SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 12 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 13 [X]
EVERGREEN MONEY MARKET TRUST
(Exact Name of Registrant as Specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices)
(617) 210-3200
(Registrant's Telephone Number)
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
<PAGE>
EVERGREEN MONEY MARKET TRUST
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 12
TO
REGISTRATION STATEMENT
This Post-Effective Amendment No. 12 to Registrant's Registration Statement
No. 333-42181/811-08555 consists of the following pages, items of information
and documents:
The Facing Sheet
The Contents Page
PART A
------
Prospectus for Class A, B, C and Y shares of Evergreen Money Market Fund,
Evergreen Pennsylvania Municipal Money Market Fund, Evergreen Municipal Money
Market Fund, Evergreen Treasury Money Market Fund, Evergreen Florida Municipal
Money Market Fund and Evergreen New Jersey Municipal Money Market Fund
is contained herein.
Prospectus for Class S shares of Evergreen Money Market Fund, Evergreen
Pennsylvania Municipal Money Market Fund, Evergreen Municipal Money Market Fund,
Evergreen Treasury Money Market Fund, Evergreen Florida Municipal Money Market
Fund and Evergreen New Jersey Municipal Money Market Fund is incorporated by
reference to Post-Effective Amendment No. 11 filed on May 15, 2000.
PART B
------
Statement of Additional Information for Evergreen Money Market Fund,
Evergreen Pennsylvania Municipal Money Market Fund, Evergreen Municipal Money
Market Fund, Evergreen Treasury Municipal Money Market Fund, Evergreen Florida
Municipal Money Market Fund and Evergreen New Jersey Municipal Money Market Fund
is contained herein.
PART C
------
Financial Statements
Exhibits
Number of Holders of Securities
Indemnification
Business and Other Connections of Investment Adviser
Principal Underwriter
Location of Accounts and Records
Undertakings
Signatures
<PAGE>
EVERGREEN MONEY MARKET TRUST
PART A
PROSPECTUS
<PAGE>
EVERGREEN MONEY MARKET FUNDS
Evergreen Florida Municipal Money Market Fund
Evergreen Money Market Fund
Evergreen Municipal Money Market Fund
Evergreen New Jersey Municipal Money Market Fund
Evergreen Pennsylvania Municipal Money Market Fund
Evergreen Treasury Money Market Fund
Class A
Class B
Class C
Class Y
[LOGO OF EVERGREEN FUNDS APPEARS HERE]
Prospectus, June 1, 2000
The Securities and Exchange Commission has not determined that the information
in this prospectus is accurate or complete, nor has it approved or disapproved
these securities. Anyone who tells you otherwise is committing a crime.
<PAGE>
TABLE OF CONTENTS
FUND RISK/RETURN SUMMARIES:
Overview of Fund Risks.....................................1
Evergreen Florida Municipal Money
Market Fund...............................................2
Evergreen Money Market Fund................................4
Evergreen Municipal Money Market Fund......................6
Evergreen New Jersey Municipal Money
Market Fund...............................................8
Evergreen Pennsylvania Municipal Money
Market Fund.............................................10
Evergreen Treasury Money Market Fund......................12
GENERAL INFORMATION:
The Funds' Investment Advisors............................14
Calculating the Share Price...............................14
How to Choose an Evergreen Fund...........................15
How to Choose the Share Class
That Best Suits You.....................................15
How to Buy Shares.........................................17
How to Redeem Shares......................................18
Other Services............................................19
The Tax Consequences of
Investing in the Funds..................................19
Fees and Expenses of the Funds............................20
Financial Highlights......................................21
Other Fund Practices......................................28
In general, Funds included in this prospectus seek to provide investors with
current income consistent with stability of principal and liquidity.
Fund Summaries Key
Each Fund's summary is organized around the following basic topics and
questions:
Investment Goal
What is the Fund's financial objective? You can find clarification on how the
Fund seeks to achieve its objective by looking at the Fund's strategy and
investment policies. The Fund's Board of Trustees can change the investment
objective without a shareholder vote.
Investment Strategy
How does the Fund go about trying to meet its goals? What types of investments
does it contain? What style of investing and investment philosophy does it
follow? Does it have limits on the amount invested in any particular type of
security?
Risk Factors
What are the specific risks for an investor in the Fund?
Performance
How well has the Fund performed in the past year? The past five years? The past
ten years?
Expenses
How much does it cost to invest in the Fund? What is the difference between
sales charges and expenses?
<PAGE>
OVERVIEW OF FUND RISKS
Money Market
Funds
typically rely on a combination of the following strategies:
- maintaining $1.00 per share net asset value;
- investing in high-quality, short-term money market instruments,
including U.S. government securities;
- investing in compliance with industry-standard requirements for money
market funds for the quality, maturity and diversification of
investments; and
- selling a portfolio investment when: i) the issuer's investment
fundamentals begin to deteriorate; ii) to take advantage of more
attractive yield opportunities; iii) when the investment no longer
appears to meet the Fund's investment objective; iv) when the Fund
must meet redemptions; or v) for other investment reasons which the
portfolio manager deems necessary
may be appropriate for investors who:
- are seeking a conservative investment which invests in relatively
safe securities;
- are seeking a fund for short-term investment; and
- are seeking liquidity.
Following this overview, you will find information on each Fund's specific
investment strategies and risks.
Risk Factors for All Mutual Funds
Please remember that mutual fund investment shares are:
- - not guaranteed to achieve their investment goal
- - not a deposit with a bank
- - not insured, endorsed or guaranteed by the FDIC or any government agency
- - subject to investment risks, including possible loss of your original
investment
Although the Funds seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Funds.
Here are the most important factors that may affect the value of your
investment. Other factors may be described in the discussion following this
overview:
Interest Rate Risk
When interest rates go up, the value of debt securities tends to fall. Since
your Fund invests a significant portion of its portfolio in debt securities,
if interest rates rise, then the value of your investment may decline. When
interest rates go down, interest earned by your Fund on its investments may
also decline, which could cause the Fund to reduce the dividends it pays.
Credit Risk
The value of a debt security is directly affected by the issuer's ability to
repay principal and pay interest on time. Since your Fund invests in debt
securities, the value of your investment may decline if an issuer fails to
pay an obligation on a timely basis.
Concentration Risk
An investment in a Fund that concentrates its investments in a single state
entails greater risk than an investment in a Fund that invests its assets in
numerous states. The Fund may be vulnerable to any development in its named
state's economy that may weaken or jeopardize the ability of the state's
municipal bond issuers to pay interest and principal on their debt obligations.
Non-Diversification Risk
An investment in a Fund that is non-diversified entails greater risk than an
investment in a diversified fund. When a Fund is non-diversified, there is no
limit on the percentage of assets that can be invested in any single issuer.
A higher percentage of investments among fewer issuers may result in greater
fluctuation in the total market value of the Fund's portfolio.
<PAGE>
Florida Municipal Money Market Fund
FUND FACTS:
Goals:
.. High Current Income Exempt from Federal and State Tax
.. Stability of Principal
.. Maintain Liquidity
Principal Investment:
.. Municipal Money Market Securities
Classes of Shares Offered in this Prospectus:
.. Class A
.. Class Y
Investment Advisor:
.. Evergreen Asset Management Corp.
NASDAQ Symbols:
EFIXX (Class A)
Dividend Payment Schedule:
Monthly
INVESTMENT GOAL
The Fund seeks to provide Florida residents an investment that is, to the
extent possible, exempt from the Florida intangible personal property tax and
to seek as high a level of current income exempt from regular federal income
taxes, as is believed to be consistent with the preservation of capital,
maintenance of liquidity and stability of principal.
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview
of Fund Risks" on page 1.
The Fund invests at least 80% of its net assets in high quality short-term debt
obligations issued by the state of Florida and possessions of the U.S. and
their political subdivisions, which are exempt from federal income tax
other than the alternative minimum tax and exempt from Florida intangible
personal property tax, and which are determined to present minimal credit risk.
These municipal money market securities include fixed, variable, or floating
rate general obligation and revenue bonds; tax, bond and revenue anticipation
notes; and commercial paper obligations.
The Fund will comply with the diversification requirements prescribed by Rule
2a-7. However, the Fund is non-diversified and therefore may invest a
significant percentage of its assets in obligations of a single issuer. In
determining what securities to purchase for the portfolio, the portfolio
manager focuses on the supply and demand of the security in the market place
as well as the current interest rate environment.
The Fund may temporarily invest up to 20% of its net assets in taxable
securities under one or more of the following circumstances: (a) pending
investment of proceeds from the sale of Fund shares or of portfolio securities;
(b) pending settlement of purchases of portfolio securities, and (c) to
maintain liquidity for the purpose of meeting anticipated redemptions. The Fund
may temporarily invest up to 100% of its total assets in taxable securities for
defensive purposes which may result in the Fund not achieving its investment
objective.
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview
of Fund Risks" on page 1 under the headings:
.. Interest Rate Risk
.. Credit Risk
.. Concentration Risk
.. Non-Diversification Risk
The performance of the Fund is influenced by the political, economic and
statutory environment within the State of Florida. The Fund invests in
obligations of Florida issuers, which results in the Fund's performance being
subject to risks associated with the most current conditions within the state.
Some of these conditions include state budgetary problems associated with the
state's growing population, its reliance on tourism, and the impact which both
of these factors may have on the state's tax base and revenues. These and other
factors may cause rating agencies to downgrade the credit ratings on certain
issues.
For further information on the factors that could affect the ability of Florida
bond issuers to pay interest and principal on securities acquired by the Fund,
see "Additional Information Concerning Florida" in the Statement of
Additional Information.
Because the taxable money market is a broader and more liquid market and has a
greater number of investors, issuers and market makers than the market for
short-term tax exempt municipal securities, the liquidity of the Fund may not
be equal to that of a money market fund which invests exclusively in short-term
taxable money market instruments. The more limited marketability of short-term
tax exempt municipal securities may make it difficult in certain circumstances
to dispose of large investments advantageously.
For further information regarding the Fund's investment strategies and risk
factors see "Other Fund Practices."
<PAGE>
PERFORMANCE
The following tables show how the Fund has performed in the past. Past
performance is not an indication of future results.
The table below shows the percentage gain or loss for Class A shares of the
Fund in the calendar year since the Class A shares' inception on 10/26/1998.
This table includes the effects of Fund expenses.
Year-by-Year Total Return for Class A Shares (%)
1999
2.66
Best Quarter: 4th Quarter 1999 +0.78%
Worst Quarter: 1st Quarter 1999 +0.54%
Year-to-date total return through 3/31/2000 was +0.74%.
The next table lists the Fund's average annual total return by class over the
past year and since inception (through 12/31/1999). This table is intended to
provide you with some indication of the risks of investing in the Fund.
Average Annual Total Return
(for the period ended 12/31/1999)*
Inception Performance
Date of 1 year 5 year 10 Since
Class year 10/26/1998
Class A 10/26/1998 2.66% N/A N/A 2.66%
Class Y 12/29/1998 2.97% N/A N/A 3.11%
* Historical performance shown for Class Y prior to its inception is based on
the performance of Class A, the original class offered. The historical returns
for Class Y have not been adjusted to reflect the fact that Class Y does not
pay 12b-1 fees. This fee for Class A is 0.30%. If this fee had been
eliminated, returns would have been higher.
To obtain current yield information call 1-800-343-2898.
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)+
Total
Management 12b-1 Other Fund
Fees Fees Expenses Operating
Expenses
0.41% 0.30% 0.13% 0.84%
Class A
Class Y 0.41% 0.00% 0.13% 0.54%
+Restated for the fiscal year ended 1/31/2000 to reflect current fees.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and
is for illustration only. The example assumes a 5% average annual return and
that you reinvest all of your dividends and distributions. Your actual costs
may be higher or lower.
Example of Fund Expenses
After: Class A Class Y
1 year $86 $55
3 years $268 $173
5 years $466 $302
10 years $1,037 $677
<PAGE>
Money Market Fund
FUND FACTS:
Goals:
.. High Current Income
.. Preservation of Capital
.. Liquidity
Principal Investment:
.. Money Market Instruments
Classes of Shares Offered in this Prospectus:
.. Class A
.. Class B
.. Class C
.. Class Y
Investment Advisor:
.. Evergreen Asset Management Corp.
NASDAQ Symbols:
EMAXX (Class A)
EMBXX (Class B)
EGMXX (Class Y)
Dividend Payment Schedule:
Monthly
INVESTMENT GOAL
The Fund seeks to achieve as high a level of current income as is consistent
with preserving capital and providing liquidity.
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview
of Fund Risks" on page 1.
The Fund invests in money market securities including certificates of deposit
and bankers' acceptances, commercial paper, U.S. Treasury obligations,
short-term corporate obligations and repurchase agreements determined to
present minimal credit risk.
The Fund invests principally in short-term corporate debt securities
determined to present minimal credit risk. In addition, the Fund may invest in
short-term securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities, including the Interamerican Development Bank and
the International Bank for Reconstruction and Development. The Fund may invest
up to 30% of its total assets in bank certificates of deposit and bankers'
acceptances payable in U.S. dollars and issued by foreign banks (including U.S.
branches of foreign banks) or by foreign branches of U.S. banks. The Fund may
also invest in commercial paper and bank obligations.
The portfolio manager focuses primarily on the interest rate environment in
determining which securities to purchase for the portfolio. Generally, in a
rising rate environment, the Fund will invest in securities of shorter
maturities. If interest rates are high, the Fund will invest in securities with
longer maturities; however, the Fund will not acquire any security with a
remaining maturity greater than 397 days.
