THE VIRTUS FUNDS
THE MONEY MARKET FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
January 5, 1998
Dear Shareholder,
As a result of the merger of Signet Banking Corporation with and into a
wholly-owned subsidiary of First Union Corporation effective November 28, 1997,
I am writing to shareholders of The Money Market Fund, (the "Fund"), to inform
you of a Special Shareholders' meeting to be held on February 20, 1998. Before
that meeting, I would like your vote on the important issues affecting your Fund
as described in the attached Prospectus/Proxy Statement.
The Prospectus/Proxy Statement includes two proposals. The first proposal
requests that shareholders consider and act upon an Agreement and Plan of
Reorganization whereby all of the assets of the Fund would be acquired by
Evergreen Money Market Fund in exchange for either Class A or Class Y shares of
Evergreen Money Market Fund and the assumption by Evergreen Money Market Fund of
certain liabilities of the Fund. You will receive shares of Evergreen Money
Market Fund having an aggregate net asset value equal to the aggregate net asset
value of your Fund shares. Details about Evergreen Money Market Fund's
investment objective, portfolio management team, performance, etc. are contained
in the attached Prospectus/Proxy Statement. The transaction is a non-taxable
event for shareholders.
The second proposal requests shareholder consideration of an Interim Investment
Advisory Agreement between the Fund and Virtus
Capital Management, Inc.
Information relating to the Interim Investment Advisory Agreement is contained
in the attached Prospectus/Proxy Statement.
The Board of Trustees has approved the proposals and recommends that you vote
FOR these proposals.
I realize that this Prospectus/Proxy Statement will take time to review, but
your vote is very important. Please take the time to familiarize yourself with
the proposals presented and sign and return your proxy card in the enclosed
postage paid envelope today. If you have any questions about this proxy, please
call our proxy solicitor, Shareholder Communications Corporation, at
800-733-8481 ext. 437. You may also FAX your completed and signed proxy card to
800-733-1885.
<PAGE>
If we do not receive your completed proxy card after several weeks, you may be
contacted by Shareholder Communications Corporation who will remind you to vote
your shares.
Thank you for taking this matter seriously and participating in this important
process.
Sincerely,
Edward C. Gonzales
President
The Virtus Funds
<PAGE>
THE VIRTUS FUNDS
THE MONEY MARKET FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 20, 1998
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of The Money Market Fund, a series of The Virtus Funds (the
"Fund"), will be held at the offices of the Evergreen Funds, 200 Berkeley
Street, 26th Floor, Boston, Massachusetts 02116 on February 20, 1998 at 2:00
p.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization
(the "Plan") dated as of November 26, 1997, providing for the acquisition of all
of the assets of the Fund by Evergreen Money Market Fund, a series of Evergreen
Money Market Trust, ("Evergreen Money Market") in exchange for shares of
Evergreen Money Market and the assumption by Evergreen Money Market of certain
identified liabilities of the Fund. The Plan also provides for distribution of
such shares of Evergreen Money Market to shareholders of the Fund in liquidation
and subsequent termination of the Fund. A vote in favor of the Plan is a vote in
favor of the liquidation and dissolution of the Fund.
2. To consider and act upon the Interim Investment Advisory Agreement
between the Fund and Virtus Capital
Management, Inc.
3. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
The Trustees of The Virtus Funds on behalf of the Fund have fixed the
close of business on December 26, 1997 as the record date for the determination
of shareholders of the Fund entitled to notice of and to vote at the Meeting or
any adjournment thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND IN PERSON ARE URGED WITHOUT DELAY TO SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Trustees
John W. McGonigle
Secretary
<PAGE>
January 5, 1998
<PAGE>
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and may help to avoid the time and expense involved in
validating your vote if you fail to sign your proxy card(s) properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it
appears in the Registration on the proxy card(s).
2. JOINT ACCOUNTS: Either party may sign, but the name of
the party signing should conform exactly to a name shown in the
Registration on the proxy card(s).
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy
card(s) should be indicated unless it is reflected in the form of Registration.
For example:
REGISTRATION VALID SIGNATURE
CORPORATE
ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith, Sr. John B. Smith, Jr., Executor
<PAGE>
PROSPECTUS/PROXY STATEMENT DATED JANUARY 5, 1998
Acquisition of Assets of
THE MONEY MARKET FUND
a series of
The Virtus Funds
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By and in Exchange for Shares of
EVERGREEN MONEY MARKET FUND
a series of
Evergreen Money Market Trust
200 Berkeley Street
Boston, Massachusetts 02116
This Prospectus/Proxy Statement is being furnished to shareholders of
The Money Market Fund ("Virtus Money Market") in connection with a proposed
Agreement and Plan of Reorganization (the "Plan") to be submitted to
shareholders of Virtus Money Market for consideration at a Special Meeting of
Shareholders to be held on February 20, 1998 at 2:00 p.m. at the offices of the
Evergreen Funds, 200 Berkeley Street, Boston, Massachusetts 02116, and any
adjournments thereof (the "Meeting"). The Plan provides for all of the assets of
Virtus Money Market to be acquired by Evergreen Money Market Fund ("Evergreen
Money Market") in exchange for shares of Evergreen Money Market and the
assumption by Evergreen Money Market of certain identified liabilities of Virtus
Money Market (hereinafter referred to as the "Reorganization"). Evergreen Money
Market and Virtus Money Market are sometimes hereinafter referred to
individually as the "Fund" and collectively as the "Funds." Following the
Reorganization, shares of Evergreen Money Market will be distributed to
shareholders of Virtus Money Market in liquidation of Virtus Money Market and
such Fund will be terminated. Holders of Investment shares of Virtus Money
Market will receive Class A shares of Evergreen Money Market, and holders of
Trust shares of Virtus Money Market will receive Class Y shares of Evergreen
Money Market. Each such class of shares of Evergreen Money Market has
substantially similar Rule 12b-1 distribution-related fees, if any, as the
shares of the class of Virtus Money Market held by them prior to the
Reorganization. No initial sales charge will be imposed in connection with Class
A shares of Evergreen Money Market received by holders of Investment shares of
Virtus Money Market. As a result of the proposed Reorganization, shareholders of
Virtus Money Market will receive that number of full and fractional shares of
Evergreen Money Market having an aggregate net asset value equal to the
aggregate net asset value of such shareholder's shares of Virtus Money
<PAGE>
Market. The Reorganization is being structured as a tax-free
reorganization for federal income tax purposes.
Evergreen Money Market is a separate series of Evergreen Money Market
Trust, an open-end management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The investment objective of
Evergreen Money Market is to achieve as high a level of current income as is
consistent with preserving capital and providing liquidity. The investment
objective of Virtus Money Market is substantially identical -- to provide
current income consistent with stability of principal. Each 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.
Shareholders of Virtus Money Market are also being asked to approve the
Interim Investment Advisory Agreement with Virtus Capital Management, Inc., a
subsidiary of First Union Corporation ("Virtus") (the "Interim Advisory
Agreement"), with the same terms and fees as the previous advisory agreement
between Virtus Money Market and Virtus. The Interim Advisory Agreement will be
in effect for the period of time between November 28, 1997, the date on which
the merger of Signet Banking Corporation with and into a wholly-owned subsidiary
of First Union Corporation was consummated, and the date of the Reorganization
(scheduled for on or about February 27, 1998).
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about Evergreen Money Market
that shareholders of Virtus Money Market should know before voting on the
Reorganization. Certain relevant documents listed below, which have been filed
with the Securities and Exchange Commission ("SEC"), are incorporated in whole
or in part by reference. A Statement of Additional Information dated January 5,
1998, relating to this Prospectus/Proxy Statement and the Reorganization which
includes the financial statements of Evergreen Money Market dated August 31,
1997 and of Virtus Money Market dated September 30, 1997, has been filed with
the SEC and is incorporated by reference in its entirety into this
Prospectus/Proxy Statement. A copy of such Statement of Additional Information
is available upon request and without charge by writing to Evergreen Money
Market at 200 Berkeley Street, Boston, Massachusetts 02116 or by calling
toll-free 1-800-343-2898.
The two Prospectuses of Evergreen Money Market dated October 31, 1996,
as amended, and its Annual Report for the fiscal year ended August 31, 1997 are
incorporated herein by reference in their entirety, insofar as they relate to
Evergreen Money Market only, and not to any other funds described therein. The
Prospectuses, which pertain to (i) Class Y shares and (ii) Class A, Class B and
Class C shares, differ only insofar as they describe the separate distribution
and shareholder servicing
<PAGE>
arrangements applicable to the classes. Shareholders of Virtus Money Market will
receive, with this Prospectus/Proxy Statement, copies of the Prospectus
pertaining to the class of shares of Evergreen Money Market that they will
receive as a result of the consummation of the Reorganization. Additional
information about Evergreen Money Market is contained in its Statement of
Additional Information of the same date which has been filed with the SEC and
which is available upon request and without charge by writing to or calling
Evergreen Money Market at the address or telephone number listed in the
preceding paragraph.
The two Prospectuses of Virtus Money Market (which pertain to (i) Trust
shares and (ii) Investment shares) dated November 30, 1997, insofar as they
relate to Virtus Money Market only, and not to any other funds described
therein, are incorporated herein in their entirety by reference. Copies of the
Prospectuses and related Statements of Additional Information dated the same
date, are available upon request without charge by writing to Virtus Money
Market at the address listed on the cover page of this Prospectus/Proxy
Statement or by calling toll-free 1-800- 829-3863.
Included as Exhibits A and B to this Prospectus/Proxy Statement are a
copy of the Plan and the Interim Advisory Agreement, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The shares offered by this Prospectus/Proxy Statement are not deposits
or obligations of any bank and 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 risk, including
possible
loss of capital.
<PAGE>
TABLE OF CONTENTS
Page
COMPARISON OF FEES AND EXPENSES...........................................6
SUMMARY ................................................................10
Proposed Plan of Reorganization.................................10
Tax Consequences................................................12
Investment Objectives and Policies of the Funds.................13
Comparative Performance Information for each Fund...............13
Management of the Funds.........................................15
Investment Advisers and Sub-Adviser.............................15
Administrator...................................................16
Distribution of Shares..........................................16
Purchase and Redemption Procedures..............................18
Exchange Privileges.............................................18
Dividend Policy.................................................19
Risks .......................................................19
REASONS FOR THE REORGANIZATION...........................................20
Agreement and Plan of Reorganization............................23
Federal Income Tax Consequences.................................25
Pro-forma Capitalization........................................26
Shareholder Information.........................................28
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES.........................29
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS..........................31
Forms of Organization...........................................31
Capitalization..................................................32
Shareholder Liability...........................................32
Shareholder Meetings and Voting Rights..........................33
Liquidation or Dissolution......................................34
Liability and Indemnification of Trustees.......................34
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT.....................36
Introduction....................................................36
Comparison of the Interim Advisory Agreement and the
Previous Advisory Agreement............................37
Information About Virtus Money Market's Investment
Adviser....................................................38
ADDITIONAL INFORMATION...................................................39
VOTING INFORMATION CONCERNING THE MEETING................................39
FINANCIAL STATEMENTS AND EXPERTS.........................................42
LEGAL MATTERS............................................................42
<PAGE>
OTHER BUSINESS...........................................................43
APPENDIX A...............................................................44
EXHIBIT A
EXHIBIT B
EXHIBIT C
<PAGE>
COMPARISON OF FEES AND EXPENSES
The amounts for Class Y and Class A shares of Evergreen Money Market
set forth in the following tables and in the examples are based on the expenses
of Evergreen Money Market for the fiscal year ended August 31, 1997. The amounts
for Trust and Investment shares of Virtus Money Market set forth in the
following tables and in the examples are based on the expenses for Virtus Money
Market for the fiscal year ended September 30, 1997. The pro forma amounts for
Class Y and Class A shares of Evergreen Money Market are based on what the
combined expenses would have been for Evergreen Money Market for the fiscal year
ending August 31, 1997. All amounts are adjusted for voluntary expense waivers.
The following tables show for Evergreen Money Market, Virtus Money
Market and Evergreen Money Market pro forma, assuming consummation of the
Reorganization, the shareholder transaction expenses and annual fund operating
expenses associated with an investment in the Class Y, Class A, Trust and
Investment shares of each Fund, as applicable.
<PAGE>
Comparison of Class A and Class Y Shares
of Evergreen Money Market With Trust and
Investment Shares of Virtus Money Market
<TABLE>
<CAPTION>
Evergreen Money Virtus Money
Market Market
Class Y Class A Trust Investment
<S> <C> <C> <C> <C>
Shareholder
Transaction Expenses
Maximum Sales Load None None None None
Imposed on Purchases
(as a percentage of
offering price)
Maximum Sales Load None None None None
Imposed on Reinvested
Dividends (as a
percentage of offering
price)
Contingent Deferred None None None None (1)
Sales Charge (as a
percentage of original
purchase price or
redemption proceeds,
whichever is lower)
Exchange Fee None None None None
Annual Fund Operating
Expenses (as a
percentage of average
daily net assets)
Management Fee (After 0.41% 0.41% 0.48% 0.48%
Waiver) (2)
12b-1 Fees (3) None 0.30% None 0.25%
Other Expenses 0.07% 0.08% 0.24% 0.24%
----- ----- ----- -----
Annual Fund Operating 0.48% 0.79% 0.72% 0.97%
===== ===== ===== =====
Expenses (4)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Evergreen Money Market Pro Forma
Class Y Class A
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on None None
Purchases (as a percentage of offering
price)
Maximum Sales Load Imposed on None None
Reinvested Dividends (as a percentage
of offering price)
Contingent Deferred Sales Charge (as a None None
percentage of original purchase price
or redemption proceeds, whichever is
lower)
Redemption Fee None None
Exchange Fee None None
Annual Fund Operating Expenses (as a
percentage of average daily net
assets)
Management Fee 0.46% 0.46%
12b-1 Fees (3) 0.00% 0.30%
Other Expenses (After Reimbursement) 0.02% 0.03%
----- -----
Annual Fund Operating Expenses (5) 0.48% 0.79%
===== =====
</TABLE>
- -------------------
(1) A contingent deferred sales charge will be imposed on the Investment shares
of Virtus Money Market only in the limited circumstances in which shares
being redeemed were acquired in exchange for Investment shares in those
Virtus Funds which charge a contingent deferred sales charge. The
contingent deferred sales charge is 2.00% of the lesser of the original
purchase price or the net asset value of shares redeemed, within five years
following the purchase date of such shares, and 0.00% thereafter.
