or its assignee to any outstanding amounts payable or which may
in the future be payable by the Distributor or its assignee under financing
arrangements entered into in connection with the payment of commissions on the
sale of Shares.
(f) The Distributor may sell, assign, pledge or hypothecate its
rights to receive compensation hereunder. The Trust acknowledges that, in
connection with the financing of commission payments made by the Distributor in
connection with the sale of Shares, the Distributor may sell and assign, and/or
has sold and assigned, to Mutual Fund Funding 1994-1
5
<PAGE>
the Distributor's interest in certain items of compensation payable to the
Distributor hereunder, and that Mutual Fund Funding 1994-1 in turn may pledge or
assign, and/or has assigned, such interest to First Union Corporation as lender
to secure such financing. It is understood that an assignee may not further
sell, assign, pledge, or hypothecate its right to receive such reimbursement
unless such sale, assignment, pledge or hypothecation has been approved by the
vote of the Board of the Trust, including a majority of the Disinterested
Trustees, cast in person at a meeting called for the purpose of voting on such
approval.
(g) In addition to the foregoing, and in respect of its services
hereunder and for similar services rendered to other investment companies for
which Evergreen Asset Management Corp. (the "Investment Adviser") serves as
investment adviser, the Investment Adviser may pay to the Distributor an
additional fee to be paid in such amount and manner as the Investment Adviser
and Distributor may agree from time to time.
8. CONFIDENTIALITY, NON-EXCLUSIVE AGENCY.
8.1. The Distributor agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Trust all records and
other information relative to the Funds and its prior, present or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and to obtain approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
8.2. Nothing contained in this Agreement shall prevent the Distributor,
or any affiliated person of the Distributor, from performing services similar to
those to be performed hereunder for any other person, firm, or corporation or
for its or their own accounts or for the accounts of others.
9. TERM.
9.1. This Agreement shall continue until June 30, 1998 and thereafter
for successive annual periods, provided such continuance is specifically
approved at least annually by (i) a vote of the majority of the Trustees of the
Trust and (ii) a vote of the majority of those Trustees of the Trust who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan, in this Agreement or any agreement
related to the Plan (the "Independent Trustees") by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable at any time, with respect to the Trust, without penalty, (a) on not
less than 60 days' written notice by vote of a majority of the Independent
Trustees, or by vote of the holders of a majority of the outstanding voting
securities of the Trust, or (b) upon not less than 60 days' written notice by
the Distributor. This Agreement may remain in effect with respect to a Fund even
if it has been terminated in accordance with this paragraph with respect to one
or more other Funds of the Trust. This Agreement will also terminate
6
<PAGE>
automatically in the event of its assignment. (As used in this Agreement, the
terms "majority of the outstanding voting securities", "interested persons", and
"assignment" shall have the same meaning as such terms have in the 1940 Act.)
10. MISCELLANEOUS.
10.1. This Agreement shall be governed by the laws of the State of New
York.
10.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their constructions or effect.
10.3 The obligations of the Trust hereunder are not personally binding
upon, nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust and only the Trust's
property shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below.
EVERGREEN KEYSTONE DISTRIBUTOR, INC. EVERGREEN MONEY MARKET TRUST
By: By:
Title: , Vice President Title: John J. Pileggi, President
7
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EXHIBIT A
To Distribution Agreement between Evergreen Funds Distributor, Inc.
and EVERGREEN MONEY MARKET TRUST
FUNDS AND CLASSES COVERED BY THIS AGREEMENT:
Evergreen Money Market Fund
CLASS A SHARES
CLASS B SHARES
CLASS Y SHARES
Evergreen Institutional Money Market Fund
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
Evergreen Institutional Treasury Money Market Fund
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
DISTRIBUTION FEES
1. During the term of this Agreement, the Trust will pay to the Distributor a
quarterly fee with respect to the Fund and Classes of Shares thereof listed
above. This fee will be computed at the annual rate of .30 of 1% of the average
net asset value on an annual basis of Class A Shares of the Fund;.75 of 1% of
the average net asset value on an annual basis of Class B Shares of the Fund,
and .25 of 1% of the average net asset value on an annual basis of the
Institutional Service Shares of the Fund.
2. For the quarterly period in which the Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the quarter.
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit A to
the Distribution Agreement between the parties dated as of January 1, 1997 to be
executed by their officers designated below.
EVERGREEN FUNDS DISTRIBUTOR, INC. EVERGREEN MONEY MARKET TRUST
By: By:
Title: , Vice President Title: John J. Pileggi, President
8
DISTRIBUTION PLAN OF CLASS K SHARES
THE EVERGREEN MONEY MARKET TRUST
EVERGREEN MONEY MARKET FUND
Section 1. The Evergreen Money Market Trust (the "Trust") may act as the
distributor of securities which are issued in respect of one or more of its
separate investment series, pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "1940 Act") according to the terms of this Distribution Plan
("Plan").