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview
of Fund Risks" on page 1 under the headings:
.. Interest Rate Risk
.. Credit Risk
Because obligations of the Interamerican Development Bank and the International
Bank of Reconstruction and Development are supported only by appropriated but
unpaid commitments of member countries, there is no assurance that the
commitments will be undertaken in the future.
Because the taxable money market is a broader and more liquid market and has a
greater number of investors, issuers and market makers than the market for
short-term tax exempt municipal securities, the liquidity of the Fund may not
be equal to that of a money market fund which invests exclusively in short-term
taxable money market instruments. The more limited marketability of short-term
tax exempt municipal securities may make it difficult in certain circumstances
to dispose of large investments advantageously.
For further information regarding the Fund's investment strategy and risk
factors see "Other Fund Practices."
<PAGE>
PERFORMANCE
The following tables show how the Fund has performed in the past. Past
performance is not an indication of future results.
The table below shows the percentage gain or loss for Class Y shares of the
Fund in each of the last ten calendar years. It should give you a general
idea of the risks of investing in the Fund by showing how the Fund's return
has varied from year-to-year. This table includes the effects of Fund
expenses.
Year-by-Year Total Return for Class Y Shares (%)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
8.30 6.26 3.88 3.22 3.98 5.66 5.22 5.33 5.26 4.93
Best Quarter: 2nd Quarter 1990 +2.03%
Worst Quarter: 1st Quarter 1993 +0.78%
Year-to-date total return through 3/31/2000 was +1.38%.
The next table lists the Fund's average annual total return by class over the
past one, five and ten years and since inception (through 12/31/1999). This
table is intended to provide you with some indication of the risks of
investing in the Fund.
Average Annual Total Return
(For the period ended 12/31/1999)*
Inception Performance
Date of 1 year 5 year 10 year Since
Class 11/2/1987
Class A 1/4/1995 4.62% 4.97% 5.04% 5.63%
Class B 1/26/1995 -1.11% 3.89% 4.67% 5.33%
Class C 8/1/1997 2.89% 4.77% 4.94% 5.55%
Class Y 11/2/1987 4.93% 5.27% 5.19% 5.76%
* Historical performance shown for Classes A, B, and C prior to their inception
is based on the performance of Class Y, the original class offered. These
historical returns for Classes A, B, and C have not been adjusted to reflect
the effect of each class' 12b-1 fees. These fees are 0.30% for Class A and
1.00% for Classes B and C. Class Y does not pay a 12b-1 fee. If these fees had
been reflected, returns would have been lower.
To obtain current yield information call 1-800-343-2898.
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
<TABLE>
<CAPTION>
Shareholder Transaction Expenses Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Maximum deferred sales charge
(as a % of either the redemption
amount or initial investment,
whichever is lower) None 5.00% 2.00% None
</TABLE>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)+
Total
Management Other Fund
Fees 12b-1 Fees Expenses Operating
Expenses
Class A 0.39% 0.30% 0.14% 0.83%
Class B 0.39% 1.00% 0.14% 1.53%
Class C 0.39% 1.00% 0.15% 1.54%
Class Y 0.39% 0.00% 0.14% 0.53%
+Restated for the fiscal year ended 1/31/2000 to reflect current fees.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends and distributions. Your actual costs may be
higher or lower.
Example of Fund Expenses
Assuming Redemption at End of Period Assuming No
Redemption
After: Class A Class B Class C Class Y Class B Class C
1 year $ 85 $ 656 $ 357 $ 54 $ 156 $ 157
3 years $ 265 $ 783 $ 486 $ 170 $ 483 $ 486
5 years $ 460 $1,034 $ 839 $ 296 $ 834 $ 839
10 years $1,025 $1,546 $1,834 $ 665 $1,546 $1,834
<PAGE>
Municipal Money Market Fund
FUND FACTS:
Goals:
.. High Current Income Exempt from Federal Tax
.. Preservation of Capital
.. Liquidity
Principal Investment:
.. Municipal Money Market Securities
Classes of Shares Offered in this Prospectus:
.. Class A
.. Class Y
Investment Advisor:
.. Evergreen Asset Management Corp.
NASDAQ Symbols:
EXAXX (Class A)
EVTXX (Class Y)
Dividend Payment Schedule:
Monthly
INVESTMENT GOAL
The Fund seeks to achieve as high a level of current income exempt from federal
income tax, as is consistent with preserving capital and providing liquidity.
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview
of Fund Risks" on page 1.
The Fund invests at least 80% of its assets in municipal securities (including
fixed, variable or floating rate general obligation and revenue bonds, tax,
bond and revenue anticipation notes; and commercial paper obligations), the
interest from which is exempt from federal income tax, other than the
alternative minimum tax.
The Fund invests in municipal money market securities determined to present
minimal credit risk and issued by any U.S. state and District of Columbia and
their political subdivisions. In determining what securities to purchase for
the portfolio, the portfolio manager focuses on the supply and demand of the
security in the market place as well as the current interest rate environment.
The Fund may temporarily invest up to 20% of its net assets in taxable
securities under one or more of the following circumstances: (a) pending
investment of proceeds from the sale of Fund shares or of portfolio securities;
(b) pending settlement of purchases of portfolio securities; and (c) to
maintain liquidity for the purpose of meeting anticipated redemptions. The
Fund may also temporarily invest up to 100% of its total assets in taxable
securities for defensive purposes which may result in the Fund not achieving
its investment objective.
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview
of Fund Risks" on page 1 under the headings:
.. Interest Rate Risk
.. Credit Risk
Because the taxable money market is a broader and more liquid market and has a
greater number of investors, issuers and market makers than the market for
short-term tax exempt municipal securities, the liquidity of the Fund may not
be equal to that of a money market fund which invests exclusively in short-term
taxable money market instruments. The more limited marketability of short-term
tax exempt municipal securities may make it difficult in certain circumstances
to dispose of large investments advantageously.
For further information regarding the Fund's investment strategies and risk
factors see "Other Fund Practices."
<PAGE>
PERFORMANCE
The following tables show how the Fund has performed in the past. Past
performance is not an indication of future results.
The table below shows the percentage gain or loss for Class Y shares of the
Fund in each of the last ten calendar years. It should give you a general idea
of the risks of investing in the Fund by showing how the Fund's return
has varied from year-to-year. This table includes the effects of Fund expenses.
Year-by-Year Total Return for Class Y Shares (%)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
6.10 4.88 3.16 2.48 2.76 3.77 3.39 3.50 3.40 3.18
Best Quarter: 4th Quarter 1990 +1.56%
Worst Quarter: 1st Quarter 1994 +0.60%
Year-to-date total return through 3/31/2000 was +0.86%.
The next table lists the Fund's average annual total return by class over the
past one, five and ten years and since inception (through 12/31/1999). This
table is intended to provide you with some indication of the risks of
investing in the Fund.
Average Annual Total Return
(for the period ended 12/31/1999)*
Inception Performance
Date of 1 year 5 year 10 year Since
Class 11/2/1988
Class A 1/5/1995 2.87% 3.14% 3.50% 3.82%
Class Y 11/2/1988 3.18% 3.44% 3.66% 3.96%
* Historical performance shown for Class A prior to its inception is based on
the performance of Class Y, the original class offered. The historical returns
for Class A have not been adjusted to reflect the effect of the class' 0.30%
12b-1 fees. Class Y does not pay 12b-1 fees. If these fees had been reflected,
returns would have been lower.
To obtain current yield information call 1-800-343-2898.
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)+
Total
Management 12b-1 Other Fund
Fees Fees Expenses Operating
Expenses
Class A 0.43% 0.30% 0.13% 0.86%
Class Y 0.43% 0.00% 0.13% 0.56%
+Restated for the fiscal year ended 1/31/2000 to reflect current fees.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends and distributions. Your actual costs may be
higher or lower.
Example of Fund Expenses
After: Class A Class Y
1 year $ 88 $ 57
3 years $ 274 $179
5 years $ 477 $313
10 years $1,061 $701
<PAGE>
New Jersey Municipal Money Market Fund
FUND FACTS:
Goals:
.. High Current Income Exempt from Federal and State Tax
.. Stability of Principal
.. Maintain Liquidity
Principal Investment:
.. Municipal Money Market Securities
Classes of Shares Offered in this Prospectus:
.. Class A
.. Class Y
Investment Advisor:
Evergreen Asset Management Corp.
NASDAQ Symbols:
ENJXX (Class A)
Dividend Payment Schedule:
Monthly
INVESTMENT GOAL
The Fund seeks to achieve as high a level of current income exempt from
regular federal income tax and, to the extent possible, from New Jersey gross
income tax, as is believed to be consistent with the preservation of capital,
maintenance of liquidity and stability of principal.
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview
of Fund Risks" on page 1.
The Fund invests at least 80% of its net assets in municipal money market
securities issues by the state of New Jersey, possessions of the U.S. and
their political subdivisions, which are exempt from federal income tax other
than the alternative minimum tax and exempt from the New Jersey gross income
tax, and are determined to present minimal credit risk. These municipal money
market securities include fixed, variable or floating rate general obligation
and revenue bonds; tax, bond and revenue anticipation notes; and commercial
paper obligations.
The Fund will comply with the diversification requirements prescribed by Rule
2a-7. However, the Fund is non-diversified and therefore may invest a
significant percentage of its assets in obligations of a single issuer. In
determining what securities to purchase for the portfolio, the portfolio
manager focuses on the supply and demand of the security in the market place as
well as the current interest rate environment.
The Fund may temporarily invest up to 20% of its net assets in taxable
securities under one or more of the following circumstances: (a) pending
investment of proceeds from the sale of Fund shares or of portfolio securities;
(b) pending settlement of purchases of portfolio securities; and (c) to
maintain liquidity for the purpose of meeting anticipated redemptions. The Fund
may temporarily invest up to 100% of its total assets in taxable securities for
defensive purposes which may result in the Fund not achieving its investment
objective.
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview
of Fund Risks" on page 1 under the headings:
.. Interest Risk
.. Credit Risk
.. Concentration Risk
.. Non-Diversification Risk
The performance of the Fund is influenced by the political, economic and
statutory environment within the State of New Jersey. The Fund invests in
obligations of New Jersey issuers, which results in the Fund's performance
being subject to risks associated with the most current conditions within the
state. Some of these conditions include the state's slowing growth rate since
1987 and the job losses which have occurred in certain sectors of New Jersey's
economy. These and other factors may cause rating agencies to downgrade the
credit ratings on certain issues.
For further information on the factors that could affect the ability of the
New Jersey bond issuers to pay interest and principal on securities acquired
by the Fund, see "Additional Information Concerning New Jersey" in the
Statement of Additional Information.
Because the taxable money market is a broader and more liquid market and has a
greater number of investors, issuers and market makers than the market for
short-term tax exempt municipal securities, the liquidity of the Fund may not
be equal to that of a money market fund which invests exclusively in short-term
taxable money market instruments. The more limited marketability of short-term
tax exempt municipal securities may make it difficult in certain circumstances
to dispose of large investments advantageously.
For further information regarding the Fund's investment strategies and risk
factors see "Other Fund Practices."
<PAGE>
PERFORMANCE
The following tables show how the Fund has performed in the past. Past
performance is not an indication of future results.
The table below shows the percentage gain or loss for Class A shares of the
Fund in the calendar year since the Class A shares' inception on 10/26/1998.
This table includes the effects of Fund expenses.
Year-by-Year Total Return for Class A Shares (%)
1999
2.54
Best Quarter: 4th Quarter 1999 +0.75%
Worst Quarter: 1st Quarter 1999 +0.53%
Year-to-date total return through 3/31/2000 was +0.74%.
The next table lists the Fund's average annual total return by class over the
past year and since inception (through 12/31/1999). This table is intended to
provide you with some indication of the risks of investing in the Fund.
Average Annual Total Return
(for the period ended 12/31/1999)*
Inception Performance
Date of 1 year 5 year 10 year Since
Class 10/26/1998
Class A 10/26/1998 2.54% N/A N/A 2.55%
Class Y 04/05/1999 2.77% N/A N/A 2.75%
* Historical performance shown for Class Y prior to its inception is based on
the performance of Class A, the original class offered. The historical returns
for Class Y have not been adjusted to reflect the fact that Class Y does not
pay 12b-1 fees. This fee for Class A is 0.30%. If this fee had been eliminated,
returns would have been higher.
To obtain current yield information call 1-800-343-2898.
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)+
Total
Management 12b-1 Other Fund
Fees Fees Expenses Operating
Expenses
Class A 0.41% 0.30% 0.13% 0.84%
Class Y 0.41% 0.00% 0.13% 0.54%
+Restated for the fiscal year ended 1/31/2000 to reflect current fees.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual
funds and is for illustration only. The example assumes a 5% average annual
return and that you reinvest all of your dividends and distributions. Your
actual costs may be higher or lower.
Example of Fund Expenses
After: Class A Class Y
1 year $ 86 $ 55
3 years $ 268 $173
5 years $ 466 $302
10 years $1,037 $677
<PAGE>
Pennsylvania Municipal Money Market Fund
FUND FACTS:
Goals:
.. High Current Income Exempt from Federal and State Tax
.. Preservation of Capital
.. Liquidity
Principal Investment:
.. Municipal Money Market Securities
Classes of Shares Offered in this Prospectus:
.. Class A
.. Class Y
Investment Advisor:
.. Evergreen Investment Management
NASDAQ Symbols:
EPPXX (Class A)
EPAXX (Class Y)
Dividend Payment Schedule:
Monthly
INVESTMENT GOAL
The Fund seeks to provide investors with as high a level of current income
exempt from regular federal income tax, as is consistent with preservation of
capital and providing liquidity.