(2) The management fee for Evergreen Money Market has been reduced from
0.46% to reflect the voluntary waiver by the investment adviser. The
management fee for Virtus Money Market has been reduced from 0.50% to
reflect the voluntary waiver by the investment adviser.
<PAGE>
(3) Class A shares of Evergreen Money Market can pay up to 0.75% of average
daily net assets as a 12b-1 fee. For the foreseeable future, the Class
A 12b-1 fees will be limited to 0.30% of average daily net assets.
(4) Annual Fund Operating Expenses for Class Y and Class A shares of Evergreen
Money Market would have been 0.53% and 0.84%, respectively, for the fiscal
year ended August 31, 1997 absent fee waivers described in footnote 2
above. Annual Fund Operating Expenses for Trust and Investment shares of
Virtus Money Market would have been 0.74% and 0.99%, respectively, for the
fiscal year ended September 30, 1997 absent fee waivers described in
footnote 2 above.
(5) Annual Fund Operating Expenses for Class Y and Class A shares of
Evergreen Money Market pro forma for the fiscal year ending August 31,
1997 would have been 0.53% and 0.84%, respectively, absent expense
reimbursements of 0.05% for each of Class Y and Class A shares.
Examples. The following tables show for Evergreen Money Market and
Virtus Money Market, and for Evergreen Money Market pro forma, assuming
consummation of the Reorganization, examples of the cumulative effect of
shareholder transaction expenses and annual fund operating expenses indicated
above on a $1,000 investment in each class of shares for the periods specified,
assuming (i) a 5% annual return, (ii) redemption at the end of such period and,
additionally for Investment shares, no redemption at the end of each period.
<TABLE>
<CAPTION>
Evergreen Money Market
Three Five
One Year Years Years Ten Years
<S> <C> <C> <C> <C>
Class Y $5 $15 $27 $60
Class A $8 $25 $44 $98
Virtus Money Market
Three Five
One Year Years Years Ten Years
Trust $7 $23 $40 $89
Investment $30 $51 $54 $119
(Assuming
redemption at end
of period)
Investment $10 $31 $54 $119
(Assuming no
redemption at end
of period)
</TABLE>
<TABLE>
<CAPTION>
Evergreen Money Market Pro Forma
Three Five
One Year Years Years Ten Years
<S> <C> <C> <C> <C>
Class Y $5 $15 $27 $60
Class A $8 $25 $44 $98
</TABLE>
The purpose of the foregoing examples is to assist Virtus Money Market
shareholders in understanding the various costs and expenses that an investor in
Evergreen Money Market would bear, directly and indirectly, as a result of the
Reorganization as compared with the various direct and indirect expenses
currently borne by a shareholder in Virtus Money Market. These examples should
not be considered a representation of past or future expenses or annual return.
Actual expenses may be greater or less than those shown.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy Statement,
and, to the extent not inconsistent with such additional information, the
Prospectuses of Evergreen Money Market dated October 31, 1996, as amended, and
the Prospectuses of Virtus Money Market dated November 30, 1997 (which are
incorporated herein by reference), the Plan and the Interim Advisory Agreement,
forms of which are attached to this Prospectus/Proxy Statement as Exhibits A and
B, respectively.
Proposed Plan of Reorganization
The Plan provides for the transfer of all of the assets of Virtus Money
Market in exchange for shares of Evergreen Money Market and the assumption by
Evergreen Money Market of certain identified liabilities of Virtus Money Market.
The identified liabilities consist only of those liabilities reflected on the
Fund's statement of assets and liabilities determined immediately preceding the
Reorganization. The Plan also calls for the distribution of shares of Evergreen
Money Market to Virtus Money Market shareholders in liquidation of Virtus Money
Market as part of the Reorganization. As a result of the Reorganization, the
holders of Investment shares and Trust shares, respectively, of Virtus Money
Market will become the owners of that number of full and fractional Class A and
Class Y shares of Evergreen Money Market having an aggregate net asset value
equal to the aggregate net asset value of the holders' shares of Virtus Money
Market, as of the close of business immediately prior to the date that Virtus
Money Market's assets are exchanged for shares of Evergreen Money Market. See
"Reasons for the Reorganization Agreement and Plan of Reorganization."
<PAGE>
The Trustees of The Virtus Funds, including the Trustees who are not
"interested persons," as such term is defined in the 1940 Act (the "Independent
Trustees"), have concluded that the Reorganization would be in the best
interests of shareholders of Virtus Money Market, and that the interests of the
shareholders of Virtus Money Market will not be diluted as a result of the
transactions contemplated by the Reorganization. Accordingly, the Trustees have
submitted the Plan for the approval of Virtus Money Market's shareholders.
THE BOARD OF TRUSTEES OF THE VIRTUS FUNDS
RECOMMENDS APPROVAL BY SHAREHOLDERS OF VIRTUS MONEY MARKET
OF THE PLAN EFFECTING THE REORGANIZATION.
The Trustees of Evergreen Money Market Trust have also approved the Plan,
and accordingly, Evergreen Money Market's participation in the Reorganization.
Approval of the Reorganization on the part of Virtus Money Market will
require the affirmative vote of a majority of Virtus Money Market's shares
present and entitled to vote, with all classes voting together as a single class
at a Meeting at which a quorum of Virtus Money Market shares is present. A
majority of the outstanding shares entitled to vote, represented in person or by
proxy, is required to constitute a quorum at the Meeting. See "Voting
Information Concerning the Meeting."
The merger (the "Merger") of Signet Banking Corporation ("Signet") with
and into a wholly-owned subsidiary of First Union Corporation ("First Union")
has been consummated and, as a result, by law the Merger terminated the
investment advisory agreement between Virtus and Virtus Money Market. Prior to
consummation of the Merger, Virtus Money Market received an order from the SEC
which permitted the implementation, without formal shareholder approval, of a
new investment advisory agreement between the Fund and Virtus for a period of
not more than 120 days beginning on the date of the closing of the Merger and
continuing through the date the Interim Advisory Agreement is approved by the
Fund's shareholders (but in no event later than April 30, 1998). The Interim
Advisory Agreement has the same terms and fees as the previous investment
advisory agreement between Virtus Money Market and Virtus. The Reorganization is
scheduled to take place on or about February 27, 1998.
Approval of the Interim Advisory Agreement requires the affirmative
vote of (i) 67% or more of the shares of Virtus Money Market present in person
or by proxy at the Meeting, if holders of more than 50% of the shares of Virtus
Money Market outstanding on the record date are present, in person or by proxy,
or (ii) more than 50% of the outstanding shares of Virtus Money Market,
whichever is less. See "Voting Information Concerning the Meeting."
<PAGE>
If the shareholders of Virtus Money Market do not vote to approve the
Reorganization, the Trustees will consider other possible courses of action in
the best interests of shareholders.
Tax Consequences
Prior to or at the completion of the Reorganization, Virtus Money
Market will have received an opinion of Sullivan & Worcester LLP that the
Reorganization has been structured so that no gain or loss will be recognized by
the Fund or its shareholders for federal income tax purposes as a result of the
receipt of shares of Evergreen Money Market in the Reorganization. The holding
period and aggregate tax basis of shares of Evergreen Money Market that are
received by Virtus Money Market's shareholders will be the same as the holding
period and aggregate tax basis of shares of the Fund previously held by such
shareholders, provided that shares of the Fund are held as capital assets. In
addition, the holding period and tax basis of the assets of Virtus Money Market
in the hands of Evergreen Money Market as a result of the Reorganization will be
the same as in the hands of the Fund immediately prior to the Reorganization,
and no gain or loss will be recognized by Evergreen Money Market upon the
receipt of the assets of the Fund in exchange for shares of Evergreen Money
Market and the assumption by Evergreen Money Market of certain identified
liabilities.
Investment Objectives and Policies of the Funds
The investment objectives and policies of Evergreen Money Market and
Virtus Money Market are substantially identical.
The investment objective of Evergreen Money Market is to achieve as
high a level of current income as is consistent with preserving capital and
providing liquidity. The investment objective of Virtus Money Market is to
provide current income consistent with stability of principal.
Both Funds follow policies to maintain a stable net asset value of
$1.00 per share, although there is no assurance that either or both can do so on
a continuing basis. Each Fund will invest in securities that are determined to
present minimal credit risk and are, at the time of acquisition, eligible
securities under Rule 2a-7 of the 1940 Act. Evergreen Money Market may invest in
so-called "First Tier Securities" (i.e. securities rated in the highest
short-term rating category by nationally recognized statistical rating
organizations) and may invest up to 5% of the value of its assets in so-called
"Second Tier Securities" (i.e. securities which are not in the First Tier).
Virtus Money Market may invest only in First Tier Securities or in securities of
comparable quality. See "Comparison of Investment Objectives and Policies"
below.
<PAGE>
Comparative Performance Information for each Fund
Discussions of the manner of calculation of total return and yield are
contained in the respective Prospectuses and Statements of Additional
Information of the Funds. The following tables set forth the current yield and
effective yield of the Class Y and Class A Shares of Evergreen Money Market and
of the Trust and Investment Shares of Virtus Money Market for the 7 day period
ended September 30, 1997, the total return of each such Class of the Funds for
the one and five year periods ended September 30, 1997 and for the period from
inception through September 30, 1997. The calculations of total return assume
the reinvestment of all dividends and capital gains distributions on the
reinvestment date and the deduction of all recurring expenses (including sales
charges) that were charged to shareholders' accounts.
<TABLE>
<CAPTION>
Current Yield Effective Yield
7 Days Ended 7 Days Ended
September 30, September 30,
1997 (1) 1997 (1)
<S> <C> <C>
Evergreen Money Market
Class Y shares................................... 5.17% 5.31%
Class A shares................................... 4.87% 4.99%
Virtus Money Market
Trust Shares..................................... 4.84% 4.96%
Investment Shares................................ 4.59% 4.70%
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return (1)
From
1 Year 5 Years Inception
Ended Ended To
September September September Inception
30, 1997 30, 1997 30, 1997 Date
-------- -------- -------- ----
<S> <C> <C> <C> <C>
Evergreen
Money Market
Class Y 5.29% 4.57% 5.90% 11/2/87
shares
Class A 4.97% N/A 5.10% 1/4/95
shares
Virtus Money
Market
Trust shares 4.93% 4.31% 4.50% 10/16/90
<PAGE>
Investment
shares 4.67% 4.11% 4.36% 10/16/90
</TABLE>
- ----------------
(1) Reflects waiver of advisory fees and reimbursements and/or waivers of
expenses. Without such reimbursements and/or waivers, the yield and
average annual total return during the periods would have been lower.
Important information about Evergreen Money Market is also contained in
management's discussion of Evergreen Money Market's performance, attached hereto
as Exhibit C. This information also appears in Evergreen Money Market's most
recent Annual Report.
Management of the Funds
The overall management of Evergreen Money Market and of Virtus Money
Market is the responsibility of, and is supervised by, the Board of Trustees of
Evergreen Money Market Trust and The Virtus Funds, respectively.
Investment Advisers and Sub-Adviser
Evergreen Asset Management Corp. ("Evergreen Asset") serves as
investment adviser to Evergreen Money Market. Evergreen Asset, with its
predecessors, has served as investment adviser to the Evergreen family of mutual
funds since 1971. Evergreen Asset is a wholly-owned subsidiary of First Union
National Bank ("FUNB"). FUNB is a subsidiary of First Union, the sixth largest
bank holding company in the United States based on total assets as of September
30, 1997. FUNB and its affiliates manage the Evergreen family of mutual funds
with assets of approximately $40 billion as of November 30, 1997. For further
information regarding Evergreen Asset, FUNB and First Union, see "Management of
the Funds - Investment Advisers" in the Prospectuses of Evergreen Money Market.
Evergreen Asset manages investments and supervises the daily business
affairs of Evergreen Money Market subject to the authority of the Trustees.
Evergreen Asset is entitled to receive from the Fund an annual fee equal to
0.50% of the Fund's average daily net assets on the first $1 billion in assets
and 0.45% of average daily net assets in excess of $1 billion. Evergreen Asset
has voluntarily agreed to reimburse Evergreen Money Market to the extent that
its aggregate operating expenses (including Evergreen Asset's fee, but excluding
taxes, interest, brokerage commissions, Rule 12b-1 distribution-related fees and
shareholder servicing-related fees and extraordinary expenses) exceed 1.00% of
average daily net assets of Evergreen Money Market.
Evergreen Asset has entered into a sub-advisory agreement with Lieber &
Company, an indirect wholly-owned subsidiary of
<PAGE>
FUNB, 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 Evergreen Money
Market. 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 Evergreen Money
Market for the services provided by Lieber & Company.
Virtus serves as the investment adviser for Virtus Money Market. As
investment adviser, Virtus continuously conducts investment research and
supervision of Virtus Money Market and is responsible for the purchase and sale
of portfolio securities. For its services as investment adviser, Virtus receives
a fee at an annual rate of 0.50% of the Fund's average daily net assets.
Each investment adviser may, at its discretion, reduce or waive its fee
or reimburse a Fund for certain of its other expenses in order to reduce its
expense ratios. Each investment adviser may reduce or cease these voluntary
waivers and reimbursements at any time.
Administrator
Federated Administrative Services ("FAS") provides Virtus Money Market
with certain administrative personnel and services including certain legal and
accounting services. FAS is entitled to receive a fee for such services at the
following annual rates: 0.15% on the first $250 million of average daily net
assets of the combined assets of the funds in the Blanchard/Virtus mutual fund
family, 0.125% on the next $250 million of such assets, 0.10% on the next $250
million of such assets, and 0.075% on assets in excess of $750 million.
Distribution of Shares
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund
Services, acts as underwriter of Evergreen Money Market's shares. EDI
distributes the Fund's shares directly or through broker-dealers, banks
(including FUNB), or other financial intermediaries. Evergreen Money Market
offers five classes of shares: Class A, Class B, Class C, Class K and Class Y.