Section 2. The Trust may expend daily amounts at an annual rate of 1% of the
average daily net asset value of the Class K Shares ("Shares") of its Evergreen
Money Market Fund Series ("Fund") to finance any activity which is principally
intended to result in the sale of Shares including, without limitation,
expenditures consisting of payments to a principal underwriter of the Fund
(Principal Underwriter) or others in order: (i) to enable payments to be made by
the Principal Underwriter or others for any activity primarily intended to
result in the sale of Shares, including, without limitation, (a) compensation to
public relations consultants or other persons assisting in, or providing
services in connection with, the distribution of Shares, (b) advertising, (c)
printing and mailing of prospectuses and reports for distribution to persons
other than existing shareholders, (d) preparation and distribution of
advertising material and sales literature, (e) commission payments, and
principal and interest expenses associated with the financing of commission
payments, made by the Principal Underwriter in connection with the sale of
Shares and (f) conducting public relations efforts such as seminars; (ii) to
enable the Principal Underwriter or others to receive, pay or to have paid to
others who have sold Shares, or who provide services to holders of Shares, a
maintenance or other fee in respect of services provided to holders of Shares,
at such intervals as the Principal Underwriter may determine, in respect of
Shares previously sold and remaining outstanding during the period in respect of
which such fee is or has been paid; and/or (iii) to compensate the Principal
Underwriter for its efforts in respect of sales of Shares since inception of the
Plan. Appropriate adjustments shall be made to the payments made pursuant to
this Section 2 to the extent necessary to ensure that no payment is made by the
Fund with respect to any Class in excess of the applicable limit imposed on
asset based, front end and deferred sales charges under subsection (d) of
Section 26 of Article III of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD"). In addition, to the extent
any amounts paid hereunder fall within the definition of an "asset based sales
charge" under said NASD Rule such payments shall be limited to .75 of 1% of the
aggregate net asset value of the Shares on an annual basis
1
<PAGE>
and, to the extent that any such payments are made in respect of
"shareholder services" as that term is defined in the NASD Rule, such payments
shall be limited to .25 of 1% of the aggregate net asset value of the Shares on
an annual basis and shall only be made in respect of shareholder services
rendered during the period in which such amounts are accrued. Section 3. This
Plan shall not take effect with respect to any Fund until it has been approved
by votes of a majority of (a) the outstanding Shares of such Series, (b) the
Trustees of the Trust, and (c) those Trustees of the Trust who are not
"interested persons" of the Fund (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or any
agreements of the Trust related hereto or any other person related to this Plan
("Disinterested Trustees"), cast in person at a meeting called for the purpose
of voting on this Plan. In addition, any agreement related to this Plan and
entered into by the Fund in connection therewith shall not take effect until it
has been approved by votes of a majority of (a) the Board of Trustees of the
Trust, and (c) the Disinterested Trustees of the Trust. Section 4. Unless sooner
terminated pursuant to Section 6, this Plan shall continue in effect for a
period of one year from the date it takes effect and thereafter shall continue
in effect for additional periods that shall not exceed one year so long as such
continuance is specifically approved by votes of a majority of both (a) the
Board of Trustees of the Trust and (b) the Disinterested Trustees of the Trust,
cast in person at a meeting called for the purpose of voting on this Plan.
Section 5. Any person authorized to direct the disposition of monies paid or
payable pursuant to this Plan or any related agreement shall provide to the
Trust's Board and the Board shall review at least quarterly a written report of
the amounts so expended and the purposes for which such expenditures were made.
Section 6. This Plan may be terminated at any time with respect to any Fund by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the Shares of the Fund. Section 7. Any agreement of the Trust, with respect to
any Fund, related to this Plan shall be in writing and shall provide: A. That
such agreement may be terminated with respect to a Fund at any time without
payment of any penalty, by vote of a majority of the Disinterested Trustees or
by a vote of a majority of the outstanding Shares of such Fund on not more than
sixty days written notice to any other party to the agreement; and B. That such
agreement shall terminate automatically in the event of its assignment.
2
<PAGE>
Section 8. This Plan may not be amended to increase materially the amount of
distribution expenses provided for in Section 2 with respect to a Fund unless
such amendment is approved by a vote of at least a majority (as defined in the
1940 Act) of the outstanding Shares of such Fund, and no material amendment to
this Plan shall be made unless approved by votes of a majority of (a) the Board
of Trustees of the Trust, and (c) the Disinterested Trustees of the Trust, cast
in person at a meeting called for the purpose of voting on such amendment.
DATED:
April 28, 1997