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview
of Fund Risks" on page 1.
The Fund invests at least 80% of its net assets in municipal money market
securities issued by the Commonwealth of Pennsylvania, possessions of the U.S.
and their political subdivisions, which are exempt from federal income
tax other than the alternative minimum tax and exempt from the Pennsylvania
income tax, and are determined to present minimal credit risk. These municipal
money market securities include fixed, variable or floating rate general
obligation and revenue bonds; tax, bond and revenue anticipation notes; and
commercial paper obligations.
The Fund will comply with the diversification requirements prescribed by Rule
2a-7. However, the Fund is non-diversified and therefore may invest a
significant percentage of its assets in obligations of a single issuer. In
determining what securities to purchase for the portfolio, the portfolio
manager focuses on the supply and demand of the security in the market place as
well as the current interest rate environment.
The Fund may temporarily invest up to 20% of its net assets in taxable
securities under one or more of the following circumstances: (a) pending
investment of proceeds from the sale of Fund shares or of portfolio securities;
(b) pending settlement of purchases of portfolio securities; and (c) to
maintain liquidity for the purpose of meeting anticipated redemptions. The
Fund may also temporarily invest up to 100% of its net assets in taxable
securities for defensive purposes which may result in the Fund not achieving
its investment objective.
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview
of Fund Risks" on page 1 under the headings:
.. Interest Rate Risk
.. Credit Risk
.. Concentration Risk
.. Non-Diversification Risk
The performance of the Fund is influenced by the political, economic and
statutory environment within the Commonwealth of Pennsylvania. The Fund
invests in obligations of Pennsylvania issuers, which results in the Fund's
performance being subject to risks associated with the most current conditions
within the Commonwealth. Some of these conditions include adverse changes to
the statewide, regional or local economies which affect the creditworthiness
of the Commonwealth and certain other non-governmental related issuers and may
cause rating agencies to downgrade the credit ratings on certain issues.
For further information on the factors that could affect the ability of the
bond issuers to pay interest and principal on securities acquired by the Fund,
see "Additional Information Concerning Pennsylvania" in the Statement of
Additional Information.
Because the taxable money market is a broader and more liquid market and has a
greater number of investors, issuers and market makers than the market for
short-term tax exempt municipal securities, the liquidity of the Fund may not
be equal to that of a money market fund which invests exclusively in short-term
taxable money market instruments. The more limited marketability of short-term
tax exempt municipal securities may make it difficult in certain circumstances
to dispose of large investments advantageously.
For further information regarding the Fund's investment strategies and risk
factors see "Other Fund Practices."
<PAGE>
PERFORMANCE
The following tables show how the Fund has performed in the past. Past
performance is not an indication of future results.
The table below shows the percentage gain or loss for Class Y shares of the
Fund in each calendar year since the Class Y shares' inception on 8/15/1991.
It should give you a general idea of the risks of investing in the Fund
by showing the risks of investing in the Fund by showing how the Fund's return
has varied from year-to-year. This table includes the effects of Fund expenses.
Year-by-Year Total Return for Class Y Shares (%)
1992 1993 1994 1995 1996 1997 1998 1999
2.87 2.12 2.54 3.66 3.07 3.23 3.09 2.96
Best Quarter: 2nd Quarter 1995 +0.99%
Worst Quarter: 1st Quarter 1994 +0.49%
Year-to-date total return through 3/31/2000 was +0.83%.
The next table lists the Fund's average annual total return by class over the
past one and five years and since inception (through 12/31/1999). This table is
intended to provide you with some indication of the risks of investing in the
Fund.
Average Annual Total Return
(for the period ended 12/31/1999)*
Inception Performance
Date of 1 year 5 year 10 year Since
Class 8/15/1991
Class A 8/22/1995 2.85% 3.13% N/A 2.96%
Class Y 8/15/1991 2.96% 3.20% N/A 3.01%
*Historical performance shown for Class A prior to its inception is based on
the performance of Class Y, the original class offered. The historical returns
for Class A have not been adjusted to reflect the effect of the class' 0.30%
12b-1 fees. Class Y does not pay 12b-1 fees. If these fees had been reflected,
returns would have been lower.
To obtain current yield information call 1-800-343-2898.
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)+
Total
Management 12b-1 Other Fund
Fees Fees Expenses Operating
Expenses++
Class A 0.36% 0.30% 0.14% 0.80%
Class Y 0.36% 0.00% 0.14% 0.50%
+Restated for the fiscal year ended 1/31/2000 to reflect current fees
++From time to time, the Fund's investment advisor may, at its discretion,
reduce or waive its fees or reimburse the Fund for certain of its expenses in
order to reduce expense ratios. The Fund's investment advisor may cease these
waivers or reimbursements at any time. The Annual Fund Operating Expenses do
not reflect fee waivers and expense reimbursements. Including current fee
waivers and expense reimbursements. Total Fund Operating Expenses were 0.60%
for Class A.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends and distributions. Your actual costs may be
higher or lower.
Example of Fund Expenses
After: Class A Class Y
1 year $82 $51
3 years $255 $160
5 years $444 $280
10 years $990 $628
<PAGE>
Treasury Money Market Fund
FUND FACTS:
Goals:
.. Stability of Principal
.. Current Income
Principal Investment:
.. Short-term U.S. Treasury Obligations
Classes of Shares Offered in this Prospectus:
.. Class A
.. Class Y
Investment Advisor:
.. Evergreen Investment Management
NASDAQ Symbols:
ETAXX (Class A)
ETYXX (Class Y)
Dividend Payment Schedule:
Monthly
INVESTMENT GOAL
The Fund seeks to maintain stability of principal while earning current income.
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview
of Fund Risks" on page 1.
The Fund will invest in short-term U.S. Treasury obligations (with an average
dollar-weighted maturity of 60 days or less) and repurchase agreements backed
at least 65% by such obligations. U.S. Treasury securities are guaranteed as to
principal and interest, and supported by the full faith and credit of the U.S.
government. The portfolio manager focuses primarily on the interest rate
environment in determining which securities to purchase for the portfolio.
Generally, in a rising rate environment, the Fund will invest in securities of
shorter maturities. If interest rates are high, the Fund will invest in
securities with longer maturities; however, the Fund will not acquire any
security with a remaining maturity of greater than 397 days.
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview
of Fund Risks" on page 1 under the headings:
.. Interest Rate Risk
For further information regarding the Fund's investment strategy and risk
factors see "Other Fund Practices."
Because the taxable money market is a broader and more liquid market and has a
greater number of investors, issuers and market makers than the market for
short-term tax exempt municipal securities, the liquidity of the Fund may not
be equal to that of a money market fund which invests exclusively in short-term
taxable money market instruments. The more limited marketability of short-term
tax exempt municipal securities may make it difficult in certain circumstances
to dispose of large investments advantageously.
<PAGE>
PERFORMANCE
The following tables show how the Fund has performed in the past. Past
performance is not an indication of future results.
The table below shows the percentage gain or loss for Class Y shares of the
Fund in each calendar year since the Class Y shares' inception on 3/6/1991.
It should give you a general idea of the risks of investing in the Fund
by showing how the Fund's return has varied from year-to-year. This table
includes the effects of Fund expenses.
Year-by-Year Total Return for Class Y Shares (%)
1992 1993 1994 1995 1996 1997 1998 1999
3.67 3.04 4.06 5.69 5.09 5.24 5.14 4.65%
Best Quarter: 2nd Quarter 1995 +1.43%
Worst Quarter: 2nd Quarter 1993 +0.75%
Year-to-date total return through 3/31/2000 was +1.29%.
The next table lists the Fund's average annual total return by class over the
past one and five years and since inception (through 12/31/1999). This table is
intended to provide you with some indication of the risks of investing in the
Fund.
Average Annual Total Return
(for the period ended 12/31/1999)
Inception Performance
Date of 1 year 5 year 10 year Since
Class 3/6/1991
Class A 3/6/1991 4.33% 4.84% N/A 4.37%
Class Y 3/6/1991 4.65% 5.16% N/A 4.67%
To obtain current yield information call 1-800-343-2898.
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets+
Total Fund
Management 12b-1 Other Operating
Fees Fees Expenses Expenses
Class A 0.31% 0.30% 0.13% 0.74%
Class Y 0.31% 0.00% 0.13% 0.44%
+Restated for the fiscal year ended 1/31/2000 to reflect current fees.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends and distributions. Your actual costs may be
higher or lower.
Example of Fund Expenses
After: Class A Class Y
1 year $76 $45
3 years $237 $141
5 years $411 $246
10 years $918 $555
<PAGE>
The Funds' Investment Advisors
An investment advisor manages a Fund's investments and supervises its daily
business affairs. There are two different investment advisors for the Funds.
All investment advisors for the Evergreen Funds are subsidiaries of First
Union Corporation, the sixth largest bank holding company in the United States,
with over $ 253.6 billion in consolidated assets as of 3/31/2000. First Union
Corporation is located at 301 South College Street, Charlotte, North Carolina
28288-0013.
Evergreen Asset Management Corp. (EAMC) is the investment advisor to:
.Florida Municipal Money Market Fund
.Money Market Fund
.Municipal Money Market Fund
.New Jersey Municipal Money Market Fund
EAMC, with its predecessors, has served as investment advisor to the Evergreen
Funds since 1971, and currently manages over $23.43 billion in assets for 20
of the Evergreen Funds. EAMC is located at 1311 Mamaroneck Avenue,
White Plains, New York 10605.
Evergreen Investment Management (EIM) is the investment advisor to:
.Pennsylvania Municipal Money Market Fund
.Treasury Money Market Fund
EIM (formerly known as the Capital Management Group or CMG), a division of
First Union National Bank (FUNB), has been managing money for over 50 years
and currently manages over $30.2 billion in assets for 40 of the Evergreen
Funds. EIM is located at 201 South College Street, Charlotte, North Carolina
28288-0630.
Lieber & Company is the investment sub-advisor to:
.Florida Municipal Money Market Fund
.Money Market Fund
.Municipal Money Market Fund
.New Jersey Money Market Fund
EAMC has entered into sub-advisory agreements with Lieber & Company (Lieber),
an indirect wholly-owned subsidiary of FUNB, which provide that Lieber's
research department and staff will furnish EAMC with information, investment
recommendations, advice and assistance, and will generally be available for
consultation. Lieber will be reimbursed by EAMC in connection with the
rendering of services on the basis of the direct and indirect costs of
performing such services. There is no additional charge to the Funds for the
services provided by Lieber. Lieber is located at 1311 Mamaroneck Avenue,
White Plains, New York 10605.
For the fiscal year ended 1/31/2000, the aggregate advisory fee paid to the
investment advisor by each Fund was as follows:
% of the Fund's
Fund average daily
net assets*
Florida Municipal Money Market Fund 0.44%
Money Market Fund 0.45%
Municipal Money Market Fund 0.48%
New Jersey Municipal Money Market Fund 0.45%
Pennsylvania Municipal Money Market Fund 0.40%
Treasury Money Market Fund 0.35%
*As of January 3, 2000, the Funds' contractual advisory fees were reduced in
order to offset an increase in the Fund's administrative services fees to 0.06%.
CALCULATING THE SHARE PRICE
The value of one share of a Fund, also known as the net asset value, or NAV,
is calculated twice daily on each day the New York Stock Exchange is open at
12 noon (Eastern time) and as of the time the Exchange closes (normally 4 p.m.
Eastern time). The Fund calculates the share price for each share by adding up
its total assets, subtracting all liabilities, then dividing the result by the
total number of shares outstanding. Each class of shares is calculated
separately. Each security held by a Fund is valued on an amortized cost basis
according to Rule 2a-7 under the Investment Company Act of 1940. Under this
<PAGE>
method of valuation, a security is initially valued at its acquisition cost,
and thereafter a constant straightline amortization of any discount or premium
is assumed each day regardless of the impact of fluctuating interest rates on
the market value of the security.
The price per share you pay for a Fund purchase or the amount you receive for
a Fund redemption is based on the next price calculated after the order is
received and all required information is provided. The value of your account
at any given time is the latest share price multiplied by the number of shares
you own.
HOW TO CHOOSE AN EVERGREEN FUND
When choosing an Evergreen Fund, you should:
.Most importantly, read the prospectus to see if the Fund is
suitable for you.
.Consider talking to an investment professional. He or she is
qualified to give you investment advice based on your investment
goals and financial situation and will be able to answer questions
you may have after reading the Fund's prospectus. He or she can also
assist you through all phases of opening your account.
.Request any additional information you want about the Fund, such as
the Statement of Additional Information (SAI), Annual Report or
Semi-annual Report by calling 1-800-343-2898. In addition, any of
theses documents, with exception of the SAI, may be downloaded off
our website at www.evergreen-funds.com.
HOW TO CHOOSE THE SHARE
CLASS THAT BEST SUITS YOU
After choosing a Fund, you select a share class. Each Fund offered in this
prospectus offers up to five different share classes: Class A, Class B,
Class C, Class Y and Class S. Class S shares are not offered in this
prospectus. See the "Fund Facts" next to the Fund Risk/Return Summaries to
find out which classes of shares are offered by a particular Fund. Each class
except Class A and Class Y has its own sales charge. Pay particularly close
attention to the fee structure of each class so you know how much you will be
paying before you invest.