Each class has separate distribution arrangements. (See "Distribution-Related
Expenses" below.) No class bears the distribution expenses relating to the
shares of any other class.
In the proposed Reorganization, shareholders of Virtus Money Market who
own Trust shares will receive Class Y shares of Evergreen Money Market, and
shareholders of Virtus Money Market who own Investment shares will receive Class
A shares of Evergreen Money Market. The Class A and Class Y shares of Evergreen
Money Market have substantially similar arrangements
<PAGE>
with respect to the imposition of Rule 12b-1 distribution and service fees as
the Investment and Trust shares of Virtus Money Market. Because the
Reorganization will be effected at net asset value without the imposition of a
sales charge, Evergreen Money Market shares acquired by shareholders of Virtus
Money Market pursuant to the proposed Reorganization will not be subject to any
initial sales charge or contingent deferred sales charge ("CDSC") as a result of
the Reorganization.
The following is a summary description of charges and fees for the
Class Y and Class A shares of Evergreen Money Market which will be received by
Virtus Money Market shareholders in the Reorganization. More detailed
descriptions of the distribution arrangements applicable to the classes of
shares are contained in the respective Evergreen Money Market Prospectuses and
the Virtus Money Market Prospectuses and in each Fund's respective Statements of
Additional Information.
Class Y Shares. Class Y shares are sold at net asset value without an
initial sales charge or a CDSC. Class Y shares are only available to (i) all
shareholders of record in one or more of the Evergreen family of funds for which
Evergreen Asset served as investment adviser as of December 30, 1994, (ii)
certain institutional investors and (iii) investment advisory clients of FUNB,
Evergreen Asset or their affiliates. Virtus Money Market shareholders who
receive Evergreen Money Market Class Y shares in the Reorganization who wish to
make subsequent purchases of Evergreen Money Market shares will be able to
purchase Class Y shares.
Class A Shares. Class A shares are sold at net asset value without an
initial sales charge or a CDSC. As indicated below, Class A shares are subject
to distribution-related fees. Holders of Investment shares of Virtus Money
Market who receive Evergreen Money Market Class A shares in the Reorganization
will be able to purchase additional Class A shares of Evergreen Money Market and
of any other Evergreen fund at net asset value. No initial sales charge will be
imposed.
Additional information regarding the classes of shares of each Fund is
included in their respective Prospectuses and Statements of Additional
Information.
Distribution-Related Expenses. Evergreen Money Market has adopted a Rule 12b-1
plan with respect to its Class A shares under which the Class may pay for
distribution-related expenses at an annual rate which may not exceed 0.75% of
average daily net assets attributable to the Class. Payments with respect to
Class A shares are currently limited to 0.30% of average daily net assets
attributable to the Class, which amount may be increased to the full plan rate
for the Fund by the Trustees without shareholder approval.
<PAGE>
Virtus Money Market has adopted a Rule 12b-1 plan with respect to its
Investment shares under which the Class may pay for distribution-related
expenses at an annual rate of 0.25% of average daily net assets attributable to
the Class. Virtus Money Market has not adopted a Rule 12b-1 Plan with respect to
its Trust shares.
Additional information regarding the Rule 12b-1 plans adopted by each
Fund is included in its respective Prospectus and Statement of Additional
Information.
Purchase and Redemption Procedures
Information concerning applicable sales charges and
distribution-related fees is provided above. Investments in the Funds are not
insured. The minimum initial purchase requirement for each Fund is $1,000
($10,000 for Trust shares of Virtus Money Market). Except for the minimum
investment requirement of $100 for Investment shares of Virtus Money Market,
there is no minimum for subsequent purchases of shares of either Fund. Each Fund
provides for telephone, mail or wire redemption of shares at net asset value
(less any applicable CDSC in the case of Virtus Money Market) as next determined
after receipt of a redemption request on each day the New York Stock Exchange
("NYSE") is open for trading. Additional information concerning purchases and
redemptions of shares, including how each Fund's net asset value is determined,
is contained in the respective Prospectuses for each Fund. Each Fund may
involuntarily redeem shareholders' accounts that have less than $1,000 of
invested funds. All funds invested in each Fund are invested in full and
fractional shares. The Funds reserve the right to reject any purchase order.
Exchange Privileges
Virtus Money Market currently permits holders of Investment shares to
exchange such shares for Investment shares of other funds managed by Virtus.
Exchanges of Trust shares are not permitted. Holders of shares of a class of
Evergreen Money Market generally may exchange their shares for shares of the
same class of any other Evergreen fund. Virtus Money Market shareholders will be
receiving Class Y and Class A shares of Evergreen Money Market in the
Reorganization. With respect to shares of Evergreen Money Market received by
Virtus Money Market shareholders in the Reorganization, the exchange privilege
is limited to the Class Y and Class A shares, as applicable, of other Evergreen
funds. Evergreen Money Market limits exchanges to five per calendar year and
three per calendar quarter. No sales charge is imposed on an exchange. An
exchange which represents an initial investment in another Evergreen fund is
subject to the minimum investment and suitability requirements of such Fund. The
current exchange privileges, and the requirements and limitations attendant
thereto, are described in each Fund's respective Prospectuses and Statements of
Additional Information.
<PAGE>
Dividend Policy
Each Fund declares dividends of its net income daily and pays such
dividends monthly. Each Fund distributes its net capital gains, if any, at least
annually. Shareholders begin to earn dividends on the first business day after
shares are purchased unless shares were not paid for, in which case dividends
are not earned until the next business day after payment is received. Dividends
and distributions are reinvested in additional shares of the same class of the
respective Fund, or paid in cash, as a shareholder has elected. See the
respective Prospectuses of each Fund for further information concerning
dividends and distributions.
After the Reorganization, shareholders of Virtus Money Market who have
elected to have their dividends and/or distributions reinvested will have
dividends and/or distributions received from Evergreen Money Market reinvested
in shares of Evergreen Money Market. Shareholders of Virtus Money Market who
have elected to receive dividends and/or distributions in cash will receive
dividends and/or distributions from Evergreen Money Market in cash after the
Reorganization, although they may, after the Reorganization, elect to have such
dividends and/or distributions reinvested in additional shares of Evergreen
Money Market.
Each of Evergreen Money Market and Virtus Money Market has qualified
and intends to continue to qualify to be treated as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"). While
so qualified, so long as each Fund distributes all of its net investment company
taxable income and any net realized gains to shareholders, it is expected that a
Fund will not be required to pay any federal income taxes on the amounts so
distributed. A 4% nondeductible excise tax will be imposed on amounts not
distributed if a Fund does not meet certain distribution requirements by the end
of each calendar year. Each Fund anticipates meeting such distribution
requirements.
Risks
Since the investment objectives and policies of each Fund are
substantially the same, the risks involved in investing in each Fund's shares
are similar. There is no assurance that investment performances will be positive
or that either of the Funds will meet its investment objective. For a discussion
of each Fund's objectives and policies, see "Comparison of Investment Objectives
and Policies."
In general, an investment in either Fund entails substantially the same
risks. The Funds invest only in securities that have remaining maturities of 397
days (thirteen months) or less at the date of purchase. For this purpose,
<PAGE>
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 that 397 days pursuant to conditions
established by the SEC. The Funds maintain a dollar-weighted average portfolio
maturity of ninety days or less. The Funds follow these policies to maintain a
stable net asset value of $1.00 per share, although there is no assurance they
can do so on a continuing basis. The market value of the obligations in a Fund's
portfolio can be expected to vary inversely to changes in prevailing interest
rates.
REASONS FOR THE REORGANIZATION
On July 18, 1997, First Union entered into an Agreement and Plan of
Merger with Signet, which provided, among other things, for the Merger of Signet
with and into a wholly-owned subsidiary of First Union. The Merger was
consummated on November 28, 1997. As a result of the Merger it is expected that
FUNB and its affiliates will succeed to the investment advisory and
administrative functions currently performed for Virtus Money Market by various
units of Signet and various unaffiliated parties. It is also expected that
Signet will no longer, upon completion of the Reorganization and similar
reorganizations of other funds in the Signet mutual fund family, provide
investment advisory or administrative services to investment companies.
At a meeting held on September 16, 1997, the Board of Trustees of The
Virtus Funds considered and approved the Reorganization as in the best interests
of shareholders of Virtus Money Market and determined that the interests of
existing shareholders of Virtus Money Market will not be diluted as a result of
the transactions contemplated by the Reorganization. In addition, the Trustees
approved the Interim Advisory Agreement with respect to Virtus Money Market.
As noted above, Signet has merged with and into a wholly-owned
subsidiary of First Union. Signet is the parent company of Virtus, investment
adviser to the mutual funds which comprise The Virtus Funds. The Merger caused,
as a matter of law, termination of the investment advisory agreement between
each series of The Virtus Funds and Virtus with respect to the Fund. The Virtus
Funds have received an order from the SEC which permits Virtus to continue to
act as Virtus Money Market's investment adviser without shareholder approval,
for a period of not more than 120 days from the date the Merger was consummated
(November 28, 1997) to the date of shareholder approval of a new investment
advisory agreement. Accordingly, the Trustees have considered the
recommendations of Signet in approving the proposed Reorganization.
In approving the Plan, the Trustees reviewed various factors
about the Funds and the proposed Reorganization. There are
<PAGE>
substantial similarities between Evergreen Money Market and Virtus Money Market.
Specifically, Evergreen Money Market and Virtus Money Market have substantially
similar investment objectives and policies and comparable risk profiles. See
"Comparison of Investment Objectives and Policies" below. At the same time, the
Board of Trustees evaluated the potential economies of scale associated with
larger mutual funds and concluded that operational efficiencies may be achieved
upon the combination of Virtus Money Market with an Evergreen fund with a
greater level of assets. As of September 30, 1997, Evergreen Money Market's net
assets were approximately $3,359 million and Virtus Money Market's net assets
were approximately $241 million.
In addition, assuming that an alternative to the Reorganization would
be to propose that Virtus Money Market continue its existence and be separately
managed by Evergreen Asset or one of its affiliates, Virtus Money Market would
be offered through common distribution channels with the substantially similar
Evergreen Money Market. Virtus Money Market would also have to bear the cost of
maintaining its separate existence. Signet and Evergreen Asset believe that the
prospect of dividing the resources of the Evergreen mutual fund organization
between two similar funds could result in each Fund being disadvantaged due to
an inability to achieve optimum size, performance levels and the greatest
possible economies of scale. Accordingly, for the reasons noted above and
recognizing that there can be no assurance that any economies of scale or other
benefits will be realized, Signet and Evergreen Asset believe that the proposed
Reorganization would be in the best interests of each Fund and its shareholders.
The Board of Trustees of The Virtus Funds met and considered the
recommendation of Signet and Evergreen Asset, and, in addition, considered among
other things, (i) the terms and conditions of the Reorganization; (ii) whether
the Reorganization would result in the dilution of shareholders' interests;
(iii) expense ratios, fees and expenses of Evergreen Money Market and Virtus
Money Market; (iv) the comparative performance records of each of the Funds; (v)
compatibility of their investment objectives and policies; (vi) the investment
experience, expertise and resources of Evergreen Asset; (vii) the service and
distribution resources available to the Evergreen funds and the broad array of
investment alternatives available to shareholders of the Evergreen funds; (viii)
the personnel and financial resources of First Union and its affiliates; (ix)
the fact that FUNB will bear the expenses incurred by Virtus Money Market in
connection with the Reorganization; (x) the fact that Evergreen Money Market
will assume certain identified liabilities of Virtus Money Market; and (xi) the
expected federal income tax consequences of the Reorganization.
The Trustees also considered the benefits to be derived by shareholders
of Virtus Money Market from the sale of its assets
<PAGE>
to Evergreen Money Market. In this regard, the Trustees considered the potential
benefits of being associated with a larger entity and the economies of scale
that could be realized by the participation in such an entity by shareholders of
Virtus Money Market.
In addition, the Trustees considered that there are alternatives
available to shareholders of Virtus Money Market, including the ability to
redeem their shares, as well as the option to vote against the Reorganization.
During their consideration of the Reorganization the Trustees met with
Fund counsel and counsel to the Independent Trustees regarding the legal issues
involved. The Trustees of Evergreen Money Market Trust also concluded at a
meeting on September 16, 1997 that the proposed Reorganization would be in the
best interests of shareholders of Evergreen Money Market and that the interests
of the shareholders of Evergreen Money Market would not be diluted as a result
of the transactions contemplated by the Reorganization.
THE TRUSTEES OF THE VIRTUS FUNDS RECOMMEND
THAT THE SHAREHOLDERS OF VIRTUS MONEY MARKET APPROVE
THE PROPOSED REORGANIZATION.
Agreement and Plan of Reorganization
The following summary is qualified in its entirety by reference to the
Plan (Exhibit A hereto).
The Plan provides that Evergreen Money Market will acquire all of the
assets of Virtus Money Market in exchange for shares of Evergreen Money Market
and the assumption by Evergreen Money Market of certain identified liabilities
of Virtus Money Market on or about February 27, 1998 or such other date as may
be agreed upon by the parties (the "Closing Date"). Prior to the Closing Date,
Virtus Money Market will endeavor to discharge all of its known liabilities and
obligations. Evergreen Money Market will not assume any liabilities or
obligations of Virtus Money Market other than those reflected in an unaudited
statement of assets and liabilities of Virtus Money Market prepared as of the
close of regular trading on the NYSE, currently 4:00 p.m. Eastern time, on the
business day immediately prior to the Closing Date. The number of full and
fractional shares of each class of Evergreen Money Market to be received by the
shareholders of Virtus Money Market will be determined by multiplying the
respective outstanding class of shares of Virtus Money Market by a factor which
shall be computed by dividing the net asset value per share of the respective
class of shares of Virtus Money Market by the net asset value per share of the
respective class of shares of Evergreen Money Market. Such computations will
take place as of the close of regular trading on the NYSE on the business day
<PAGE>
immediately prior to the Closing Date. The net asset value per share of each
class will be determined by dividing assets, less liabilities, in each case
attributable to the respective class, by the total number of outstanding shares.