Class A
Each Fund offers Class A shares at net asset value without an initial sales
charge. However, certain broker-dealers and other financial institutions may
impose a fee in connection with Class A purchases of the Funds through them.
When exchanging from Class A shares of a money market fund to another fund
within the Evergreen Funds family, a fee or sales charge will be imposed on
the exchange. This fee or sales charge only applies to Class A shares of an
Evergreen money market fund.
Class B (Money Market Fund Only)
If you select Class B shares, you do not pay a front-end sales charge, so the
entire amount of your purchase is invested in the Fund. However, your shares
are subject to an additional expense, known as 12b-1 fees. In addition, you may
pay a deferred sales charge if you redeem your shares within six years after
the month of purchase. The amount of the deferred sales charge depends on the
length of time the shares are held, as shown below:
<TABLE>
<CAPTION>
Maximum Deferred
Time Held Sales Charge
<S> <C>
Month of Purchase + First 12 Month Period 5.00%
Month of Purchase + Second 12 Month Period 4.00%
Month of Purchase + Third 12 Month Period 3.00%
Month of Purchase + Fourth 12 Month Period 3.00%
Month of Purchase + Fifth 12 Month Period 2.00%
Month of Purchase + Sixth 12 Month Period 1.00%
Thereafter 0.00%
After 7 Years Converts to Class A
Dealer Allowance 4.00%
</TABLE>
<PAGE>
The maximum deferred sales charge may be reduced for certain investors. For
further information on how the deferred sales charge is calculated at the time
of redemption see "Calculating the Deferred Sales Charge" below.
Class C (Money Market Fund Only)
Like Class B shares, you do not pay a front-end sales charge on Class C shares.
However, you may pay a deferred sales charge if you redeem your shares within
two years after the month of purchase. Also, these shares do not convert to
Class A shares and so the higher 12b-1 fees paid by the Class C shares continue
for the life of the account.
The amount of the maximum deferred sales charge depends on the length of time
the shares are held, as shown below:
<TABLE>
<CAPTION>
Time Held Maximum Deferred
Sales Charge
<S> <C>
Month of Purchase + First 12 Month Period 2.00%
Month of Purchase + Second 12 Month Period 1.00%
Thereafter 0.00%
Dealer Allowance 2.00%
</TABLE>
The maximum deferred sales charge may be reduced for certain investors. For
further information on how the deferred sales charge is calculated at the time
of redemption see "Calculating the Deferred Sales Charge" below.
Waiver of Class B or Class C Deferred Sales Charges
You will not be assessed a deferred sales charge for Class B or Class C shares
if you redeem shares in the following situations:
.. When the shares were purchased through reinvestment of dividends/capital gains
.. Death or disability
.. Lump-sum distribution from a 401(k) plan or other benefit plan qualified
under ERISA
.. Automatic IRA withdrawals if your age is at least 59 1/2
.. Automatic withdrawals of up to 1.00% of the account balance per month
.. Loan proceeds and financial hardship distributions from a retirement plan
.. Returns of excess contributions or excess deferral amounts made to a
retirement plan participant
Class Y
Each Fund offers Class Y shares at net asset value without an initial sales
charge, deferred sales charge or 12b-1 fees. Class Y shares are only offered
to persons who owned shares in an Evergreen Fund advised by EAMC on or before
12/31/1994; certain institutional investors; investment advisory clients of an
investment advisor of an Evergreen Fund (or the investment advisor's
affiliates).
Calculating the Deferred Sales Charge
If imposed, the Fund deducts the deferred sales charge from the redemption
proceeds you would otherwise receive. The deferred sales charge is a percentage
of the lesser of (1) the net asset value of the shares at the time of redemption
or (2) the shareholder's original net cost for such shares. Upon request for
redemption, to keep the deferred sales charge a shareholder must pay as low as
possible, the Fund will first seek to redeem shares not subject to the deferred
sales charge and/or shares held the longest, in that order. The deferred sales
charge on any redemption is, to the extent permitted by the National Association
of Securities Dealers, Inc. paid to Evergreen Distributor Inc. or its
predecessor.
<PAGE>
HOW TO BUY SHARES
Evergreen Funds' low investment minimums make investing easy. Once you decide
on an amount and a share class, simply fill out an application and send in your
payment, or talk to your investment professional.
Minimum Investments
<TABLE>
<CAPTION>
Initial Additional
<S> <C> <C>
Regular Accounts $1,000 None
IRAs $250 None
Systematic Investment Plan $50 $25
</TABLE>
<TABLE>
<CAPTION>
Method Opening an Account Adding to an Account
<S> <C> <C>
By Mail or through . Complete and sign the account application. . Make your check payable to Evergreen Funds
an Investment . Make the check payable to Evergreen Funds. . Write a note specifying:
Professional . Mail the application and your check to the address - The Fund name
below: - Share class
Evergreen Service Company Overnight Address: - Your account number
P.O. Box 2121 Evergreen Service Company - The name(s) in which the account is
Boston, MA 02106-9970 200 Berkeley St. registered.
Boston, MA 02116-5034 . Mail to the address to the left or
deliver to your investment representative
. Or deliver them to your investment representative
(provided he or she has a broker-dealer arrangement
with EDI.)
By Phone . Call 1-800-343-2898 to set up an account number . Call the Evergreen Express Line at
and get wiring instructions (call before 12 noon if 1-800-346-3858 24 hours a day or
you want wired funds to be credited that day). 1-800-343-2898 between 8 a.m. and 6
p.m. Eastern time, on any business day.
. Instruct your bank to wire or transfer your
purchase (they may charge a wiring fee). . If your bank account is set up on
. Complete the account application and mail to: file, you can request either:
Evergreen Service Company Overnight Address: - Federal Funds Wire (offers
P.O. Box 2121 Evergreen Service Company immediate access to funds) or
Boston, MA 02106-9970 200 Berkeley St. - Electronic transfer through the
Boston, MA 02116-5034 Automated Clearing House which avoids
wiring fees.
. Wires received after 4 p.m. Eastern time on market
trading days will receive the next market day's
closing price.*
By Exchange . You can make an additional investment by exchange from
an existing Evergreen Funds account by contacting your investment representative or calling
the Evergreen Express Line at 1-800-346-3858.**
. You can only exchange shares within the same class.
. There is no sales charge or redemption fee when exchanging funds within the Evergreen Funds family.***
. Orders placed before 4 p.m. Eastern time on market trading days will receive that day's closing share price
(if not, you will receive the next market day's closing price).*
. Exchanges are limited to three per calendar quarter, but in no event more than five per calendar year.
. Exchanges between accounts which do not have identical ownership must be made in writing with a signature
guarantee (see "Exceptions: Redemption Requests That Require A Signature Guarantee" on the next page).
Systematic . You can transfer money automatically from your bank . To establish automatic investing for an
Investment Plan account into your Fund account on a monthly basis. existing account, call 1-800-343-2898
(SIP) . Initial investment minimum is $50 if you invest at for an application.
least $25 per month with this service. . The minimum is $25 per month or
. To enroll, check off the box on the account $75 per quarter.
application and provide: . You can also establish an investing
- Your bank account information program through direct deposit from
- The amount and date of your monthly investment. your paycheck. Call 1-800-343-2898
for details.
</TABLE>
*The Fund's shares may be made available through financial service firms which
are also investment dealers and which have a service agreement with EDI. The
Fund has approved the acceptance of purchase and repurchase request orders
effective as of the time of their receipt by certain authorized financial
intermediaries.
**Once you have authorized either the telephone exchange or redemption service,
anyone with a Personal Identification Number (PIN) and the required account
information (including your broker) can request a telephone transaction in your
account. All calls are recorded or monitored for verification, recordkeeping and
quality-assurance purposes. The Evergreen Funds reserve the right to terminate
the exchange privilege of any shareholder who exceeds the listed maximum number
of exchanges, as well as to reject any large dollar exchange if placing it
would, in the judgment of the portfolio manager, adversely affect the price of
the Fund.
***This does not apply to exchanges from Class A shares of an Evergreen money
market fund.
<PAGE>
<TABLE>
<CAPTION>
HOW TO REDEEM SHARES
We offer you several convenient ways to redeem your shares in any of the
Evergreen Funds:
<S> <C> <C>
Methods Requirements
Call Us . Call the Evergreen Express Line at 1-800-346-3858 24 hours a day or 1-800-343-2898 between
8 a.m. and 6 p.m. Eastern time, on any business day.
. This service must be authorized ahead of time, and is only available for regular accounts.*
. All authorized requests made before 4 p.m. Eastern time on market trading days will be processed at
that day's closing price. Requests made after 4 p.m. will be processed the following business day.**
. We can either:
- wire the proceeds into your bank account (service charges may apply)
- electronically transmit the proceeds into your bank account via the Automated Clearing House service
- mail you a check.
. All telephone calls are recorded and/or monitored for your protection. We are not responsible for acting
on telephone orders we believe are genuine.
. See exceptions list below for requests that must be made in writing.
Write Us . You can mail a redemption request to: Evergreen Service Company Overnight Address:
P.O. Box 2121 Evergreen Service Company
Boston, MA 02106-2121 200 Berkeley St.
Boston, MA 02116-5039
. Your letter of instructions must:
- list the Fund name and the account number
- indicate the number of shares or dollar value you wish to redeem
- be signed by the registered owner(s)
. See "Exceptions: Redemption Requests That Require A Signature Guarantee" list below for requests
that must be signature guaranteed.
. To redeem from an IRA or other retirement account, call 1-800-343-2898 for a special application.
Redeem Your . You may also redeem your shares through participating broker-dealers by delivering a letter as
Shares in Person described above to your broker-dealer.
. A fee may be charged for this service.
Systematic . You can transfer money automatically from your Fund account on a monthly or quarterly basis - without
Withdrawal redemption fees.
Plan (SWP) . The withdrawal can be mailed to you, or deposited directly into your bank account.
. The minimum is $75 per month.
. The maximum is 1% of your account per month or 3% per quarter.
. To enroll, call 1-800-343-2898 for an application.
</TABLE>
*The Fund's shares may be made available through financial service firms
which are also investment dealers and which have a service agreement with EDI.
The Fund has approved the acceptance of purchase and repurchase request orders
effective as of the time of their receipt by certain authorized financial
intermediaries.
**Once you have authorized either the telephone exchange or redemption service,
anyone with a Personal Identification Number (PIN) and the required account
information (including your broker) can request a telephone transaction in your
account. All calls are recorded and/or monitored for verification, recordkeeping
and quality-assurance purposes. The Evergreen Funds reserve the right to
terminate the exchange privilege of any shareholder who exceeds the listed
maximum number of exchanges, as well as to reject any large dollar exchange if
placing it would, in the judgment of the portfolio manager, adversely affect the
price of the Fund.
Timing of Proceeds
Normally, we will send your redemption proceeds on the next business day after
we receive your request; however, we reserve the right to wait up to seven
business days to redeem any investments made by check and five business days for
investments made by Automated Clearing House transfer. We also reserve the right
to redeem in kind, under certain circumstances, by paying you the proceeds of a
redemption in securities rather than cash, and to redeem the remaining amount in
the account if your redemption brings the account balance below the initial
minimum of $1,000.
Exceptions: Redemption Requests That Require A Signature Guarantee
To protect you and the Evergreen Funds against fraud, certain redemption
requests must be made in writing with your signature guaranteed. A signature
guarantee can be obtained at most banks and securities dealers. A notary public
is not authorized to provide a signature guarantee. The following circumstances
require signature guarantees:
.. You are redeeming more than $50,000.
.. You want the proceeds transmitted into a bank account not listed on the
account.
.. You want the proceeds payable to anyone other than the registered owner(s)
of the account.
.. Either your address or the address of your bank account has been changed
within 30 days.
.. The account is registered in the name of a fiduciary corporation or any
other organization.
In these cases, additional documentation is required:
corporate accounts: certified copy of corporate resolution
fiduciary accounts: copy of the power of attorney or other governing document
Who Can Provide A Signature Guarantee:
.. Commercial Bank
.. Trust Company
.. Savings Association
.. Credit Union
.. Member of a U.S. stock exchange
<PAGE>
OTHER SERVICES
Evergreen Express Line
1-800-346-3858
Use our automated, 24-hour service to check the value of your investment in a
Fund; purchase, redeem or exchange Fund shares; find a Fund's price, yield or
total return; order a statement or duplicate tax form; or hear market commentary
from Evergreen portfolio managers.
Automatic Reinvestment of Dividends
For the convenience of investors, all dividends and capital gains distributions
are automatically reinvested, unless you request otherwise. Distributions can be
made by check or electronic transfer through the Automated Clearing House to
your bank account. The details of your dividends and other distributions will be
included on your statement.
Payroll Deduction (Class A, Class B and Class C only)
If you want to invest automatically through your paycheck, call us to find out
how you can set up direct payroll deductions. The amounts deducted will be
invested in your Fund account using the Electronic Funds Transfer System. We
will provide the Fund account number. Your payroll department will let you know
the date of the pay period when your investment begins.
Telephone Investment Plan
You may make additional investments electronically in an existing Fund account
at amounts of not less than $100 or more than $10,000 per investment. Telephone
requests received by 4 p.m. Eastern time will be invested the day the request is
received.
Dividend Exchange
You may elect on the application to reinvest capital gains and/or dividends
earned in one Evergreen Fund into an existing account in another Evergreen Fund
in the same share class - automatically. Please indicate on the application the
Evergreen Fund(s) into which you want to invest the distributions.
Reinvestment Privileges
Under certain circumstances, shareholders may, within one year of redemption,
reinstate their accounts at the current price. This is the Fund's net asset
value, also sometimes referred to as the Fund's "NAV".
THE TAX CONSEQUENCES OF INVESTING IN THE FUNDS
You may be taxed in two ways:
.. On Fund distributions (dividends and capital gains)
.. On any profit you make when you sell any or all of your shares.
Fund Distributions
A mutual fund passes along to all of its shareholders the net income or profits
it receives from its investments. The shareholders of the fund then pay any
taxes due, whether they receive these distributions in cash or elect to have
them reinvested. The Florida Municipal Money Market Fund, Municipal Money Market
Fund, New Jersey Municipal Money Market Fund and Pennsylvania Municipal Money
Market Fund expect that substantially all of their regular dividends will be
exempt from federal income tax other than the alternative minimum tax.
Otherwise, the Funds will distribute two types of taxable income to you:
.. Dividends. To the extent the regular dividends are derived from interest that
is not tax-exempt, or from short-term capital gains, you will have to include
them in your federal taxable income. Each Fund pays a monthly dividend from the
dividends, interest and other income on the securities in which it invests.
.. Capital Gains. When a mutual fund sells a security it owns for a profit, the
result is a capital gain. The Funds generally distribute capital gains, if any,
at least once a year, near the end of the calendar year. Short-term capital
gains reflect securities held by the Fund for a year or less and are considered
ordinary income just like dividends. Profits on securities held longer than 12
months are considered long-term capital gains and are taxed at a special tax
rate (20% for most taxpayers.) It is not anticipated that any significant
capital gains will be realized by the Fund.
Dividend and Capital Gain Reinvestment
Unless you choose otherwise on the account application, all dividend and capital
gain payments will be reinvested to buy additional shares. Distribution checks
that are returned and distribution checks that are uncashed when the shareholder
has failed to respond to mailings from the shareholder servicing agent will
automatically be reinvested to buy additional shares.
No interest will accrue on amounts represented by uncashed distribution or
redemption checks.
<PAGE>
We will send you a statement each January with the federal
tax status of dividends and distributions paid by each Fund during the previous
calendar year.
Profits You Realize When You Redeem Shares
When you sell shares in a mutual fund, whether by redeeming or exchanging, you
have created a taxable event. You must report any gain or loss on your tax
return unless the transaction was entered into by a tax-deferred retirement
plan. Investments in money market funds typically do not generate capital gains.
It is your responsibility to keep accurate records of your mutual fund
transactions. You will need this information when you file your income tax
return, since you must report any capital gains or losses you incur when you
sell shares. Remember, an exchange is a purchase and a sale for tax purposes.
Tax Reporting
Evergreen Service Company provides you with a tax statement of your dividend and
capital gains distributions for each calendar year on Form 1099 DIV. Proceeds
from a sale are reported on Form 1099B. You must report these on your tax
return. Since the IRS receives a copy as well, you could pay a penalty if you
neglect to report them.
Evergreen Service Company will send you a tax information guide each year during
tax season, which may include a cost basis statement detailing the gain or loss
on taxable transactions you had during the year. Please consult your own tax
advisor for further information regarding the federal, state and local tax
consequences of an investment in the Funds.
Retirement Plans
You may invest in each Fund through various retirement plans, including IRAs,
401(k) plans, Simplified Employee Plans (SEPs), IRAs, 403(b) plans, 457 plans
and others. For special rules concerning these plans, including applications,
restrictions, tax advantages, and potential sales charge waivers, contact your
broker-dealer. To determine if a retirement plan may be appropriate for you,
consult your tax advisor.
FEES AND EXPENSES OF THE FUNDS
Every mutual fund has fees and expenses that are assessed either directly or
indirectly. This section describes each of those fees.
Management Fee
The management fee pays for the normal expenses of managing the fund, including
portfolio manager salaries, research costs, corporate overhead expenses and
related expenses.
12b-1 Fees
The Trustees of the Evergreen Funds have approved a policy to assess 12b-1 fees
for Class A, Class B and Class C shares. Up to 0.75% of the average daily net
assets of Class A shares and up to 1.00% of the average daily net assets of
Class B and Class C shares may be payable as 12b-1 fees. However, currently the
12b-1 fees for Class A shares are limited to 0.30% of the average daily net
assets of the class. These fees increase the cost of your investment. The higher
12b-1 fees imposed on Class B and Class C shares, may, over time, cost more than
the initial sales charge of Class A shares. The purpose of the 12b-1 fees is to
promote the sale of more shares of the Fund to the public. The Fund may use the
12b-1 fees for advertising and marketing and as a "service fee" to the broker-
dealer for additional shareholder services.
Other Expenses
Other expenses include miscellaneous fees from affiliated and outside service
providers. These may include legal, audit, custodial and safekeeping fees, the
printing and mailing of reports and statements, automatic reinvestment of
distributions and other conveniences for which the shareholder pays no
transaction fees.
Total Fund Operating Expenses
The total cost of running the fund is called the expense ratio. As a
shareholder, you are not charged these fees directly; instead they are taken out
before the fund's net asset value is calculated, and are expressed as a
percentage of the fund's average daily net assets. The effect of these fees is
reflected in the performance results for that share class. Because these fees
are "invisible," investors should examine them closely in the prospectus,
especially when comparing one fund with another fund in the same investment
category. There are three things to remember about expense ratios: 1) your total
return in a fund is reduced in direct proportion to the fees; 2) expense ratios
can vary greatly between funds and fund families, from under 0.25% to over
3.00%; and 3) a fund's advisor may waive a portion of the fund's expenses for a
period of time, reducing its expense ratio.
<PAGE>
FINANCIAL HIGHLIGHTS
This section looks in detail at the results for one share in each share class
of the Funds -- how much income it earned, how much of this income was passed
along as a distribution and how much the return was reduced by expenses. The
following tables have been derived from financial information audited by KPMG
LLP for each fiscal year or period shown below: Florida Municipal Money Market
Fund, New Jersey Municipal Money Market Fund, Pennsylvania Municipal Money
Market
EVERGREEN
Florida Municipal Money Market Fund
<TABLE>
<CAPTION>
Year Ended
January 31,
----------------
2000 1999 (a)
<S> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 1.00 $ 1.00
------ ------
Net investment income 0.03 0.01
Distributions to shareholders from
Net investment income (0.03) (0.01)
Net asset value, end of period $ 1.00 $ 1.00
------ ------
Total return 2.69% 0.69%
Ratios and supplemental data
Net assets, end of period (millions) $ 140 $ 84
Ratios to average net assets
Expenses++ 0.84% 0.93%+
Net investment income 2.77% 2.66%+
</TABLE>
<TABLE>
<CAPTION>
Year Ended
January 31,
----------------
2000 1999 (b)
<S> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 1.00 $1.00
------ -----
Net investment income 0.03 0+++
Distributions to shareholders from
Net investment income (0.03) 0+++
------ -----
Net asset value, end of period $ 1.00 $1.00
------ -----
Total return 3.01% 0.26%
Ratios and supplemental data
Net assets, end of period (millions) $ 0 $ 0
Ratios to average net assets
Expenses++ 0.54% 0.65%+
Net investment income 3.07% 2.98%+
</TABLE>
(a) For the period from October 26, 1998 (commencement of class operations) to
January 31, 1999.
(b) For the period from December 29, 1998 (commencement of class operations) to
January 31, 1999.
+ Annualized.
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
+++ Represents an amount less than $0.005 per share.
<PAGE>
Fund and Treasury Money Market Fund and for Money Market Fund and Municipal
Money Market Fund for the fiscal year ended January 31, 2000. For the fiscal
years or periods ended prior to January 31, 2000, the tables for Money Market
Fund and Municipal Money Market Fund were derived from financial information
audited by other accountants. For a more complete picture of the Funds'
financial statements, please see the Funds' Annual Report as well as the
Statement of Additional Information.
EVERGREEN
Money Market Fund
<TABLE>
<CAPTION>
Year Ended January 31, Year Ended August 31,
------------------------ ------------------------
2000 1999 1998 (a) 1997 1996 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Net investment income 0.05 0.05 0.02 0.05 0.05 0.03
Distributions to
shareholders from
Net investment income (0.05) (0.05) (0.02) (0.05) (0.05) (0.03)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Total return 4.68% 4.90% 2.08% 4.95% 5.05% 3.53%
Ratios and supplemental
data
Net assets, end of period
(millions) $8,931 $5,210 $2,910 $2,803 $1,755 $ 685
Ratios to average net
assets
Expenses++ 0.83% 0.85% 0.89%+ 0.79% 0.75% 0.81%+
Net investment income 4.63% 4.78% 4.91%+ 4.87% 4.86% 5.26%+
<CAPTION>
Year Ended January 31, Year Ended August 31,
------------------------ ------------------------
2000 1999 1998 (a) 1997 1996 1995 (c)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Net investment income 0.04 0.04 0.02 0.04 0.04 0.03
Distributions to
shareholders from
Net investment income (0.04) (0.04) (0.02) (0.04) (0.04) (0.03)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Total return* 3.95% 4.18% 1.78% 4.22% 4.31% 2.78%
Ratios and supplemental
data
Net assets, end of period
(millions) $ 67 $ 65 $ 25 $ 23 $ 10 $ 8
Ratios to average net
assets
Expenses++ 1.53% 1.55% 1.59%+ 1.49% 1.45% 1.51%+
Net investment income 3.89% 4.09% 4.22%+ 4.16% 4.18% 4.54%+
</TABLE>
(a) For the five months ended January 31, 1998. The Fund changed its fiscal
year end from August 31 to January 31, effective January 31, 1998.
(b) For the period from January 4, 1995 (commencement of class operations) to
August 31, 1995.
(c) For the period from January 26, 1995 (commencement of class operations) to
August 31, 1995.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes expense reductions.
<PAGE>
EVERGREEN
Money Market Fund
<TABLE>
<CAPTION>
Year Ended January 31,
------------------------ Period Ended
2000 1999 1998 (a) August 31, 1997 (b)
<S> <C> <C> <C> <C>
CLASS C SHARES
Net asset value, beginning of
period $ 1.00 $ 1.00 $ 1.00 $1.00
------ ------ ------ -----
Net investment income 0.04 0.04 0.02 0+++
Distributions to shareholders
from
Net investment income (0.04) (0.04) (0.02) 0+++
------ ------ ------ -----
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $1.00
------ ------ ------ -----
Total return* 3.95% 4.18% 1.78% 0.37%
Ratios and supplemental data
Net assets, end of period
(millions) $ 6 $ 5 $ 2 $ 5
Ratios to average net assets
Expenses++ 1.54% 1.55% 1.59%+ 1.67%+
Net investment income 3.95% 4.09% 4.20%+ 4.42%+
</TABLE>
<TABLE>
<CAPTION>
Year Ended August
Year Ended January 31, 31,
------------------------ ----------------------
2000 1999 1998 (a) 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Net investment income 0.05 0.05 0.02 0.05 0.05 0.05
Distributions to
shareholders from
Net investment income (0.05) (0.05) (0.02) (0.05) (0.05) (0.05)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Total return 4.99% 5.21% 2.21% 5.27% 5.36% 5.38%
Ratios and supplemental data
Net assets, end of period
(millions) $1,908 $1,745 $ 610 $ 635 $ 671 $ 283
Ratios to average net assets
Expenses++ 0.53% 0.55% 0.59%+ 0.48% 0.45% 0.53%
Net investment income 4.89% 5.07% 5.22%+ 5.13% 5.16% 5.26%
</TABLE>
(a) For the five months ended January 31, 1998. The Fund changed its fiscal
year end from August 31 to January 31, effective January 31, 1998.
(b) For the period from August 1, 1997 (commencement of class operations) to
August 31, 1997.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes expense reductions.
+++ Represents an amount less than $0.005 per share.
<PAGE>
EVERGREEN
Municipal Money Market Fund
<TABLE>
<CAPTION>
Year Ended January 31, Year Ended August 31,
------------------------ ------------------------
2000 1999 1998 (a) 1997 1996 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Net investment income 0.03 0.03 0.01 0.03 0.03 0.02
Distributions to
shareholders from
Net investment income (0.03) (0.03) (0.01) (0.03) (0.03) (0.02)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Total return 2.90% 3.07% 1.34% 3.13% 3.22% 2.24%
Ratios and supplemental
data
Net assets, end of period
(millions) $ 708 $ 737 $ 672 $ 667 $ 661 $ 555
Ratios to average net
assets
Expenses++ 0.86% 0.87% 0.88%+ 0.83% 0.79% 0.78%+
Net investment income 2.84% 3.02% 3.18%+ 3.09% 3.14% 3.28%+
<CAPTION>
Year Ended January 31, Year Ended August 31,
------------------------ ------------------------
2000 1999 1998 (a) 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Net investment income 0.03 0.03 0.01 0.03 0.03 0.04
Distributions to
shareholders from
Net investment income (0.03) (0.03) (0.01) (0.03) (0.03) (0.04)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Total return 3.21% 3.38% 1.47% 3.44% 3.53% 3.59%
Ratios and supplemental
data
Net assets, end of period
(millions) $ 591 $ 540 $ 386 $ 378 $ 617 $ 421
Ratios to average net
assets
Expenses++ 0.56% 0.57% 0.58%+ 0.53% 0.49% 0.50%
Net investment income 3.15% 3.30% 3.46%+ 3.37% 3.44% 3.53%
</TABLE>
(a) For the five months ended January 31, 1998. The Fund changed its fiscal
year end from August 31 to January 31, effective January 31, 1998.