State Street Bank and Trust Company, the custodian for Evergreen Money
Market, will compute the value of each Fund's respective portfolio securities.
The method of valuation employed will be consistent with the procedures set
forth in the Prospectuses and Statement of Additional Information of Evergreen
Money Market, Rule 22c-1 under the 1940 Act, and with the interpretations of
such Rule by the SEC's Division of Investment Management.
At or prior to the Closing Date, Virtus Money Market will have declared
a dividend or dividends and distribution or distributions which, together with
all previous dividends and distributions, shall have the effect of distributing
to the Fund's shareholders (in shares of the Fund, or in cash, as the
shareholder has previously elected) all of the Fund's net investment company
taxable income for the taxable period ending on the Closing Date (computed
without regard to any deduction for dividends paid) and all of its net capital
gains realized in all taxable periods ending on the Closing Date (after
reductions for any capital loss carryforward).
As soon after the Closing Date as conveniently practicable, Virtus
Money Market will liquidate and distribute pro rata to shareholders of record as
of the close of business on the Closing Date the full and fractional shares of
Evergreen Money Market received by Virtus Money Market. Such liquidation and
distribution will be accomplished by the establishment of accounts in the names
of the Fund's shareholders on the share records of Evergreen Money Market's
transfer agent. Each account will represent the respective pro rata number of
full and fractional shares of Evergreen Money Market due to the Fund's
shareholders. All issued and outstanding shares of Virtus Money Market,
including those represented by certificates, will be canceled. The shares of
Evergreen Money Market to be issued will have no preemptive or conversion
rights. After such distributions and the winding up of its affairs, Virtus Money
Market will be terminated. In connection with such termination, The Virtus Funds
will file with the SEC an application for termination as a registered investment
company.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan, including approval by Virtus Money Market's shareholders,
accuracy of various representations and warranties and receipt of opinions of
counsel, including opinions with respect to those matters referred to in
"Federal Income Tax Consequences" below. Notwithstanding approval of Virtus
Money Market's shareholders, the Plan may be terminated (a) by the mutual
agreement of Virtus Money Market and Evergreen
<PAGE>
Money Market; or (b) at or prior to the Closing Date by either party (i) because
of a breach by the other party of any representation, warranty, or agreement
contained therein to be performed at or prior to the Closing Date if not cured
within 30 days, or (ii) because a condition to the obligation of the terminating
party has not been met and it reasonably appears that it cannot be met.
The expenses of Virtus Money Market in connection with the
Reorganization (including the cost of any proxy soliciting agent) will be borne
by FUNB whether or not the Reorganization is consummated. No portion of such
expenses will be borne directly or indirectly by Virtus Money Market or its
shareholders. There are not any liabilities or any expected reimbursements in
connection with the 12b-1 Plan of Virtus Money Market. As a result, no 12b-1
liabilities will be assumed by Evergreen Money Market following the
Reorganization.
If the Reorganization is not approved by shareholders of Virtus Money
Market, the Board of Trustees of The Virtus Funds will consider other possible
courses of action in the best
interests of shareholders.
Federal Income Tax Consequences
The Reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368(a) of the Code. As a
condition to the closing of a Reorganization, Virtus Money Market will receive
an opinion of Sullivan & Worcester LLP to the effect that, on the basis of the
existing provisions of the Code, U.S. Treasury regulations issued thereunder,
current administrative rules, pronouncements and court decisions, for federal
income tax purposes, upon consummation of the Reorganization:
(1) The transfer of all of the assets of Virtus Money Market solely in
exchange for shares of Evergreen Money Market and the assumption by Evergreen
Money Market of certain identified liabilities, followed by the distribution of
Evergreen Money Market's shares by Virtus Money Market in dissolution and
liquidation of Virtus Money Market, will constitute a "reorganization" within
the meaning of section 368(a)(1)(C) of the Code, and Evergreen Money Market and
Virtus Money Market will each be a "party to a reorganization" within the
meaning of section 368(b) of the Code;
(2) No gain or loss will be recognized by Virtus Money Market on the
transfer of all of its assets to Evergreen Money Market solely in exchange for
Evergreen Money Market's shares and the assumption by Evergreen Money Market of
certain identified liabilities of Virtus Money Market or upon the distribution
of Evergreen Money Market's shares to Virtus Money Market's shareholders in
exchange for their shares of the Fund;
<PAGE>
(3) The tax basis of the assets transferred will be the same to
Evergreen Money Market as the tax basis of such assets to Virtus Money Market
immediately prior to the Reorganization, and the holding period of such assets
in the hands of Evergreen Money Market will include the period during which the
assets were held by Virtus Money Market;
(4) No gain or loss will be recognized by Evergreen Money Market upon
the receipt of the assets from Virtus Money Market solely in exchange for the
shares of Evergreen Money Market and the assumption by Evergreen Money Market of
certain identified liabilities of Virtus Money Market;
(5) No gain or loss will be recognized by Virtus Money Market's
shareholders upon the issuance of the shares of Evergreen Money Market to them,
provided they receive solely such shares (including fractional shares) in
exchange for their shares of Virtus Money Market; and
(6) The aggregate tax basis of the shares of Evergreen Money Market,
including any fractional shares, received by each of the shareholders of Virtus
Money Market pursuant to the Reorganization will be the same as the aggregate
tax basis of the shares of Virtus Money Market held by such shareholder
immediately prior to the Reorganization, and the holding period of the shares of
Evergreen Money Market, including fractional shares, received by each such
shareholder will include the period during which the shares of Virtus Money
Market exchanged therefor were held by such shareholder (provided that the
shares of the Fund were held as a capital asset on the date of the
Reorganization).
Opinions of counsel are not binding upon the Internal Revenue Service
or the courts. If the Reorganization is consummated but does not qualify as a
tax-free reorganization under the Code, a shareholder of Virtus Money Market
would recognize a taxable gain or loss equal to the difference between his or
her tax basis in his or her Fund shares and the fair market value of Evergreen
Money Market shares he or she received. Shareholders of Virtus Money Market
should consult their tax advisers regarding the effect, if any, of the proposed
Reorganization in light of their individual circumstances. It is not anticipated
that the securities of the combined portfolio will be sold in significant
amounts in order to comply with the policies and investment practices of
Evergreen Money Market. Since the foregoing discussion relates only to the
federal income tax consequences of the Reorganization, shareholders of Virtus
Money Market should also consult their tax advisers as to the state and local
tax consequences, if any, of the Reorganization.
Pro-forma Capitalization
<PAGE>
The following table sets forth the capitalizations of Evergreen Money
Market and Virtus Money Market as of September 30, 1997 and the capitalization
of Evergreen Money Market on a pro forma basis as of that date, giving effect to
the proposed acquisition of assets at net asset value. The pro forma data
reflects an exchange ratio of approximately 1.00 and 1.00 Class Y and Class A
shares, respectively, of Evergreen Money Market issued for each Trust and
Investment share, respectively, of Virtus Money Market.
<TABLE>
<CAPTION>
Capitalization of Virtus Money Market,
Evergreen Money Market and Evergreen
Money Market (Pro Forma)
Evergreen Money
Virtus Money Evergreen Money Market (After
Market Market Reorganization)
<S> <C> <C> <C>
Net Assets
Trust.......................... $164,290,280 N/A N/A
Investment..................... $77,220,470 N/A N/A
Class A........................ N/A $2,765,660,868 $2,842,881,338
Class B........................ N/A $19,980,018 $19,980,018
Class C........................ N/A $4,548,126 $4,548,126
Class K........................ N/A $186,604 $186,604
Class Y........................ N/A $568,378,112 $732,668,392
------------ --------------- ---------------
Total Net $241,510,750 $3,358,753,728 $3,600,264,478
Assets.......................
Net Asset Value Per
Share
Trust.......................... $1.00 N/A N/A
Investment..................... $1.00 N/A N/A
Class A........................ N/A $1.00 $1.00
Class B........................ N/A $1.00 $1.00
Class C........................ N/A $1.00 $1.00
Class K........................ N/A $1.00 $1.00
Class Y........................ N/A $1.00 $1.00
Shares Outstanding
Trust.......................... 164,290,280 N/A N/A
Investment..................... 77,220,470 N/A N/A
Class A........................ N/A 2,765,805,651 2,843,026,121
Class B........................ N/A 19,983,079 19,983,079
Class C........................ N/A 4,549,434 4,549,434
Class K........................ N/A 186,604 186,604
Class Y........................ N/A 568,939,822 733,230,102
------------ -------------- -------------
All Classes.................... 241,510,750 3,359,464,590 3,600,975,340
</TABLE>
The table set forth above should not be relied upon to reflect the
number of shares to be received in the Reorganization; the actual number of
shares to be received will
<PAGE>
depend upon the net asset value and number of shares outstanding of each Fund at
the time of the Reorganization.
Shareholder Information
As of December 26, 1997 (the "Record Date"), the following number of
each Class of shares of beneficial interest of Virtus Money Market were
outstanding:
Class of Shares
Trust.......................................... 201,390,525
Investment..................................... 71,428,188
-----------
All Classes.................................... 272,818,713
As of November 30, 1997, the officers and Trustees of The Virtus Funds
beneficially owned as a group less than 1% of the outstanding shares of Virtus
Money Market. To Virtus Money Market's knowledge, the following persons owned
beneficially or of record more than 5% of Virtus Money Market's total
outstanding shares as of November 30, 1997:
<TABLE>
<CAPTION>
Percentage of
Percentage Shares of Class
of Shares of After Reorgani-
Class Before zation
Reorgani-
No. of zation
Name and Address Class Shares
<S> <C> <C> <C> <C>
Bova & Co. Trust 210,172,525 97.05% 25.89% Class Y
Signet Trust
Company
P.O. Box 26311
Richmond, VA
23260-6311
</TABLE>
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by
the descriptions of the respective investment objectives, policies and
restrictions set forth in the respective Prospectuses and Statements of
Additional Information of the Funds. The investment objective, policies and
restrictions of Evergreen Money Market can be found in the Prospectuses of
Evergreen Money Market under the caption "Investment Objectives and Policies."
Evergreen Money Market's Prospectuses also offer additional funds advised by
FUNB or its affiliates. These additional funds are not involved in the
Reorganization, their investment objectives and policies are not discussed in
this Prospectus/Proxy Statement and their shares are not offered hereby. The
investment objective, policies and restrictions of Virtus Money Market can be
found in the Prospectuses of the Fund under the caption "Investment Objective
and Policies of each Fund." Unlike the investment objective of Virtus Money
Market, which is fundamental, the investment objective of Evergreen Money Market
is non-fundamental and can be changed by the Board of Trustees without
shareholder approval.
The investment objective of Evergreen Money Market is to achieve as
high a level of current income as is consistent with preserving capital and
providing liquidity. The Fund invests in high quality money market instruments,
which are determined to be of eligible quality under 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
<PAGE>
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.
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 an 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.
Evergreen Money Market may invest up to 30% of its total assets in bank
certificates of deposit and bankers' acceptances payable in U.S. dollars and
issued by foreign banks (including U.S. branches of foreign banks) or by foreign
branches of U.S.
banks.
Evergreen Money Market may invest in commercial paper and other
short-term corporate obligations which meet the rating criteria specified in
paragraphs 3 and 4 above and which are
<PAGE>
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.
The investment objective of Virtus Money Market is substantially
identical to that of Evergreen Money Market: to provide current income
consistent with stability of principal. Virtus Money Market and Evergreen Money
Market invest in similar securities. Both invest in a diversified portfolio of
high quality money market instruments maturing in 397 days or less. Both
maintain a dollar-weighted average portfolio maturity of 90 days or less. Both
invest only in instruments denominated and payable in U.S. dollars. However,
Virtus Money Market does not have a policy limiting investments in foreign bank
instruments.
The characteristics of each investment policy and the associated risks
are described in each Fund's respective Prospectuses and Statements of
Additional Information. The Funds have other investment policies and
restrictions which are also set forth in the Prospectuses and Statements of
Additional Information of each Fund.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
Forms of Organization
Evergreen Money Market Trust and The Virtus Funds are open-end
management investment companies registered with the SEC under the 1940 Act,
which continuously offer shares to the public. Evergreen Money Market Trust is
organized as a Delaware business trust and The Virtus Funds is organized as a
Massachusetts business trust. Each Trust is governed by a Declaration of Trust,
By-Laws and a Board of Trustees. Each Trust is also governed by applicable
Delaware, Massachusetts and federal law. Evergreen Money Market is a series of
Evergreen Money Market Trust and Virtus Money Market is a series of The Virtus
Funds.
As set forth in the Supplement to Evergreen Money Market's
Prospectuses, effective December 22, 1997, Evergreen Money Market Fund, a series
of Evergreen Money Market Trust, a Massachusetts business trust, was reorganized
(the "Delaware Reorganization") into a corresponding series (Evergreen Money
Market) of Evergreen Money Market Trust. In connection with the Delaware
Reorganization, the Fund's investment objective was reclassified from
"fundamental" to "non-fundamental" and therefore may be changed without
shareholder approval; the Fund adopted certain standardized investment
restrictions; and the Fund eliminated or
<PAGE>
reclassified from fundamental to non-fundamental certain of the Fund's other
currently fundamental investment restrictions.
Capitalization
The beneficial interests in Evergreen Money Market are represented by
an unlimited number of transferable shares of beneficial interest, $.001 par
value per share. The beneficial interests in Virtus Money Market are represented
by an unlimited number of transferable shares of beneficial interest without par
value. The respective Declaration of Trust under which each Fund has been
established permits the Trustees to allocate shares into an unlimited number of
series, and classes thereof, with rights determined by the Trustees, all without
shareholder approval. Fractional shares may be issued. Each Fund's shares
represent equal proportionate interests in the assets belonging to the Funds.
Shareholders of each Fund are entitled to receive dividends and other amounts as
determined by the Trustees. Shareholders of each Fund vote separately, by class,
as to matters, such as approval of or amendments to Rule 12b-1 distribution
plans, that affect only their particular class and by series as to matters, such
as approval of or amendments to investment advisory agreements or proposed
reorganizations, that affect only their particular series.
Shareholder Liability
Under Massachusetts law, shareholders of a business trust could, under
certain circumstances, be held personally liable for the obligations of the
business trust. However, the Declaration of Trust under which Virtus Money
Market was established disclaims shareholder liability for acts or obligations
of the series and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Fund or the
Trustees. The Virtus Funds' Declaration of Trust provides for indemnification
out of the series property for all losses and expenses of any shareholder held
personally liable for the obligations of the series. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
considered remote since it is limited to circumstances in which a disclaimer is
inoperative and the series or the trust itself would be unable to meet its
obligations.
Under Delaware law, shareholders of a Delaware business trust are
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. No similar statutory or other authority limiting
business trust shareholder liability exists in any other state. As a result, to
the extent that Evergreen Money Market Trust or a shareholder is subject to the
jurisdiction of courts in those states, the courts may not apply Delaware law,
and may thereby subject shareholders of a Delaware business trust to liability.
To guard against this risk, the Declaration of Trust of Evergreen Money Market
Trust
<PAGE>
(a) provides that any written obligation of the Trust may contain a statement
that such obligation may only be enforced against the assets of the Trust or the
particular series in question and the obligation is not binding upon the
shareholders of the Trust; however, the omission of such a disclaimer will not
operate to create personal liability for any shareholder; and (b) provides for
indemnification out of Trust property of any shareholder held personally liable
for the obligations of the Trust. Accordingly, the risk of a shareholder of
Evergreen Money Market Trust incurring financial loss beyond that shareholder's
investment because of shareholder liability is limited to circumstances in
which: (i) the court refuses to apply Delaware law; (ii) no contractual
limitation of liability was in effect; and (iii) the Trust itself is unable to
meet its obligations. In light of Delaware law, the nature of the Trust's
business, and the nature of its assets, the risk of personal liability to a
shareholder of Evergreen Money Market Trust is remote.
Shareholder Meetings and Voting Rights
Neither Evergreen Money Market Trust on behalf of Evergreen Money
Market nor The Virtus Funds on behalf of Virtus Money Market is required to hold
annual meetings of shareholders. However, a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee must be called when
requested in writing by the holders of at least 10% of the outstanding shares of
Evergreen Money Market Trust or The Virtus Funds. In addition, each is required
to call a meeting of shareholders for the purpose of electing Trustees if, at
any time, less than a majority of the Trustees then holding office were elected
by shareholders. Each Trust currently does not intend to hold regular
shareholder meetings. Each Trust does not permit cumulative voting. Except when
a larger quorum is required by applicable law, with respect to Evergreen Money
Market, twenty-five percent (25%) of the outstanding shares entitled to vote,
and with respect to Virtus Money Market, a majority of the outstanding shares
entitled to vote constitutes a quorum for consideration of such matter. For
Evergreen Money Market and for Virtus Money Market, a majority of the votes cast
and entitled to vote is sufficient to act on a matter (unless otherwise
specifically required by the applicable governing documents or other law,
including the 1940 Act).
Under the Declaration of Trust of Evergreen Money Market Trust, each
share of Evergreen Money Market will be entitled to one vote for each dollar of
net asset value applicable to each share. Under the voting provisions governing
Virtus Money Market, each share is entitled to one vote. Over time, the net
asset values of the mutual funds which are each a series of The Virtus Funds
have changed in relation to one another and are expected to continue to do so in
the future. Because of the divergence in net asset values, a given dollar
investment in a fund which is a series of The Virtus Funds and which has a lower
<PAGE>
net asset value will purchase more shares and, under the current voting
provisions of The Virtus Funds, will have more votes, than the same investment
in a fund with a higher net asset value. Under the Declaration of Trust of
Evergreen Money Market Trust, voting power is related to the dollar value of the
shareholders' investment rather than to the number of shares held.
Liquidation or Dissolution
In the event of the liquidation of Evergreen Money Market and Virtus
Money Market the shareholders are entitled to receive, when, and as declared by
the Trustees, the excess of the assets belonging to such Fund or attributable to
the class over the liabilities belonging to the Fund or attributable to the
class. In either case, the assets so distributable to shareholders of the Fund
will be distributed among the shareholders in proportion to the number of shares
of a class of the Fund held by them and recorded on the books of the Fund.
Liability and Indemnification of Trustees
The Declaration of Trust of The Virtus Funds provides that a Trustee
shall be liable only for his own willful defaults, and that no Trustee shall be
protected against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
The By-Laws of The Virtus Funds provide that a present or former
Trustee or officer is entitled to indemnification against liabilities and
expenses with respect to claims related to his or her position with the Trust,
provided that no indemnification shall be provided to a Trustee or officer
against any liability to the Trust or any series thereof or the shareholders of
any series by reasons of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Under the Declaration of Trust of Evergreen Money Market Trust, a
Trustee is liable to the Trust and its shareholders only for such Trustee's own
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of the office of Trustee or the discharge of such
Trustee's functions. As provided in the Declaration of Trust, each Trustee of
the Trust is entitled to be indemnified against all liabilities against him or
her, including the costs of litigation, unless it is determined that the Trustee
(i) did not act in good faith in the reasonable belief that such Trustee's
action was in or not opposed to the best interests of the Trust; (ii) had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
such Trustee's duties; and (iii) in a criminal proceeding, had reasonable cause
to believe that such Trustee's conduct was unlawful (collectively,
<PAGE>
"disabling conduct"). A determination that the Trustee did not engage in
disabling conduct and is, therefore, entitled to indemnification may be based
upon the outcome of a court action or administrative proceeding or by (a) a vote
of a majority of those Trustees who are neither "interested persons" within the
meaning of the 1940 Act nor parties to the proceeding or (b) an independent
legal counsel in a written opinion. The Trust may also advance money for such
litigation expenses provided that the Trustee undertakes to repay the Trust if
his or her conduct is later determined to preclude indemnification and certain
other conditions are met.
The foregoing is only a summary of certain characteristics of the
operations of the Declarations of Trust, By-Laws, Delaware and Massachusetts law
and is not a complete description of those documents or law. Shareholders should
refer to the provisions of such Declarations of Trust, By-Laws, Delaware and
Massachusetts
law directly for more complete information.
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT
Introduction
In view of the Merger discussed above, and the factors discussed below,
the Board of Trustees of The Virtus Funds recommends that shareholders of Virtus
Money Market approve the Interim Advisory Agreement. The Merger became effective
on November 28, 1997. Pursuant to an order received from the SEC all fees
payable under the Interim Advisory Agreement will be placed in escrow and paid
to Virtus if shareholders approve the contract within 120 days of its effective
date. The Interim Advisory Agreement will remain in effect until the earlier of
the Closing Date for the Reorganization or two years from its effective date.
The terms of the Interim Advisory Agreement are essentially the same as the
Previous Advisory Agreement (as defined below). The only difference between the
Previous Advisory Agreement and the Interim Advisory Agreement, if approved by
shareholders, is the length of time each Agreement is in effect. A description
of the Interim Advisory Agreement pursuant to which Virtus continues as
investment adviser to Virtus Money Market, as well as the services to be
provided by Virtus pursuant thereto as set forth below under "Advisory
Services." The description of the Interim Advisory Agreement in this
Prospectus/Proxy Statement is qualified in its entirety by reference to the
Interim Advisory Agreement, attached hereto as Exhibit B.
Virtus, a Maryland corporation formed in 1995 to succeed to the
business of Signet Asset Management (adviser to the Fund since 1990), is an
indirect wholly-owned subsidiary of First Union. Virtus' address is 707 East
Main Street, Suite 1300, Richmond, Virginia 23219. Virtus has served as
investment adviser pursuant to an Investment Advisory Contract dated March
<PAGE>
1, 1995, as amended on October 21, 1996. As used herein, the Investment Advisory
Agreement, as amended, for Virtus Money Market is referred to as the "Previous
Advisory Agreement." At a meeting of the Board of Trustees of The Virtus Funds
held on September 16, 1997, the Trustees, including a majority of the
Independent Trustees, approved the Interim Advisory Agreement for Virtus Money
Market.
The Trustees have authorized The Virtus Funds, on behalf of Virtus
Money Market, to enter into the Interim Advisory Agreement with Virtus. Such
Agreement became effective on November 28, 1997. If the Interim Advisory
Agreement for Virtus Money Market is not approved by the shareholders, the
Trustees will consider appropriate actions to be taken with respect to Virtus
Money Market's investment advisory arrangements at that time. The Previous
Advisory Agreement was last approved by the Trustees, including a majority of
the Independent Trustees, on February 24, 1997.
Comparison of the Interim Advisory Agreement and the Previous
Advisory Agreement.
Advisory Services. The management and advisory services to be provided
by Virtus under the Interim Advisory Agreement are identical to those currently
provided by Virtus under the Previous Advisory Agreement. Under the Previous
Advisory Agreement and Interim Advisory Agreement, Virtus manages Virtus Money
Market and continually conducts investment research and supervision for the Fund
and is responsible for the purchase and sale of portfolio securities.
FAS currently acts as administrator of Virtus Money Market. FAS will
continue during the term of the Interim Advisory Agreement as Virtus Money
Market's administrator for the same compensation as currently received. An
affiliate of FAS currently performs transfer agency services for Virtus Money
Market's shareholders. Commencing February 9, 1998 Evergreen Service Company
will provide such transfer agency services for the same fees charged by Virtus
Money Market's current transfer agent. See "Summary - Administrator."
Fees and Expenses. The investment advisory fees and expense limitations for
Virtus Money Market under the Previous Advisory Agreement and the Interim
Advisory Agreement are identical. See "Summary -Investment Advisers and
Sub-Adviser."
Expense Reimbursement. The Previous Advisory Agreement included a
provision which provides that Virtus may from time to time and for such periods
as it deems appropriate reduce its compensation to the extent that the Fund's
expenses exceed such lower expense limitation as Virtus may, by notice to The
Virtus Funds, voluntarily declare to be effective. Furthermore, Virtus may, if
it deems appropriate, assume expenses of the Fund or a
<PAGE>
class to the extent that the Fund's or classes' expenses exceed such lower
expense limitation as Virtus may, by notice to The Virtus Funds, voluntarily
declare to be effective.
The Interim Advisory Agreement contains an identical provision.
Payment of Expenses and Transaction Charges. Under the Previous
Advisory Agreement, The Virtus Funds was required to pay or cause to be paid on
behalf of the Fund or each class, all of the Fund's or classes' expenses and the
Fund's or classes' allocable share of The Virtus Funds' expenses.
The Interim Advisory Agreement contains an identical provision.
Limitation of Liability. The Previous Advisory Agreement provided that
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties under the Agreement on the part of Virtus,
Virtus was not liable to The Virtus Funds or to the Fund or to any shareholder
for any act or omission in the course of or connected in any way with rendering
services or for any losses that may be sustained in the purchase, holding or
sale of any security.
The Interim Advisory Agreement contains an identical provision.
Termination; Assignment. The Interim Advisory Agreement provides that
it may be terminated without penalty by vote of a majority of the outstanding
voting securities of Virtus Money Market (as defined in the 1940 Act) or by a
vote of a majority of The Virtus Funds' entire Board of Trustees on 60 days'
written notice to Virtus or by Virtus on 60 days' written notice to The Virtus
Funds. Also, the Interim Advisory Agreement will automatically terminate in the
event of its assignment (as defined in the 1940 Act). The Previous Advisory
Agreement contained identical provisions as to termination and assignment.
Information About Virtus Money Market's Investment Adviser
Virtus, a registered investment adviser, manages, in addition to the
Fund, other funds of The Virtus Funds, the Blanchard Group of Funds and three
fixed income trust funds. The name and address of each executive officer and
director of Virtus are set forth in Appendix A to this Prospectus/Proxy
Statement.
During the fiscal years ended September 30, 1997, 1996 and 1995, Virtus
received from Virtus Money Market management fees of $1,250,019, $1,249,811 and
$868,490, respectively, of which $57,472, $299,129 and $336,697, respectively,
were voluntarily waived. Virtus is currently waiving a portion of its management
fee. See "Comparison of Fees and Expenses." Signet acts as
<PAGE>
custodian for Virtus Money Market and received $74,934 for the fiscal year ended
September 30, 1997. Commencing on or about January 20, 1998 FUNB will act as
Virtus Money Market's custodian during the term of the Interim Advisory
Agreement.
The Board of Trustees considered the Interim Advisory Agreement as part
of its overall approval of the Plan. The Board of Trustees considered, among
other things, the factors set forth above in "Reasons for the Reorganization."
The Board of Trustees also considered the fact that there were no material
differences between the terms of the Interim Advisory Agreement and the terms of
the Previous Advisory Agreement.
THE TRUSTEES OF THE VIRTUS FUNDS RECOMMEND THAT
THE SHAREHOLDERS OF VIRTUS MONEY MARKET APPROVE
THE INTERIM ADVISORY AGREEMENT
ADDITIONAL INFORMATION
Evergreen Money Market. Information concerning the operation and
management of Evergreen Money Market is incorporated herein by reference from
the Prospectuses dated October 31, 1996, as amended, copies of which are
enclosed, and the Statement of Additional Information of the same date. A copy
of such Statement of Additional Information is available upon request and
without charge by writing to Evergreen Money Market at the address listed on the
cover page of this Prospectus/Proxy Statement or by calling toll-free
1-800-343-2898.
Virtus Money Market. Information about the Fund is included in its
current Prospectuses dated November 30, 1997 and in the Statements of Additional
Information of the same date, that have been filed with the SEC, all of which
are incorporated herein by reference. Copies of the Prospectuses and Statements
of Additional Information are available upon request and without charge by
writing to Virtus Money Market at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling toll-free 1-800-829-3863.
Evergreen Money Market and Virtus Money Market are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information including
proxy material, and charter documents with the SEC. These items can be inspected
and copies obtained at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices located at Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661- 2511 and Seven World Trade Center, Suite 1300, New York, New
York 10048.