(b) For the period from January 5, 1995 (commencement of class operations) to
August 31, 1995.
+ Annualized.
++ The ratio of expenses to average net assets excludes expense reductions.
<PAGE>
EVERGREEN
New Jersey Municipal Money Market Fund
<TABLE>
<CAPTION>
Year Ended January 31,
--------------------------
2000 1999 (a)
<S> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 1.00 $ 1.00
----------- -----------
Net investment income 0.03 0.01
Distributions to shareholders from
Net investment income (0.03) (0.01)
----------- -----------
Net asset value, end of period $ 1.00 $ 1.00
----------- -----------
Total return 2.59% 0.66%
Ratios and supplemental data
Net assets, end of period (millions) $ 111 $ 95
Ratios to average net assets
Expenses++ 0.84% 0.85%+
Net investment income 2.57% 2.46%+
</TABLE>
<TABLE>
<CAPTION>
Period Ended
January 31, 2000 (b)
<S> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 1.00
------
Net investment income 0.02
Distributions to shareholders from
Net investment income (0.02)
------
Net asset value, end of period $ 1.00
------
Total return 2.47%
Ratios and supplemental data
Net assets, end of period (millions) $ 2
Ratios to average net assets
Expenses++ 0.52%+
Net investment income 3.06%+
</TABLE>
(a) For the period October 26, 1998 (commencement of class operations) to Janu-
ary 31, 1999.
(b) For the period April 5, 1999 (commencement of class operations) to January
31, 2000.
+ Annualized.
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
<PAGE>
EVERGREEN
Pennsylvania Money Market Fund
<TABLE>
<CAPTION>
Year Ended
Year Ended January 31, August 31,
------------------------ ---------------- Period Ended
2000 1999 1998 (a) 1997 1996 (b) February 29, 1996 (c)
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Net investment income 0.03 0.03 0.01 0.03 0.01 0.02
Distributions to
shareholders from
Net investment income (0.03) (0.03) (0.01) (0.03) (0.01) (0.02)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Total return 2.90% 2.96% 1.34% 3.05% 1.49% 1.72%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 125 $ 96 $ 37 $ 36 $ 22 $ 4
Ratios to average net
assets
Expenses++ 0.60% 0.61% 0.61%+ 0.60% 0.55%+ 0.47%+
Net investment income 2.87% 2.90% 3.15%+ 3.01% 2.97%+ 3.14%+
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Year Ended January 31, August 31, February 28,
------------------------ ---------------- --------------
2000 1999 1998 (a) 1997 1996 (b) 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------
Net investment income 0.03 0.03 0.01 0.03 0.01 0.03 0.03
Distributions to
shareholders from
Net investment income (0.03) (0.03) (0.01) (0.03) (0.01) (0.03) (0.03)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------
Total return 3.00% 3.07% 1.38% 3.15% 1.51% 3.55% 2.81%
Ratios and supplemental
data
Net assets, end of
period (millions) $ 62 $ 40 $ 33 $ 32 $ 48 $ 83 $ 44
Ratios to average net
assets
Expenses++ 0.50% 0.52% 0.51%+ 0.50% 0.50%+ 0.37% 0.33%
Net investment income 2.98% 3.02% 3.26%+ 3.10% 2.92%+ 3.42% 3.09%
</TABLE>
(a) For the five months ended January 31, 1998. The Fund changed its fiscal
year end from August 31 to January 31, effective January 31, 1998.
(b) For the six months ended August 31, 1996. The Fund changed its fiscal year
end from February 29 to August 31, effective August 31, 1996.
(c) For the period from August 22, 1995 (commencement of class operations) to
February 29, 1996.
+ Annualized.
++ The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
<PAGE>
EVERGREEN
Treasury Money Market Fund
<TABLE>
<CAPTION>
Year Ended January 31, Year Ended August 31,
------------------------ ------------------------
2000 1999 1998 (a) 1997 1996 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Net investment income 0.04 0.05 0.02 0.05 0.05 0.03
Distributions to
shareholders from
Net investment income (0.04) (0.05) (0.02) (0.05) (0.05) (0.03)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Total return 4.38% 4.75% 2.07% 4.82% 4.98% 3.58%
Ratios and supplemental
data
Net assets, end of period
(millions) $2,828 $3,366 $2,616 $2,485 $2,608 $1,178
Ratios to average net
assets
Expenses++ 0.74% 0.73% 0.73%+ 0.72% 0.69% 0.63%+
Net investment income 4.28% 4.63% 4.89%+ 4.73% 4.76% 5.30%+
</TABLE>
<TABLE>
<CAPTION>
Year Ended January 31, Year Ended August 31,
------------------------ ------------------------
2000 1999 1998 (a) 1997 1996 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Net investment income 0.05 0.05 0.02 0.05 0.05 0.04
Distributions to
shareholders from
Net investment income (0.05) (0.05) (0.02) (0.05) (0.05) (0.04)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Total return 4.69% 5.07% 2.20% 5.14% 5.29% 3.78%
Ratios and supplemental
data
Net assets, end of period
(millions) $1,034 $1,045 $ 572 $ 547 $ 760 $ 277
Ratios to average net
assets
Expenses++ 0.44% 0.43% 0.43%+ 0.42% 0.39% 0.33%+
Net investment income 4.58% 4.89% 5.19%+ 5.02% 5.12% 5.60%+
</TABLE>
(a) For the five months ended January 31, 1998. The Fund changed its fiscal
year end from August 31 to January 31, effective January 31, 1998.
(b) For the eight months ended August 31, 1995. The Fund changed its fiscal
year end from December 31 to August 31, effective August 31, 1995.
+ Annualized.
++ The ratio of expenses to average net assets excludes expense reductions.
<PAGE>
OTHER FUND PRACTICES
Taxable securities in which Florida Municipal Money Market Fund, Municipal Money
Market Fund, New Jersey Municipal Money Market Fund and Pennsylvania Money
Market Fund may invest on a short-term basis include obligations of the U.S.
government, its agencies or instrumentalities, including repurchase agreements
with banks or securities dealers involving such securities; time deposits
maturing in not more than seven days; other debt securities rated within the two
highest rating categories by any nationally recognized statistical rating
organization; commercial paper rated in the highest grade by Moody's Investors
Service, Inc. or Standard & Poor's Rating Services; and certificates of deposit
issued by U.S. branches of U.S. banks with assets of $1 billion or more.
The Funds may invest in futures and options. Such practices are used to hedge a
Fund's portfolio to protect against changes in interest rates, to adjust a
portfolios duration, to maintain a Fund's exposure to its market, to manage cash
or attempt to increase income. Although this is intended to increase returns,
those practices may actually reduce returns or increase volatility.
Florida Municipal Money Market Fund, New Jersey Municipal Money Market Fund and
Pennsylvania Municipal Money Market Fund do not intend to concentrate their
investments in any one industry. However, from time to time, a Fund may invest
25% or more of its total assets in municipal securities which are related in
such a way than an economic, business or political development or change
affecting one such obligation would also affect the others. Two examples of
obligations related in this way are (i) an obligation, the interest on which is
paid from revenues of similar type projects and (ii) obligations whose issuers
are located in the same state.
Please consult the Statement of Additional Information for more information
regarding these and other investment practices used by the Funds, including
risks.
<PAGE>
Notes
Notes
Notes
<PAGE>
EVERGREEN FUNDS
Money Market
Florida Municipal Money Market Fund
Money Market Fund
Municipal Money Market Fund
New Jersey Municipal Money Market Fund
Pennsylvania Municipal Money Market Fund
Treasury Money Market Fund
U.S. Government Money Market Fund
Tax Advantaged
Connecticut Municipal Bond Fund
Florida High Income Municipal Bond Fund
Florida Municipal Bond Fund
Georgia Municipal Bond Fund
High Grade Municipal Bond Fund
Maryland Municipal Bond Fund
Municipal Bond Fund
New Jersey Municipal Bond Fund
North Carolina Municipal Bond Fund
Pennsylvania Municipal Bond Fund
Short Intermediate Municipal Fund
South Carolina Municipal Bond Fund
Tax-Free High Income Fund
Virginia Municipal Bond Fund
Income
Capital Preservation and Income Fund
Diversified Bond Fund
High Income Fund
High Yield Bond Fund
Intermediate Term Bond Fund
Quality Income Fund
Short Duration Bond Fund
Strategic Income Fund
U.S. Government Fund
Balanced
Balanced Fund
Capital Balanced Fund
Foundation Fund
Tax Strategic Foundation Fund
Growth & Income
Blue Chip Fund
Equity Income Fund
Growth and Income Fund
Income and Growth Fund
Select Equity Index Fund
Small Cap Value Fund
Utility Fund
Value Fund
Domestic Growth
Aggressive Growth Fund
Capital Growth Fund
Evergreen Fund
Growth Fund
Masters Fund
Omega Fund
Select Special Equity Fund
Small Company Growth Fund
Stock Selector Fund
Strategic Growth Fund
Tax Strategic Equity Fund
Tax
Global International
Emerging Markets Growth Fund
Global Leaders Fund
Global Opportunities Fund
International Growth Fund
Latin America Fund
Perpetual Global Fund
Perpetual International Fund
Precious Metals Fund
Express Line
800.346.3858
Investor Services
800.343.2898
www.evergreen-funds.com
<PAGE>
Evergreen Express Line
Call 1-800-346-3858
24 hours a day to
. check your account
. order a statement
. get a Fund's current price, yield and
total return
. buy, redeem or exchange Fund shares
Investor Services
Call 1-800-343-2898
Each business day, 8 a.m. to 6 p.m. Eastern time to
. buy, redeem or exchange shares
. order applications
. get assistance with your account
Information Line for Hearing and Speech Impaired (TTY/TDD)
Call 1-800-343-2888
Each business day, 8 a.m. to 6 p.m. Eastern time
Write us a letter
Evergreen Service Company
P.O. Box 2121
Boston, MA 02106-9970
. to buy, redeem or exchange shares
. to change the registration on your account
. for general correspondence
For express, registered or certified mail:
Evergreen Service Company
200 Berkeley St.
Boston, MA 02116-5034
Contact us on-line:
www.evergreen-funds.com
Regular communications you will receive:
Account Statements - You will receive quarterly statements for each Fund
you invest in.
Confirmation Notices - We send a confirmation of any transaction you make
within five days of the transaction.
Annual and Semi-annual reports - You will receive a detailed financial
report on each Fund you invest in twice a year.
Tax Forms - Each January you will receive any Fund tax information you
need to include in your tax returns as well as the Evergreen Tax
Information Guide.
<PAGE>
For More Information About the
Evergreen Money Market Funds, Ask for:
The Funds' most recent Annual or Semi-Annual Report, which contains a
complete financial accounting for each Fund and a complete list of the
Fund's portfolio holdings as of a specific date, as well as commentary from
the Fund's portfolio manager. This Report discusses the market conditions
and investment strategies that significantly affected the Fund's
performance during the most recent fiscal year or period.
The Statement of Additional Information (SAI), which contains more detailed
information about the policies and procedures of the Funds. The SAI has
been filed with the Securities and Exchange Commission (SEC) and its
contents are legally considered to be part of this prospectus.
For questions, other information, or to request a copy, without charge, of
any of the documents, call 1-800-343-2898 or ask your investment
representative. We will mail material within three business days. In
addition, any of these documents, with exception of the SAI, may be
downloaded off our website at www.evergreen-funds.com.
Information about these Funds (including the SAI) is also available on the
SEC's Internet website at http://www.sec.gov. Copies of this material may
be obtained for a duplication fee, by writing the SEC Public Reference
Section, Washington, DC 20549-6009 or by electronic request at the
following email address: [email protected]. This material can also be
reviewed and copied at the SEC's Public Reference Room in Washington, DC.
For more information about the operation of the Public Reference Room, call
the SEC at 1-800-SEC-0330.
Evergreen Distributor, Inc.
90 Park Avenue
New York, New York 10016
SEC File No.: 811-08555
<PAGE>
EVERGREEN MONEY MARKET TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
EVERGREEN MONEY MARKET TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
STATEMENT OF ADDITIONAL INFORMATION
June 1, 2000
Evergreen Florida Municipal Money Market Fund
(Florida Municipal Money Market Fund)
Evergreen Money Market Fund (Money Market Fund)
Evergreen Municipal Money Market Fund (Municipal Money Market Fund)
Evergreen New Jersey Municipal Money Market Fund
(New Jersey Municipal Money Market Fund)
Evergreen Pennsylvania Municipal Money Market Fund
(Pennsylvania Municipal Money Market Fund)
Evergreen Treasury Money Market Fund
(Treasury Money Market Fund)
(Each a Fund; together, the Funds)
Each Fund is a series of an open-end management investment company known as
Evergreen Money Market Trust (the Trust)
This statement of additional information (SAI) pertains to all classes of
shares of the Funds. It is not a prospectus but should be read in
conjunction with the prospectuses dated June 1, 2000 and May 15, 2000 for the
Fund in which you are interested. The Funds are offered through two separate
prospectuses: one offering Class A, Class B, Class C, and Class Y shares of and
one offering Class S shares of the Funds. Only Money Market Fund offers Class B
and Class C shares. The information in Part 1 of this SAI is specific
information about the Funds described in the prospectus. The information in
Part 2 of this SAI contains more general information that may or may not apply
to the Fund or class of shares in which you are interested. You may obtain a
prospectus without charge by calling (800)-343-2898 or downloading it off our
website at www.evergreen-funds.com.