VOTING INFORMATION CONCERNING THE MEETING
<PAGE>
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Trustees of The Virtus Funds to be used at the
Special Meeting of Shareholders to be held at 2:00 p.m., February 20, 1998, at
the offices of the Evergreen Funds, 200 Berkeley Street, Boston, Massachusetts
02116 and at any adjournments thereof. This Prospectus/Proxy Statement, along
with a Notice of the meeting and a proxy card, is first being mailed to
shareholders of Virtus Money Market on or about January 5, 1998. Only
shareholders of record as of the close of business on the Record Date will be
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
The holders of a majority of the outstanding shares entitled to vote, at the
close of business on the Record Date, present in person or represented by proxy,
will constitute a quorum for the Meeting. If the enclosed form of proxy is
properly executed and returned in time to be voted at the Meeting, the proxies
named therein will vote the shares represented by the proxy in accordance with
the instructions marked thereon. Unmarked proxies will be voted FOR the proposed
Reorganization, FOR the Interim Advisory Agreement and FOR any other matters
deemed appropriate. Proxies that reflect abstentions and "broker non-votes"
(i.e., shares held by brokers or nominees as to which (i) instructions have not
been received from the beneficial owners or the persons entitled to vote or (ii)
the broker or nominee does not have discretionary voting power on a particular
matter) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but will not be counted as
shares voted and will have no effect on the vote regarding the Plan. However,
such "broker non-votes" will have the effect of being counted as votes against
the Interim Advisory Agreement which must be approved by a percentage of the
shares present at the Meeting or a majority of the outstanding voting
securities. A proxy may be revoked at any time on or before the Meeting by
written notice to the Secretary of The Virtus Funds, Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. Unless revoked, all valid proxies will be
voted in accordance with the specifications thereon or, in the absence of such
specifications, FOR approval of the Plan and the Reorganization contemplated
thereby and FOR approval of the Interim Advisory Agreement.
Approval of the Plan will require the affirmative vote of a majority of
the shares voted and entitled to vote, with all classes voting together as a
single class at the Meeting at which a quorum of the Fund's shares is present.
Approval of the Interim Advisory Agreement will require the affirmative vote of
(i) 67% or more of the outstanding voting securities if holders of more than 50%
of the outstanding voting securities are present, in person or by proxy, at the
Meeting, or (ii) more than 50% of the outstanding voting securities, whichever
is less, with all classes voting together as one class. Each full share
outstanding is entitled to one vote and each fractional share outstanding is
entitled to a proportionate share of one vote.
<PAGE>
Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone, telegraph or personal solicitations
conducted by officers and employees of FUNB or Signet, their affiliates or other
representatives of Virtus Money Market (who will not be paid for their
soliciting activities). Shareholder Communications Corporation has been engaged
by Virtus Money Market to assist in soliciting proxies.
If you wish to participate in the Meeting, you may submit the proxy
card included with this Prospectus/Proxy Statement or attend in person. Any
proxy given by you is revocable.
In the event that sufficient votes to approve the Reorganization are
not received by February 20, 1998, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further solicitation of proxies.
In determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will require an affirmative vote by the holders of a
majority of the shares present in person or by proxy and entitled to vote at the
Meeting. The persons named as proxies will vote upon such adjournment after
consideration of all circumstances which may bear upon a decision to adjourn the
Meeting.
A shareholder who objects to the proposed Reorganization will not be
entitled under either Massachusetts law or the Declaration of Trust of The
Virtus Funds to demand payment for, or an appraisal of, his or her shares.
However, shareholders should be aware that the Reorganization as proposed is not
expected to result in recognition of gain or loss to shareholders for federal
income tax purposes and that, if the Reorganization is consummated, shareholders
will be free to redeem the shares of Evergreen Money Market which they receive
in the transaction at their then-current net asset value. Shares of Virtus Money
Market may be redeemed at any time prior to the consummation of the
Reorganization. Shareholders of Virtus Money Market may wish to consult their
tax advisers as to any differing consequences of redeeming Fund shares prior to
the Reorganization or exchanging such shares in the Reorganization.
Virtus Money Market does not hold annual shareholder meetings. If the
Reorganization is not approved, shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of The Virtus Funds
at the address set forth on the cover of this Prospectus/Proxy Statement such
that they will be received by the Fund in a reasonable period of time prior to
any such meeting.
<PAGE>
The votes of the shareholders of Evergreen Money Market are not being
solicited by this Prospectus/Proxy Statement and are not required to carry out
the Reorganization.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES.
Please advise Virtus Money Market whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of copies of
this Prospectus/Proxy Statement needed to supply copies to the beneficial owners
of the respective shares.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of Evergreen Money Market as of August 31,
1997, and the financial statements and financial highlights for the periods
indicated therein, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of Price Waterhouse LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The financial statements and financial highlights of Virtus Money
Market incorporated in this Prospectus/Proxy Statement by reference from the
Annual Report of The Virtus Funds for the year ended September 30, 1997 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Evergreen
Money Market will be passed upon by Sullivan & Worcester LLP, Washington, D.C.
OTHER BUSINESS
The Trustees of The Virtus Funds do not intend to present any other
business at the Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy will
vote thereon in accordance with their judgment.
THE TRUSTEES OF THE VIRTUS FUNDS RECOMMEND APPROVAL OF THE PLAN AND THE
INTERIM ADVISORY AGREEMENT, AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE
CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN AND THE INTERIM ADVISORY
AGREEMENT.
January 5, 1998
<PAGE>
APPENDIX A
The names and addresses of the principal executive officers
and directors of Virtus Capital Management, Inc. are as follows:
OFFICERS:
Name Address
- ---- -------
David C. Francis, Chief First Union National Bank
Investment Officer 201 South College Street
Charlotte, North Carolina 28288-
1195
Tanya Orr Bird, Vice Virtus Capital Management, Inc.
President 707 East Main Street
Suite 1300
Richmond, Virginia 23219
Josie Clemons Rosson, Vice Virtus Capital Management, Inc.
President, Assistant 707 East Main Street
Secretary Suite 1300
Richmond, Virginia 23219
L. Robert Cheshire, Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-
1195
John E. Gray, Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-
1195
Dillon S. Harris, Jr., Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-
1195
J. Kellie Allen, Vice First Union National Bank
President 201 South College Street
Charlotte, North Carolina 28288-
1195
Ethel B. Sutton, Vice Evergreen Asset Management Corp.
President 2500 Westchester Avenue
Purchase, New York 10577
DIRECTORS:
<PAGE>
Name Address
- ---- -------
David C. Francis First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-
1195
Donald A. McMullen First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-
1195
William M. Ennis First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-
1195
Barbara J. Colvin First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-
1195
William D. Munn First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1195
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 26th day of November, 1997, by and between the Evergreen Money Market
Trust, a Delaware business trust, with its principal place of business at 200
Berkeley Street, Boston, Massachusetts 02116 (the "Trust"), with respect to its
Evergreen Money Market Fund series (the "Acquiring Fund"), and The Virtus Funds,
a Massachusetts business trust, with its principal place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 ("Virtus Funds"),
with respect to its The Money Market Fund series (the "Selling Fund").
This Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of (i) the transfer of all of
the assets of the Selling Fund in exchange solely for Class A and Class Y shares
of beneficial interest, $.001 par value per share, of the Acquiring Fund (the
"Acquiring Fund Shares"); (ii) the assumption by the Acquiring Fund of certain
identified liabilities of the Selling Fund; and (iii) the distribution, after
the Closing Date hereinafter referred to, of the Acquiring Fund Shares to the
shareholders of the Selling Fund in liquidation of the Selling Fund as provided
herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are each a separate
investment series of an open-end, registered investment company of the
management type and the Selling Fund owns securities that generally are assets
of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of
beneficial interest;
WHEREAS, the Trustees of the Trust have determined that the exchange of
all of the assets of the Selling Fund for Acquiring Fund Shares and the
assumption of certain identified liabilities of the Selling Fund by the
Acquiring Fund on the terms and conditions hereinafter set forth are in the best
interests of the Acquiring Fund's shareholders;
WHEREAS, the Trustees of Virtus Funds have determined that the Selling
Fund should exchange all of its assets and certain identified liabilities for
Acquiring Fund Shares and that the interests of the existing shareholders of the
Selling Fund will
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not be diluted as a result of the transactions contemplated
herein;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR
THE ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND
LIABILITIES AND LIQUIDATION OF THE SELLING FUND
1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth
and on the basis of the representations and warranties contained herein, the
Selling Fund agrees to transfer all of the Selling Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange
therefor (i) to deliver to the Selling Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of each such class of the Selling Fund by the net
asset value per share of the corresponding class of Acquiring Fund Shares
computed in the manner and as of the time and date set forth in paragraph 2.2;
and (ii) to assume certain identified liabilities of the Selling Fund, as set
forth in paragraph 1.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Closing Date").
1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be
acquired by the Acquiring Fund shall consist of all property, including, without
limitation, all cash, securities, commodities, and interests in futures and
dividends or interest receivables, that is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books of the Selling Fund
on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of Selling Fund's
assets as of the date thereof. The Selling Fund hereby represents that as of the
date of the execution of this Agreement there have been no changes in its
financial position as reflected in said financial statements other than those
occurring in the ordinary course of its business in connection with the purchase
and sale of securities and the payment of its normal operating expenses.
The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a list of the securities, if any, on the
Selling Fund's list referred to in the second sentence of this paragraph that do
not conform to the Acquiring Fund's investment objectives, policies, and
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restrictions. The Selling Fund will, within a reasonable period of time prior to
the Closing Date, furnish the Acquiring Fund with a list of its portfolio
securities and other investments. In the event that the Selling Fund holds any
investments that the Acquiring Fund may not hold, the Selling Fund, if requested
by the Acquiring Fund, will dispose of such securities prior to the Closing
Date. In addition, if it is determined that the Selling Fund and the Acquiring
Fund portfolios, when aggregated, would contain investments exceeding certain
percentage limitations imposed upon the Acquiring Fund with respect to such
investments, the Selling Fund if requested by the Acquiring Fund will dispose of
a sufficient amount of such investments as may be necessary to avoid violating
such limitations as of the Closing Date. Notwithstanding the foregoing, nothing
herein will require the Selling Fund to dispose of any investments or securities
if, in the reasonable judgment of the Selling Fund, such disposition would
adversely affect the tax-free nature of the Reorganization or would violate the
Selling Fund's fiduciary duty to its shareholders.
1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date. The Acquiring Fund shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and Liabilities of the
Selling Fund prepared on behalf of the Selling Fund, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any other liabilities,
whether absolute or contingent, known or unknown, accrued or unaccrued, all of
which shall remain the obligation of the Selling Fund.
In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by the Acquiring Fund under the National
Association of Securities Dealers, Inc. Conduct Rule 2830 ("Aggregate NASD
Cap"), the Acquiring Fund will add to its Aggregate NASD Cap immediately prior
to the Reorganization the Aggregate NASD Cap of the Selling Fund immediately
prior to the Reorganization, in each case calculated in accordance with such
Rule 2830.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date
as is conveniently practicable (the "Liquidation Date"), (a) the Selling Fund
will liquidate and distribute pro rata to the Selling Fund's shareholders of
record, determined as of the close of business on the Valuation Date (the
"Selling Fund Shareholders"), the Acquiring Fund Shares received by the Selling
Fund pursuant to paragraph 1.1; and (b) the Selling Fund will thereupon proceed
to dissolve as set forth in
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paragraph 1.8 below. Such liquidation and distribution will be accomplished by
the transfer of the Acquiring Fund Shares then credited to the account of the
Selling Fund on the books of the Acquiring Fund to open accounts on the share
records of the Acquiring Fund in the names of the Selling Fund Shareholders and
representing the respective pro rata number of the Acquiring Fund Shares due
such shareholders. All issued and outstanding shares of the Selling Fund will
simultaneously be canceled on the books of the Selling Fund. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the combined Prospectus
and Proxy Statement on Form N-14 to be distributed to shareholders of the
Selling Fund as described in paragraph 5.7.
1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the
Selling Fund is and shall remain the responsibility of the Selling Fund up to
and including the Closing Date and such later date on which the Selling Fund is
terminated.
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1.8 TERMINATION. The Selling Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
business day next preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Trust's Declaration of Trust and the Acquiring Fund's then current
prospectuses and statement of additional information or such other valuation
procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of the Acquiring
Fund Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectuses and statement of additional
information.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares of
each class to be issued (including fractional shares, if any) in exchange for
the Selling Fund's assets shall be determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of the Selling Fund attributable to each of its
classes by the net asset value per share of the respective classes of the
Acquiring Fund determined in accordance with paragraph 2.2. Holders of
Investment shares and Trust shares of the Selling Fund will receive Class A and
Class Y shares, respectively, of the Acquiring Fund.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
State Street Bank and Trust Company in accordance with its regular practice in
pricing the shares and assets of the Acquiring Fund.
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ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The Closing (the "Closing") shall take place on or
about February 27, 1998 or such other date as the parties may agree to in
writing (the "Closing Date"). All acts taking place at the Closing shall be
deemed to take place simultaneously immediately prior to the opening of business
on the Closing Date unless otherwise provided. The Closing shall be held as of
9:00 a.m. at the offices of the Evergreen Funds, 200 Berkeley Street, Boston, MA
02116, or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. Signet Trust Company, as custodian for the
Selling Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that (a) the Selling Fund's portfolio securities,
cash, and any other assets shall have been delivered in proper form to the
Acquiring Fund on the Closing Date; and (b) all necessary taxes including all
applicable federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities by the Selling Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date (a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Evergreen Service Company, as
transfer agent for the Selling Fund as of the Closing Date shall deliver at the
Closing a certificate of an authorized officer stating that its records contain
the names and addresses of the Selling Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver or
cause Evergreen Service Company, its transfer agent as of the Closing Date, to
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date to the Secretary of Virtus Funds or provide
evidence satisfactory to the Selling Fund that such Acquiring Fund Shares have
been credited to the Selling Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, share
<PAGE>
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUND. The Selling Fund
represents and warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing, and in good
standing under the laws of The Commonwealth of Massachusetts.
(b) The Selling Fund is a separate investment series of a
Massachusetts business trust that is registered as an investment company
classified as a management company of the open-end type, and its registration
with the Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
is in full force and effect.
(c) The current prospectuses and statement of additional
information of the Selling Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of Virtus Funds' Declaration of Trust or By-Laws
or of any material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Selling Fund is a party or by which it is bound.
<PAGE>
(e) The Selling Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with liability
to it prior to the Closing Date except for liabilities, if any, to be discharged
or reflected on the Statement of Assets and Liabilities as provided in paragraph
1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted
by the Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Selling Fund or any of its properties
or assets, which, if adversely determined, would materially and adversely affect
its financial condition, the conduct of its business, or the ability of the
Selling Fund to carry out the transactions contemplated by this Agreement. The
Selling Fund knows of no facts that might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(g) The financial statements of the Selling Fund at September
30, 1997 are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the Selling
Fund as of such date, and there are no known contingent liabilities of the
Selling Fund as of such date not disclosed therein.
(h) Since September 30, 1997 there has not been any material
adverse change in the Selling Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Selling Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a
decline in the net asset value of the Selling Fund shall not constitute a
material adverse change.
(i) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid, or provision shall have been made for the
payment thereof. To the best of the Selling Fund's knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, the Selling
Fund has met the requirements of Subchapter M of the Code for
<PAGE>
qualification and treatment as a regulated investment company and has
distributed in each such year all net investment income and realized capital
gains.
(k) All issued and outstanding shares of the Selling Fund are,
and at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Selling Fund (except that, under Massachusetts
law, Selling Fund Shareholders could under certain circumstances be held
personally liable for obligations of the Selling Fund). All of the issued and
outstanding shares of the Selling Fund will, at the time of the Closing Date, be
held by the persons and in the amounts set forth in the records of the transfer
agent as provided in paragraph 3.4. The Selling Fund does not have outstanding
any options, warrants, or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares.
(l) At the Closing Date, the Selling Fund will have good and
marketable title to the Selling Fund's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2 and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act, other than as
disclosed to the Acquiring Fund and accepted by the Acquiring Fund.
(m) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Selling
Fund and, subject to approval by the Selling Fund Shareholders, this Agreement
constitutes a valid and binding obligation of the Selling Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights and to general equity principles.
(n) The information to be furnished by the Selling Fund for
use in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable thereto.
(o) The Proxy Statement of the Selling Fund to be included in
the Registration Statement (as defined in paragraph 5.7)(other than information
therein that relates to the Acquiring Fund) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue statement
of a
<PAGE>
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
4.2.1 REPRESENTATIONS OF THE ACQUIRING FUND. The
Acquiring Fund represents and warrants to the Selling Fund as
follows:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust that is registered as an investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect.
(c) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling
Fund and accepted by the Selling Fund, no litigation, administrative proceeding
or investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition and the conduct of its business or the
ability of the Acquiring Fund to carry out the transactions contemplated by this
Agreement. The Acquiring Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental body
that materially and adversely affects its business or its ability to consummate
the transactions contemplated herein.
<PAGE>
(f) The financial statements of the Acquiring Fund at August
31, 1997 are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been furnished
to the Selling Fund) fairly reflect the financial condition of the Acquiring
Fund as of such date, and there are no known contingent liabilities of the
Acquiring Fund as of such date not disclosed therein.
(g) Since August 31, 1997, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Selling Fund. For the purposes of this subparagraph (g), a
decline in the net asset value of the Acquiring Fund shall not constitute a
material adverse change.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid or provision shall have been made for the
payment thereof. To the best of the Acquiring Fund's knowledge, no such return
is currently under audit, and no assessment has been asserted with respect to
such returns.
(i) For each fiscal year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(j) All issued and outstanding Acquiring Fund Shares are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any Acquiring Fund
Shares, nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(k) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights and to general equity
principles.
(l) The Acquiring Fund Shares to be issued and delivered to
the Selling Fund, for the account of the Selling Fund Shareholders, pursuant to
the terms of this Agreement will,
<PAGE>
at the Closing Date, have been duly authorized and, when so issued and
delivered, will be duly and validly issued Acquiring Fund Shares, and will be
fully paid and non-assessable.
(m) The information to be furnished by the Acquiring Fund for
use in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto.
(n) The Prospectus and Proxy Statement (as defined in
paragraph 5.7) to be included in the Registration Statement (only insofar as it
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
(o) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act,
and such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
4.2.2 REPRESENTATIONS OF PREDECESSOR FUND. The representations and
warranties set forth in Section 4.2.1 shall be deemed to include, to the extent
applicable, representations and warranties made by and on behalf of Evergreen
Money Market Fund (the "Predecessor Fund"), a series of Evergreen Money Market
Trust, a Massachusetts business trust, as of the date hereof. The Acquiring Fund
shall deliver to the Selling Fund a certificate of the Predecessor Fund of even
date making the representations set forth in Section 4.2.1 with respect to the
Predecessor Fund to the extent applicable to the Predecessor Fund as of the date
hereof.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Selling
Fund each will operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary course of
business will include customary dividends and distributions.
5.2 APPROVAL OF SHAREHOLDERS. Virtus Funds will call a
meeting of the Selling Fund Shareholders to consider and act upon
<PAGE>
this Agreement and to take all other action necessary to obtain approval of the
transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Selling Fund covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but
in any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund for
federal income tax purposes that will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be reviewed by Price
Waterhouse LLP and certified by Virtus Funds' President and Treasurer.
5.7 PREPARATION OF FORM N-14 REGISTRATION STATEMENT. The Selling Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus, which will include the proxy statement, referred to
in paragraph 4.1(o) (the "Prospectus and Proxy Statement"), all to be included
in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act in
connection with the meeting of the Selling Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.8 CAPITAL LOSS CARRYFORWARDS. AS promptly as practicable, but in any
case within sixty days after the Closing Date, the Acquiring Fund and the
Selling Fund shall cause Price Waterhouse LLP to issue a letter addressed to the
Acquiring Fund and the Selling Fund, in form and substance satisfactory to the
Funds, setting forth the federal income tax implications relating to capital
loss carryforwards (if any) of the Selling Fund and the related impact, if any,
of the proposed transfer of all of
<PAGE>
the assets of the Selling Fund to the Acquiring Fund and the ultimate
dissolution of the Selling Fund, upon the shareholders of the Selling Fund.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants, and warranties of the Acquiring
Fund contained in this Agreement shall be true and correct as of the date hereof
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by the Trust's President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Selling Fund and dated as of the Closing Date, to
such effect and as to such other matters as the Selling Fund shall reasonably
request.
6.2 The Selling Fund shall have received on the Closing Date an opinion
from Sullivan & Worcester LLP, counsel to the Acquiring Fund, dated as of the
Closing Date, in a form reasonably satisfactory to the Selling Fund, covering
the following points:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed, and
delivered by the Acquiring Fund and, assuming due authorization, execution and
delivery of this Agreement by the Selling Fund, is a valid and binding
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and to general equity principles.
<PAGE>
(d) Assuming that a consideration therefor not less than the
net asset value thereof has been paid, the Acquiring Fund Shares to be issued
and delivered to the Selling Fund on behalf of the Selling Fund Shareholders as
provided by this Agreement are duly authorized and upon such delivery will be
legally issued and outstanding and fully paid and non-assessable, and no
shareholder of the Acquiring Fund has any preemptive rights in respect thereof.
(e) The Registration Statement, to such counsel's knowledge,
has been declared effective by the Commission and no stop order under the 1933
Act pertaining thereto has been issued, and to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the State of Delaware is required for consummation by
the Acquiring Fund of the transactions contemplated herein, except such as have
been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(f) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound.
(g) Only insofar as they relate to the Acquiring Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(h) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
(i) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Acquiring Fund or
any of its properties or assets and the Acquiring Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body,
<PAGE>
which materially and adversely affects its business, other than as previously
disclosed in the Registration Statement.
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Acquiring Fund at
which the contents of the Prospectus and Proxy Statement and related matters
were discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Prospectus and Proxy Statement (except to the extent indicated
in paragraph (g) of their above opinion), on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions of the Trust's officers
and other representatives of the Acquiring Fund), no facts have come to their
attention that lead them to believe that the Prospectus and Proxy Statement as
of its date, as of the date of the Selling Fund Shareholders' meeting, and as of
the Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the Acquiring Fund
or necessary, in the light of the circumstances under which they were made, to
make the statements therein regarding the Acquiring Fund not misleading. Such
opinion may state that such counsel does not express any opinion or belief as to
the financial statements or any financial or statistical data, or as to the
information relating to the Selling Fund, contained in the Prospectus and Proxy
Statement or the Registration Statement, and that such opinion is solely for the
benefit of Virtus Funds and the Selling Fund. Such opinion shall contain such
other assumptions and limitations as shall be in the opinion of Sullivan &
Worcester LLP appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to the Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
6.3 The merger between First Union Corporation and Signet Banking
Corporation shall be completed prior to the Closing Date.
6.4 The acquisition of the assets of the Predecessor Fund by the
Acquiring Fund shall have been completed prior to the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Selling Fund of all the
<PAGE>
obligations to be performed by it hereunder on or before the Closing Date and,
in addition thereto, the following conditions:
7.1 All representations, covenants, and warranties of the Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Selling Fund shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by Virtus Funds'
President or Vice President and the Treasurer or Assistant Treasurer, in form
and substance satisfactory to the Acquiring Fund and dated as of the Closing
Date, to such effect and as to such other matters as the Acquiring Fund shall
reasonably request.
7.2 The Selling Fund shall have delivered to the Acquiring Fund a
statement of the Selling Fund's assets and liabilities, together with a list of
the Selling Fund's portfolio securities showing the tax costs of such securities
by lot and the holding periods of such securities, as of the Closing Date,
certified by the Treasurer of Virtus Funds.
7.3.1 The Acquiring Fund shall have received on the Closing Date an
opinion of Dickstein Shapiro Morin & Oshinsky LLP, counsel to the Selling Fund,
in a form satisfactory to the Acquiring Fund covering the following points:
(a) The Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts and has the power
to own all of its properties and assets and to carry on its business as
presently conducted.
(b) The Selling Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act, and, to such counsel's knowledge, such registration with the Commission as
an investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed and
delivered by the Selling Fund and, assuming due authorization, execution, and
delivery of this Agreement by the Acquiring Fund, is a valid and binding
obligation of the Selling Fund enforceable against the Selling Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or The Commonwealth of Massachusetts is required for consummation by the
Selling Fund of
<PAGE>
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act, and as may be required under state
securities laws.
(e) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of Virtus Funds' Declaration of Trust or By-laws, or any provision of
any material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which the Selling Fund is a
party or by which it or any of its properties may be bound or, to the knowledge
of such counsel, result in the acceleration of any obligation or the imposition
of any penalty, under any agreement, judgment, or decree to which the Selling
Fund is a party or by which it is bound.
(f) The descriptions in the Prospectus and Proxy Statement of
this Agreement, as set forth under the caption "Reasons for the Reorganization -
Agreement and Plan of Reorganization," the Interim Advisory Agreement and the
Previous Advisory Agreement, as set forth under the caption "Information
Regarding the Interim Advisory Agreement," and the description of voting
requirements applicable to approval of the Interim Advisory Agreement, as set
forth under the caption "Voting Information Concerning the Meeting," insofar as
the latter constitutes a summary of applicable voting requirements under the
Investment Company Act of 1940, as amended, are, in each case, accurate and
fairly present the information required to be shown by the applicable
requirements of Form N-14.
(g) Such counsel does not know of any legal or governmental
proceedings, insofar as they relate to the Selling Fund existing on or before
the date of mailing of the Prospectus and Proxy Statement and the Closing Date,
required to be described in the Prospectus and Proxy Statement or to be filed as
an exhibit to the Registration Statement which are not described or filed as
required.
(h) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Selling Fund or
any of its respective properties or assets and the Selling Fund is neither a
party to nor subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects its business
other than as previously disclosed in the Prospectus and Proxy Statement.
7.3.2 The Acquiring Fund shall have received on the Closing
Date an opinion of C. Grant Anderson, Esq., Assistant Secretary of Virtus Funds,
in form satisfactory to the Acquiring Fund as follows: Assuming that a
consideration therefor of not less than the net asset value thereof has been
paid, and assuming
<PAGE>
that such shares were issued in accordance with the terms of the Selling Fund's
registration statement, or any amendment thereto, in effect at the time of such
issuance, all issued and outstanding shares of the Selling Fund are legally
issued and fully paid and non-assessable (except that, under Massachusetts law,
Selling Fund Shareholders could under certain circumstances be held personally
liable for obligations of the Selling Fund).
Mr. Anderson shall also state that he has reviewed and is familiar with
the contents of the Prospectus and Proxy Statement and, although he is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Prospectus and Proxy
Statement, on the basis of the foregoing, no facts have come to his attention
that lead him to believe that the Prospectus and Proxy Statement as of its date,
as of the date of the Selling Fund Shareholders' meeting, and as of the Closing
Date, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein regarding the Selling Fund or
necessary, in the light of the circumstances under which they were made, to make
the statements therein regarding the Selling Fund not misleading. Such opinion
may state that he does not express any opinion or belief as to the financial
statements or any financial or statistical data, or as to the information
relating to the Acquiring Fund, contained in the Prospectus and Proxy Statement
or Registration Statement.
The opinions set forth in paragraphs 7.3.1 and 7.3.2 may state that
such opinions are solely for the benefit of the Acquiring Fund. Such opinions
shall contain such other assumptions and limitations as shall be in the opinion
of Dickstein Shapiro Morin & Oshinsky LLP and C. Grant Anderson, as applicable,
appropriate to render the opinions expressed therein, and shall indicate, with
respect to matters of Massachusetts law, that as Dickstein Shapiro Morin &
Oshinsky LLP and C. Grant Anderson are not admitted to the bar of Massachusetts,
such opinions are based either upon the review of published statutes, cases and
rules and regulations of the Commonwealth of Massachusetts or upon an opinion of
Massachusetts counsel.
In this paragraph 7.3, references to the Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
7.4 The merger between First Union Corporation and Signet Banking
Corporation shall be completed prior to the Closing Date.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE SELLING FUND
<PAGE>
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Selling Fund in accordance with the provisions of Virtus Funds' Declaration
of Trust and By-Laws and certified copies of the resolutions evidencing such
approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Selling Fund
may waive the conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, nor instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act and no action, suit or
other proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of state Blue Sky securities authorities,
including any necessary "no-action" positions of and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Selling Fund,
provided that either party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Selling Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the Selling Fund Shareholders all of the Selling Fund's net investment
company taxable income for all taxable periods ending on or prior to the Closing
Date (computed without regard to any deduction for dividends paid) and all of
its net capital gains realized in all
<PAGE>
taxable periods ending on or prior to the Closing Date (after reduction for any
capital loss carryforward).