Certain information may be incorporated by reference to the Funds' Annual
Report dated January 31, 2000. You may obtain a copy of the Annual Report
without charge by calling (800)-343-2898 or downloading it off our website at
www.evergreen-funds.com.
<PAGE>
TABLE OF CONTENTS
PART 1
TRUST HISTORY..............................................................1-1
INVESTMENT POLICIES........................................................1-1
OTHER SECURITIES AND PRACTICES.............................................1-3
PRINCIPAL HOLDERS OF FUND SHARES...........................................1-3
EXPENSES...................................................................1-6
PERFORMANCE................................................................1-11
SERVICE PROVIDERS..........................................................1-12
FINANCIAL STATEMENTS.......................................................1-15
ADDITIONAL INFORMATION CONCERNING FLORIDA..................................1-16
ADDITIONAL INFORMATION CONCERNING NEW JERSEY...............................1-23
ADDITIONAL INFORMATION CONCERNING PENNSYLVANIA.............................1-26
PART 2
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES............ 2-1
PURCHASE AND REDEMPTION OF SHARES......................................... 2-12
SALES CHARGE WAIVERS AND REDUCTIONS....................................... 2-14
PRICING OF SHARES..........................................................2-17
PERFORMANCE CALCULATIONS.................................................. 2-17
PRINCIPAL UNDERWRITER......................................................2-19
DISTRIBUTION EXPENSES UNDER RULE 12b-1.....................................2-20
TAX INFORMATION............................................................2-22
BROKERAGE..................................................................2-25
ORGANIZATION...............................................................2-26
INVESTMENT ADVISORY AGREEMENT..............................................2-28
MANAGEMENT OF THE TRUST....................................................2-29
CORPORATE AND MUNICIPAL BOND RATINGS.......................................2-30
ADDITIONAL INFORMATION.....................................................2-40
<PAGE>
PART 1
TRUST HISTORY
The Trust is an open-end management investment company, which was organized as a
Delaware business trust on September 18, 1997. A copy of the Declaration of
Trust is on file as an exhibit to the Trust's Registration Statement, of which
this SAI is a part.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT RESTRICTIONS
Each Fund has adopted the fundamental investment restrictions set forth below
which may not be changed without the vote of a majority of the Fund's outstand-
ing shares, as defined in the Investment Company Act of 1940 (the 1940 Act).
Where necessary, an explanation beneath a fundamental policy describes the
Fund's practices with respect to that policy, as allowed by current law. If the
law governing a policy changes, the Funds' practices may change accordingly
without a shareholder vote. Unless otherwise stated, all references to the
assets of the Fund are in terms of current market value.
1. Diversification (Excluding Florida Municipal Money Market Fund, New
Jersey Municipal Money Market Fund and Pennsylvania Municipal Money Market
Fund)
Each Fund, except Florida Municipal Money Market Fund, New Jersey
Municipal Money Market Fund and Pennsylvania Municipal Money Market Fund which
are nondiversified, may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
Further Explanation of Diversification Policy:
<PAGE>
To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to 75% of its
total assets, a diversified investment company may not invest more than 5% of
its total assets, determined at market or other fair value at the time of
purchase, in the securities of any one issuer, or invest in more than 10% of
the outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities
issued or guaranteed by the United States (U.S.) government or its agencies or
instrumentalities.
2. Concentration
Each Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry (other than securities
that are issued or guaranteed by the U.S. government or its agencies or
instrumentalities or, in the case of Money Market Fund, domestic bank money
instruments).
Further Explanation of Concentration Policy:
Each Fund may not invest more than 25% of its total assets, taken at
market value, in the securities of issuers primarily engaged in any particular
industry (other than securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities).
3. Issuing Senior Securities
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
4. Borrowing
Each Fund may not borrow money, except to the extent permitted by
applicable law.
Further Explanation of Borrowing Policy:
Each Fund may borrow from banks and enter into reverse repurchase
agreements in an amount up to 33 1/3% of its total assets, taken at market
value. Each Fund may also borrow up to an additional 5% of its total assets
from banks or others. A Fund may borrow only as a temporary measure for
extraordinary or emergency purposes such as the redemption of Fund shares.
A Fund may purchase additional securities so long as borrowings do not exceed
5% of its total assets. Each Fund may obtain such short-term credit as may be
necessary for the clearance of purchases and sales of portfolio securities.
Each Fund may purchase securities on margin and engage in short sales to the
extent permitted by applicable law.
5. Underwriting
Each Fund may not underwrite securities of other issuers, except insofar as
a Fund may be deemed to be an underwriter in connection with the disposition of
its portfolio securities.
6. Real Estate
Each Fund may not purchase or sell real estate, except that, to the extent
permitted by applicable law, a Fund may invest in (a) securities that are
directly or indirectly secured by real estate, or (b) securities issued by
issuers that invest in real estate.
7. Commodities
Each Fund may not purchase or sell commodities or contracts on commodities
except to the extent that a Fund may engage in financial futures contracts and
related options and currency contracts and related options and may otherwise do
so in accordance with applicable law, and without registering as a commodity
pool operator under the Commodity Exchange Act.
8. Lending
Each Fund may not make loans to other persons, except that a Fund may lend
its portfolio securities in accordance with applicable law. The acquisition of
investment securities or other investment instruments shall not be deemed to be
the making of a loan.
Further Explanation of Lending Policy:
To generate income and offset expenses, a Fund may lend portfolio
securities to broker-dealers and other financial institutions in an amount up
to 33 1/3% of its total assets, taken at market value. While securities are on
loan, the borrower will pay the Fund any income accruing on the security. The
Fund may invest any cash collateral it receives in additional portfolio
securities, such as U.S. Treasury notes, certificates of deposit, other
high-grade, short-term obligations or interest bearing cash equivalents. Gains
<PAGE>
or losses in the market value of a security lent will affect the Fund and its
shareholders.
When a Fund lends its securities, it will require the borrower to give the
Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Fund has the right to
call a loan and obtain the securities lent any time on notice of not more than
five business days. The Fund may pay fees in connection with such loans.
9. Investments in Federally Tax-Exempt Securities
Each Fund (other than Money Market Fund and Treasury Money Market Fund)
will, during periods of normal market conditions, invest its assets in
accordance with applicable guidelines issued by the Securities and Exchange
Commission (SEC) or its staff concerning investment in tax-exempt securities
for funds with the words tax-exempt, tax free or municipal in their names.
OTHER SECURITIES AND PRACTICES
For information regarding securities the Funds may purchase and investment
practices the Funds may use, see the following sections in Part 2 of this SAI
under "Additional Information on Securities and Investment Practices",
Information provided in the sections listed below expands upon and supplements
information provided in the Funds' prospectus. The list below applies to all
Funds unless otherwise noted.
Money Market Instruments
When-Issued, Delayed-Delivery and Forward Commitment Transactions
(except for Money Market Fund)
Repurchase Agreements
Reverse Repurchase Agreements
Securities Lending
Options and Futures Strategies
Foreign Securities (applies to Money Market Fund only)
Illiquid and Restricted Securities
Investment in Other Investment Companies
Municipal Bonds (except for Money Market Fund and Treasury Money Market Fund)
Master Demand Notes
Obligations of Foreign Branches of United States Banks
(applies to Money Market Fund only)
Obligations of United States Branches of Foreign Banks
(applies to Money Market Fund only)
Zero Coupon "Stripped" Bonds (except for Treasury Money Market Fund)
Floating Rate and Variable Rate Obligations
(except for Treasury Money Market Fund)
Stand-by Commitments
PRINCIPAL HOLDERS OF FUND SHARES
As of April 28, 2000, the officers and Trustees of the Trust owned as a
group less than 1% of the outstanding shares of any class of each Fund.
Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of the
outstanding shares of any class of each Fund as of April 28, 2000.
<PAGE>
---------------------------------------------------------
Florida Municipal Money Market Fund Class A
---------------------------------------- ----------------
First Union National Bank
Attn: Cap Financial 88.41%
230 S. Tryon Street
Charlotte, NC 28202-3215
---------------------------------------- ----------------
First Union Brokerage Services
301 South College Street 10.04%
Charlotte, NC 28202-6000
---------------------------------------------------------
Florida Municipal Money Market Fund Class Y
---------------------------------------- ----------------
None
---------------------------------------------------------
Money Market Fund Class A
---------------------------------------- ----------------
First Union National Bank
Attn: Cap Financial 57%
230 S. Tryon Street
Charlotte, NC 28202-3215
---------------------------------------- ----------------
First Union National Bank
Attn: Cap Financial 26%
230 S. Tryon Street
Charlotte, NC 28202-3215
---------------------------------------- ----------------
First Union Brokerage Services
301 S. College Street 5%
Charlotte, NC 28202-6000
---------------------------------------- ----------------
BISYS Fund Services Inc.
FBO First Union Sweep Customers 6%
Attn: Mike Bryan
3435 Stelzer Road
Columbus, OH 43219-6004
---------------------------------------------------------
Money Market Fund Class B
---------------------------------------- ----------------
None
---------------------------------------------------------
Money Market Fund Class C
---------------------------------------- ----------------
Harvey A. Shropshire
1009 Melbury Road 9.89%
Collierville, TN 38017-3286
---------------------------------------- ----------------
Kimberle A Smith Rev Trust
43 Lily Pond Lane 7.02%
St. Charles, MO 63304-0542
---------------------------------------- ----------------
Christine M .Stayer
W 145 N 7471 Northwood Drive 6.25%
Menomonee Falls, WI 53051
---------------------------------------- ----------------
State Street Bank and Trust Co.
Robert D. Laubner 5.44%
156 Elmwood Road
Swampscott, MA 01907-2034
---------------------------------------------------------
Money Market Fund Class Y
---------------------------------------------------------
---------------------------------------- ----------------
First Union National Bank
Attn: Ginny Batten 76.04%
401 S. Tryon Street, 3rd Floor
Charlotte, NC 28202-1911
---------------------------------------- ----------------
---------------------------------------- ----------------
<PAGE>
---------------------------------------- ----------------
Byrd & Company
C/o First Union National Bank 5.59%
Sweep Funds Processing
530 Walnut Street
Philadelphia, PA 19101
---------------------------------------- ----------------
---------------------------------------------------------
Municipal Money Market Fund Class A
---------------------------------------------------------
---------------------------------------- ----------------
First Union National Bank
Attn: Cap Financial 80.71%
230 S. Tryon Street
Charlotte, NC 28202-3215
---------------------------------------- ----------------
---------------------------------------- ----------------
First Union Brokerage Services
301 S. College Street 11.97%
Charlotte, NC 28202-6000
---------------------------------------- ----------------
---------------------------------------------------------
Municipal Money Market Fund Class Y
---------------------------------------------------------
---------------------------------------- ----------------
First Union National Bank
Attn: Ginny Batten 38.77%
11th Floor
301 S. Tryon Street
Charlotte, NC 28288
---------------------------------------- ----------------
---------------------------------------- ----------------
Pitcairn Trust Company 11.08%
One Pitcairn Place
Jenkintown, PA 19046-3531
---------------------------------------- ----------------
---------------------------------------- ----------------
First Union Securities, Inc.
Attn: Money Funds 5.48%
8739 Research Drive
Charlotte, NC 28262-8537
---------------------------------------- ----------------
---------------------------------------------------------
New Jersey Municipal Money Market Fund Class A
---------------------------------------------------------
---------------------------------------- ----------------
First Union National Bank
Attn: Cap Financial 70.64%
230 S. Tryon Street
Charlotte, NC 28202-3215
---------------------------------------- ----------------
---------------------------------------- ----------------
First Union Brokerage Services
301 South College Street 22.52%
Charlotte, NC 28202-6000
---------------------------------------- ----------------
---------------------------------------------------------
New Jersey Municipal Money Market Fund Class Y
---------------------------------------------------------
---------------------------------------- ----------------
First Clearing Corporation 49.82%
Joseph T. D'Amario & Mary D'Amario
JRWROS JTWROS
200 East 25th Street
Paterson, NJ 07514-2119
---------------------------------------- ----------------
Edmund Brenman
Sally Brenman 45.35%
65 Maebelle Drive
Clark, NJ 07066-2216
---------------------------------------------------------
Pennsylvania Municipal Money Market Fund Class A
---------------------------------------------------------
First Union National Bank
Attn: Cap Financial 81.58%
230 S. Tryon Street
Charlotte, NC 28202-3215
---------------------------------------- ----------------
---------------------------------------- ----------------
First Union Brokerage Services
301 South College Street 15.23%
Charlotte, NC 28202-6000
---------------------------------------- ----------------
<PAGE>
---------------------------------------------------------
Pennsylvania Municipal Money Market Fund Class Y
---------------------------------------------------------
---------------------------------------- ----------------
First Union National Bank
Trust Accounts 74.46%
Attn: Ginny Batten
401 S. Tryon Street, 3rd Floor
Charlotte, NC 28202-1911
---------------------------------------- ----------------
---------------------------------------- ----------------
First Union Brokerage Services
301 S. College Street 5.31%
Charlotte, NC 28202-6000
---------------------------------------- ----------------
---------------------------------------- ----------------
Johnathan B. Detwiler
P.O. Box 69 9.47%
Phoenixville, PA 19460-0069
---------------------------------------- ----------------
---------------------------------------------------------
Treasury Money Market Fund Class A
---------------------------------------------------------
---------------------------------------- ----------------
First Union National Bank
Attn: Cap Financial 73.76%
230 S. Tryon Street
Charlotte, NC 28202-3215
---------------------------------------- ----------------
---------------------------------------- ----------------
First Union National Bank
Attn: Ginny Batten 10.85%
301 S. Tryon Street, 11th floor
Charlotte, NC 28202-1910
---------------------------------------- ----------------
---------------------------------------- ----------------
BISYS Fund Services, Inc.