8.6 The parties shall have received a favorable opinion of Sullivan &
Worcester LLP, addressed to the Acquiring Fund and the Selling Fund
substantially to the effect that for federal income tax purposes:
(a) The transfer of all of the Selling Fund assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of
certain stated liabilities of the Selling Fund followed by the distribution of
the Acquiring Fund Shares to the Selling Fund in dissolution and liquidation of
the Selling Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code and the Acquiring Fund and the Selling Fund
will each be a "party to a reorganization" within the meaning of Section 368(b)
of the Code.
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain stated
liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund
upon the transfer of the Selling Fund assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of
certain stated liabilities of the Selling Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Selling Fund
Shareholders in exchange for their shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund.
(e) The aggregate tax basis for the Acquiring Fund Shares
received by each Selling Fund Shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Selling Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares to be received by each Selling Fund Shareholder will
include the period during which the Selling Fund shares exchanged therefor were
held by such shareholder (provided the Selling Fund shares were held as capital
assets on the date of the Reorganization).
(f) The tax basis of the Selling Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Selling
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Selling Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Selling Fund.
<PAGE>
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Selling Fund may waive the conditions set forth in this paragraph
8.6.
8.7 The Acquiring Fund shall have received from Price Waterhouse LLP a
letter addressed to the Acquiring Fund, in form and substance satisfactory to
the Acquiring Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Selling Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the Capitalization Table
appearing in the Registration Statement and Prospectus and Proxy Statement has
been obtained from and is consistent with the accounting records of the Selling
Fund;
(c) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the data utilized in the
calculations of the projected expense ratios appearing in the Registration
Statement and Prospectus and Proxy Statement agree with underlying accounting
records of the Selling Fund or with written estimates by Selling Fund's
management and were found to be mathematically correct.
In addition, the Acquiring Fund shall have received from Price
Waterhouse LLP a letter addressed to the Acquiring Fund dated on the Closing
Date, in form and substance satisfactory to the Acquiring Fund, to the effect,
that on the basis of limited procedures agreed upon by the Acquiring Fund (but
not an examination in accordance with generally accepted auditing standards),
the calculation of net asset value per share of the Selling Fund as of the
Valuation Date was determined in accordance with generally accepted accounting
practices and the portfolio valuation practices of the Acquiring Fund.
8.8 The Selling Fund shall have received from Price Waterhouse LLP a
letter addressed to the Selling Fund, in form and substance satisfactory to the
Selling Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
<PAGE>
(b) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus and Proxy Statement has been
obtained from and is consistent with the accounting records of the Acquiring
Fund; and
(c) on the basis of limited procedures agreed upon by the
Selling Fund (but not an examination in accordance with generally accepted
auditing standards), the data utilized in the calculations of the projected
expense ratio appearing in the Registration Statement and Prospectus and Proxy
Statement agree with written estimates by each Fund's management and were found
to be mathematically correct.
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund and the
Acquiring Fund will be borne by First Union National Bank. Such expenses
include, without limitation, (a) expenses incurred in connection with the
entering into and the carrying out of the provisions of this Agreement; (b)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund Shares to be issued
pursuant to the provisions of this Agreement; (c) registration or qualification
fees and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which the Selling Fund
Shareholders are resident as of the date of the mailing of the Prospectus and
Proxy Statement to such shareholders; (d) postage; (e) printing; (f) accounting
fees; (g) legal fees; and (h) solicitation costs of the transaction.
Notwithstanding the foregoing, the Acquiring Fund shall pay its own federal and
state registration fees.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties, and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions contemplated hereunder.
<PAGE>
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
(a) of a breach by the other of any representation, warranty,
or agreement contained herein to be performed at or prior to the Closing Date,
if not cured within 30 days; or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Selling Fund, the Trust, Virtus Funds, the respective
Trustees or officers, to the other party or its Trustees or officers.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Selling Fund and the Acquiring Fund; provided, however, that following the
meeting of the Selling Fund Shareholders called by the Selling Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Selling Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
<PAGE>
13.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflicts
of laws provisions thereof; provided, however, that the due authorization,
execution and delivery of this Agreement, in the case of the Selling Fund, shall
be governed and construed in accordance with the laws of The Commonwealth of
Massachusetts, without giving effect to the conflicts of laws provisions
thereof.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Selling Fund
and the Acquiring Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of Virtus Funds or the
Trust personally, but shall bind only the trust property of the Selling Fund and
the Acquiring Fund, as provided in the Declarations of Trust of Virtus Funds and
the Trust. The execution and delivery of this Agreement have been authorized by
the Trustees of Virtus Funds on behalf of the Selling Fund and the Trust on
behalf of the Acquiring Fund and signed by authorized officers of Virtus Funds
and the Trust, acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officers shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Selling Fund and the
Acquiring Fund as provided in the Declarations of Trust of Virtus Funds and the
Trust.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.
EVERGREEN MONEY MARKET TRUST
ON BEHALF OF EVERGREEN
MONEY MARKET FUND
By:
Name:
Title:
THE VIRTUS FUNDS
ON BEHALF OF THE
MONEY MARKET FUND
By:
Name:
Title:
<PAGE>
EXHIBIT B
THE VIRTUS FUNDS
INTERIM INVESTMENT ADVISORY AGREEMENT
This Agreement is made between Virtus Capital Management, Inc., a
Maryland corporation having its principal place of business in Richmond,
Virginia (the "Adviser"), and The Virtus Funds, a Massachusetts business trust
having its principal place of business in Pittsburgh, Pennsylvania (the
"Trust").
WHEREAS, the Trust is an open-end management investment company as that
term is defined in the Investment Company Act of 1940 (the "Act") and
is registered as such with the Securities and Exchange Commission; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each of
the portfolios ("Funds") of the Trust, which may be offered in one or more
classes of shares ("Classes"), on whose behalf the Trust executes an exhibit to
this Agreement, and Adviser, by its execution of each such exhibit, accepts the
appointments. Subject to the direction of the Trustees of the Trust, Adviser
shall provide investment research and supervision of the investments of each of
the Funds and conduct a continuous program of investment evaluation and of
appropriate sale or other disposition and reinvestment of each Fund's assets.
2. Adviser, in its supervision of the investments of each of the Funds,
will be guided by each of the Fund's fundamental investment policies and the
provisions and restrictions contained in the Declaration of Trust and By-Laws of
the Trust and as set forth in the Registration Statement and exhibits as may be
on file with the Securities and Exchange Commission.
3. The Trust shall pay or cause to be paid on behalf of each Fund or
Class, all of the Fund's or Classes' expenses and the Fund's or Classes'
allocable share of Trust expenses.
4. The Trust, on behalf of each of the Funds shall pay to Adviser for
all services rendered to such Fund by Adviser hereunder the fees set forth in
the exhibits attached hereto.
5. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation to the extent that any Fund's expenses
exceed such lower expense limitation as
<PAGE>
the Adviser may, by notice to the Trust, voluntarily declare to be effective.
Furthermore, the Adviser may, if it deems appropriate, assume expenses of one or
more Fund or Class to the extent that any Fund's or Classes' expenses exceed
such lower expense limitation as the Adviser may, by notice to the Trust,
voluntarily declare to be effective.
6. This Agreement shall begin for each Fund on the date that the Trust
executes an exhibit to this Contract relating to such Fund. This Agreement shall
remain in effect for each Fund until the earlier of the Closing Date defined in
the Agreement and Plan of Reorganization to be dated as of November 26, 1997
with respect to each Fund or for two years from the date of its execution and
from year to year thereafter, subject to the provisions for termination and all
of the other terms and conditions hereof if: (a) such continuation shall be
specifically approved at least annually by the vote of a majority of the
Trustees of the Trust, including a majority of the Trustees who are not parties
to this Agreement or interested persons of any such party (other than as
Trustees of the Trust) cast in person at a meeting called for that purpose; and
(b) Adviser shall not have notified the Trust in writing at least sixty (60)
days prior to the anniversary date of this Agreement in any year thereafter that
it does not desire such continuation with respect to that Fund.
7. Notwithstanding any provision in this Agreement, it may be
terminated at any time with respect to any Fund, without the payment of any
penalty, by the Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of that Fund, as defined in Section 2(a)(42) of
the Act on sixty (60) days' written notice to Adviser.
8. This Agreement may not be assigned by Adviser and shall
automatically terminate in the event of any assignment. Adviser may employ or
contract with such other person, persons, corporation or corporations at its own
cost and expense as it shall determine in order to assist it in carrying out
this Agreement.
9. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties under this Agreement on the part
of Adviser, Adviser shall not be liable to the Trust or to any of the Funds or
to any shareholder for any act or omission in the course of or connected in any
way with rendering services or for any losses that may be sustained in the
purchase, holding or sale of any security.
10. This Agreement may be amended at any time by agreement of the
parties provided that the amendment shall be approved both by vote of a majority
of the Trustees of the Trust, including a majority of the Trustees who are not
parties to this Agreement or interested persons of any such party to this
Agreement (other
<PAGE>
than as Trustees of the Trust), cast in person at a meeting called for that
purpose, and on behalf of a Fund by a majority of the outstanding voting
securities of such Fund as defined in Section 2(a)(42) of the Act.
11. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees that
the obligations pursuant to this Agreement of a particular Fund and of the Trust
with respect to that particular Fund be limited solely to the assets of that
particular Fund, and Adviser shall not seek satisfaction of any such obligation
from the assets of any other Fund, the shareholders of any Fund, the Trustees,
officers, employees or agents of the Trust, or any of them.
12. This Agreement shall be construed in accordance with and governed
by the laws of the Commonwealth of Pennsylvania.
13. This Agreement will become binding on the parties hereto upon their
execution of the attached exhibits to this Agreement.
<PAGE>
EXHIBIT A
THE U.S. GOVERNMENT SECURITIES FUND
THE VIRGINIA MUNICIPAL BOND FUND
THE MARYLAND MUNICIPAL BOND FUND
THE TREASURY MONEY MARKET FUND
THE MONEY MARKET FUND
THE TAX-FREE MONEY MARKET FUND
THE STYLE MANAGER FUND
THE STYLE MANAGER: LARGE CAP FUND
Name of Fund Percentage of Net Assets
- ------------ ------------------------
The Treasury Money Market Fund .50 of 1%
The Money Market Fund .50 of 1%
The Tax-Free Money Market Fund .50 of 1%
The U.S. Government Securities Fund .75 of 1%
The Virginia Municipal Bond Fund .75 of 1%
The Maryland Municipal Bond Fund .75 of 1%
The Style Manager: Large Cap Fund .75 of 1%
The Style Manager Fund 1.25 of 1%
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to the following
percentage (the "applicable percentage") of the average daily net assets of each
Fund.
The fee shall be accrued daily at the rate of 1/365th of the applicable
percentage applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 28th day of November, 1997.
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
By:
Assistant Secretary President
Attest: THE VIRTUS FUNDS
By:
Assistant Secretary Vice President
C. Grant Anderson
<PAGE>
EXHIBIT C
EVERGREEN
MONEY MARKET FUND
(Evergreen Graphic
Goes Here)
FUND AT A GLANCE
As of August 31, 1997
<TABLE>
<CAPTION>
PERFORMANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE ANNUALIZED TOTAL
RETURNS YIELDS & DISTRIBUTIONS
-------------------------- -----------------------
SHARE INCEPTION 3 5 SINCE 7-DAY YIELD 30-DAY YIELD 12-MONTH
CLASS DATE 1 YEAR 1 YEAR(1) YEARS YEARS INCEPTION (ANNUALIZED) (ANNUALIZED) DISTRIBUTION
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A 1/4/95 4.95% -- -- -- 5.10% 4.91% 4.90% $0.05
B 1/26/95 4.22% -0.78% -- -- 4.36%(1) 4.20% 4.20% $0.04
C 8/1/97 -- -- -- -- -- 4.20% 4.20% $0.004(2)
K 8/1/97 -- -- -- -- -- 4.90% -- $0.004(2)
Y 11/2/87 5.27% -- 5.34% 4.54% 5.91% 5.20% 5.20% $0.05
</TABLE>
1 THE PERFORMANCE SHOWN REFLECTS THE APPLICABLE CDSC (CONTINGENT DEFERRED SALES
CHARGE).
2 THE 12-MONTH DISTRIBUTION IS CUMULATIVE SINCE INCEPTION FOR CLASS C AND CLASS
K SHARES.
PORTFOLIO CHARACTERISTICS
TOTAL NET ASSETS (ALL CLASSES): $3,465,323,866
AVERAGE MATURITY: 80 days
OBJECTIVE: Stability of principal and competitive income
STRATEGY: Invests in high quality
money market instruments
PORTFOLIO COMPOSITION
(AS A PERCENTAGE OF PORTFOLIO ASSETS)
(Pie chart appears here with the following plot points.)
U.S. Gov't and other Agency 0.5%
Bankers' Acceptance 3.7%
Corp. Notes/Bonds 5.5%
Certificates of Deposit 12.9%
Commercial Paper 77.4%
PORTFOLIO MANAGER
Ethel B. Sutton joined Lieber & Co. in 1985 and has fifteen
years experience managing portfolios of money market
instruments. At Lieber & Co., she is Vice President-
Investments of Evergreen Money Market Trust, which she has
(Photo of managed since its inception in 1987. Prior to joining Lieber &
Ethel B. Co., Mrs. Sutton was Money Market Manager from 1980-1985 for
Sutton Avco Corporation's Paul Revere Life Insurance Company and its
Appears U.S. and Canadian subsidiaries, as well as for the credit life
Here) and casualty companies of Avco Financial Services. Mrs. Sutton
is a graduate of Mount Holyoke College where she received a
B.A. degree in English.
ETHEL B. SUTTON
AN INVESTMENT IN THE FUND IS NEITHER INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN
A STABLE NAV OF $1.00 PER SHARE. YIELDS WILL FLUCTUATE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS.
2