FBO First Union Sweep Customers 5.64%
Attn: Mike Bryan
3435 Stelzer Road
Columbus, OH 43219-6004
---------------------------------------- ----------------
---------------------------------------------------------
Treasury Money Market Fund Class Y
---------------------------------------------------------
---------------------------------------- ----------------
First Union National Bank
Attn: Ginny Batten 76.81%
301 S. Tryon Street, 11th Floor
Charlotte, NC 28202-1910
---------------------------------------- ----------------
---------------------------------------- ----------------
Evergreen Money Market
First Union National Bank 9.16%
Attn: Money Funds
8739 Research Drive
Charlotte, NC 28202-8537
---------------------------------------- ----------------
EXPENSES
Advisory Fees
Each Fund has its own investment advisor. For more information, see
"Investment Advisory Agreement" in Part 2 of this SAI.
Evergreen Asset Management Corp. (EAMC) is the investment advisor to
Florida Municipal Money Market Fund, Money Market Fund, Municipal Money Market
Fund and New Jersey Municipal Money Market Fund. Lieber & Company (Lieber) acts
as sub-advisor to Florida Municipal Money Market Fund, Money Market Fund,
Municipal Money Market Fund and New Jersey Municipal Money Market Fund. EAMC is
entitled to receive from Florida Municipal Money Market Fund, Money Market
Fund, Municipal Money Market Fund and New Jersey Municipal Money Market Fund
an annual fee based on the Fund's average daily net assets as follows:
<PAGE>
---------------------------------- =================
Average Daily Net Assets Fee
---------------------------------- =================
---------------------------------- =================
First $1 billion 0. 44%
---------------------------------- =================
---------------------------------- =================
Over $1 billion 0. 39%
---------------------------------- =================
Evergreen Investment Management (EIM), formerly the Capital Management
Group of First Union National Bank (FUNB), is the investment advisor to Treasury
Money Market Fund. EIM is entitled to receive from Treasury Money Market Fund an
annual fee equal to 0.31% of the average daily net assets of the Fund.
EIM is also the investment advisor to Pennsylvania Municipal Money Market
Fund. EIM is entitled to receive from Pennsylvania Municipal Money Market Fund
an annual fee based on the average daily net assets of the Fund, as follows:
---------------------------------- =================
Average Daily Net Assets Fee
---------------------------------- =================
---------------------------------- =================
First $500 million 0. 36%
---------------------------------- =================
---------------------------------- =================
Next $500 million 0. 32%
---------------------------------- =================
---------------------------------- =================
0. 28%
Next $500 million
---------------------------------- =================
---------------------------------- =================
Over $1.5 billion 0. 24%
---------------------------------- =================
<PAGE>
Advisory Fees Paid
Below are the advisory fees paid by each Fund for the last three fiscal
years or periods.
<TABLE>
<CAPTION>
- -------------------------------------------- --------------------------------- --------------------------
Fund/Fiscal Year or Period Advisory Fees Paid Advisory Fees Waived
<S> <C> <C>
- ------------------------------------------- --------------------------------- --------------------------
- ----------------------------------------------------------------------------------------------------------
Year Ended 1/31/2000
- ------------------------------------------- --------------------------------- --------------------------
- ----------------------------------------------------------------------------------------------------------
Florida Municipal Money Market Fund $415,461 $0
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
Money Market Fund $41,092,961 $0
- -------------------------------------------- --------------------------------- --------------------------
- ----------------------------------------------------------------------------------------------------------
Municipal Money Market Fund $6,608,878 $0
- -------------------------------------------- --------------------------------- --------------------------
- ----------------------------------------------------------------------------------------------------------
New Jersey Municipal Money Market Fund $485,050 $0
- -------------------------------------------- --------------------------------- --------------------------
- ----------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Money Market Fund $617,609 $0
- -------------------------------------------- --------------------------------- --------------------------
- ----------------------------------------------------------------------------------------------------------
Treasury Money Market Fund $14,314,005 $0
- -------------------------------------------- --------------------------------- --------------------------
- ----------------------------------------------------------------------------------------------------------
Year Ended 1/31/1999
- ------------------------------------------- --------------------------------- --------------------------
- ----------------------------------------------------------------------------------------------------------
Florida Municipal Money Market Fund (a) $107,393 $45,775
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
Money Market Fund $24,349,144 $0
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
Municipal Money Market Fund $6,136,621 $0
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
New Jersey Municipal Money Market Fund (a) $114,832 $61,737
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
Pennsylvania Municipal Money Market Fund $376,038 $0
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
Treasury Money Market Fund $13,851,709 $0
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
Year or Period Ended 1/31/1998
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
Money Market Fund $6,801,389 $0
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
Municipal Money Market Fund $2,155,943 $0
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
Pennsylvania Municipal Money Market Fund $111,425 $17,363
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
Treasury Money Market Fund $4,446,822 $0
- ------------------------------------------- --------------------------------- --------------------------
- ------------------------------------------- --------------------------------- --------------------------
(a) For the period from 10/26/1998 (commencement of investment operations) to 1/31/1999.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Sub-Advisory Fees Paid
EAMC has entered into sub-advisory agreements with Lieber, an indirect wholly-
owned subsidiary of FUNB, which provide that Lieber's research department and
staff will furnish EAMC with information, investment recommendations, advice
and assistance, and will generally be available for consultation on the
portfolios of Florida Municipal Money Market Fund, Money Market Fund, Municipal
Money Market Fund and New Jersey Money Market Fund. Lieber will be reimbursed
by EAMC in connection with the rendering of services on the basis of the direct
and indirect costs of performing such services. There is no additional charge
to the Funds for the services provided by Lieber.
Brokerage Commissions
The Funds paid no brokerage commissions during the fiscal year ended
January 31, 2000.
<PAGE>
Underwriting Commissions
For each Fund there are no underwriting commissions for the last three
fiscal periods.
12b-1 Fees
Below are the 12b-1 fees paid by each Fund for the fiscal year ended
January 31, 2000. For more information, see "Distribution Expenses Under Rule
12b-1" in Part 2 of this SAI. Class Y shares do not pay 12b-1 fees, and Class A
shares do not pay distribution fees.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Fund Class A Class B Class C
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Service Fees Distribution Service Fees Distribution Service Fees
Fees Fees
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Florida Municipal Money $280,813 $0 $0 $0 $0
Market Fund
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Money Market Fund $21,855,342 $563,933 $187,978 $42,258 $14,091
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Municipal Money Market Fund $2,320,379 $0 $0 $0 $0
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
New Jersey Municipal Money $324,029 $0 $0 $0 $0
Market Fund
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Money $336,920 $0 $0 $0 $0
Market Fund
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Treasury Money Market Fund $9,338,554 $0 $0 $0 $0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Trustee Compensation
Listed below is the Trustee compensation paid by the Trust individually
for the fiscal year ended January 31, 2000 and by the Trust and the eleven
other trusts in the Evergreen Fund Complex for the calendar year ended December
31, 1999. The Trustees do not receive pension or retirement benefits from the
Funds. For more information, see "Management of the Trust" in Part 2 of this
SAI.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Trustee Aggregate Compensation Total Compensation from the
from Trust for fiscal year Evergreen Fund Complex for
ended 1/31/2000 the calendar year ended
12/31/1999*
<S> <C> <C>
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Laurence B. Ashkin $18,189 $75,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Charles A. Austin, III $18,386 $75,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Arnold H. Dreyfuss $956 N/A
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
K. Dun Gifford $18,479 $75,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
James S. Howell** $23,205 $97,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Leroy Keith, Jr. $18,462 $75,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Gerald M. McDonnell $18,384 $75,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Thomas L. McVerry $21,055 $85,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Louis W. Moelchert, Jr. $956 N/A
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
William Walt Pettit $18,462 $75,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
David M. Richardson $18,658 $75,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Russell A. Salton, III $19,486 $77,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Michael S. Scofield $26,159 $102,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Richard J. Shima $18,658 $75,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Richard K. Wagoner $956 N/A
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
*Certain Trustees have elected to defer all or part of their total compensation
for the twelve months ended January 31, 2000. The amounts listed below
will be payable in later years to the respective Trustees:
Austin $11,250
Howell $77,600
McDonnell $75,000
McVerry $85,000
Pettit $75,000
Salton $77,000
Scofield $61,200
**As of January 1, 2000, James S. Howell retired and became Trustee Emeritus.
</TABLE>
<PAGE>
PERFORMANCE
Total Return
Below are the average annual total returns for each class of shares of
the Funds (including applicable sales charges) as of January 31, 2000. For more
information, see "Total Return" under "Performance Calculations" in Part 2 of
this SAI.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Fund/Class One Year Five Years Ten Years or Since Inception Date of
Inception Class
<S> <C> <C> <C> <C>
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Florida Municipal Money Market
Fund (a)
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class A 2.69% N/A 2.67% 10/26/1998
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class Y 3.01% N/A 3.12% 12/29/1998
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------=
Money Market Fund (c)
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class A 4.68% 4.97% 5.01% 01/04/1995
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class B -1.05% 3.90% 4.64% 01/26/1995
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class C 1.95% 4.76% 4.91% 08/01/1997
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class Y 4.99% 5.28% 5.17% 11/02/1987
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Municipal Money Market Fund (b)
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class A 2.90% 3.14% 3.48% 01/05/1995
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class Y 3.21% 3.44% 3.64% 11/02/1988
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
New Jersey Municipal Money
Market Fund (a)
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class A 2.59% N/A 2.57% 10/26/1998
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class Y 2.84% N/A 2.77% 04/05/1999
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Pennsylvania Municipal Money
Market Fund (b)
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class A 2.90% 3.12% 2.97% 08/22/1995
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class Y 3.00% 3.20% 3.01% 08/15/1991
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Treasury Money Market Fund
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class A 4.38% 4.84% 4.37% 03/06/1991
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
Class Y 4.69% 5.15% 4.68% 03/06/1991
- ------------------------------ --------------------- --------------------- --------------------- -------------------
- ------------------------------ --------------------- --------------------- --------------------- -------------------
(a) Historical performance shown for Class Y prior to its inception is based on the performance of Class A, the
original class offered. The historical returns for Class Y have not been adjusted to reflect the fact that Class
Y does not pay 12b-1 fees. These fees for Class A are 0.30%. If these fees had been eliminated returns would
have been higher.
(b) Historical performance shown for Class A prior to its inception is based on the performance of Class Y, the
original class offered. The historical returns for Class A have not been adjusted to reflect the effect of the
class' 0.30% 12b-1 fees. Class Y does not pay 12b-1 fees. If these fees had been reflected, returns would have
been lower.
(c) Historical performance shown for Classes A, B, and C prior to their inception is based on the performance of
Class Y, the original class offered. These historical returns for Classes A, B, and C have not been adjusted to
reflect the effect of each class' 12b-1 fees. These fees are 0.30% for Class A and 1.00% for Classes B and C.
Class Y does not pay a 12b-1 fee. If these fees had been reflected, returns would have been lower.
</TABLE>
Yields
Below are the yields for each class of shares of the Funds for the seven-
day period ended January 31, 2000. For more information, see Yield under
"Performance Calculations" in Part 2 of this SAI.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Fund Class Current Effective Tax Equivalent
Yield (a)
<S> <C> <C> <C>
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Florida Municipal Money
Market Fund
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class A 2.73% 2.77% 4.27%
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class Y 3.03% 3.08% 4.73%
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Money Market Fund
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class A 5.09% 5.22% N/A
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class B 4.39% 4.48% N/A
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class C 4.39% 4.48% N/A
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class Y 5.38% 5.53% N/A
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Municipal Money Market
Fund
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class A 2.97% 3.01% 4.64%
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class Y 3.27% 3.32% 5.11%
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
New Jersey Municipal
Money Market Fund
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class A 2.68% 2.71% 4.55%
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class Y 2.98% 3.03% 5.06%
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Pennsylvania Municipal
Money Market Fund
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class A 2.98% 3.02% 4.87%
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class Y 3.13% 3.17% 5.12%
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Treasury Money Market
Fund
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class A 4.83% 4.94% N/A
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
Class Y 5.13% 5.26% N/A
- ----------------------- ------------------- ----------------- -------------------
- ----------------------- ------------------- ----------------- -------------------
(a) Assumes the following combined federal and state tax rates:
Florida 36.00%
Municipal 36.00%
New Jersey 41.09%
Pennsylvania 38.84%
</TABLE>
SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. (EIS), 200 Berkeley Street,
Boston, MA 02106, a subsidiary of First Union Corporation, serves as adminis-
trator to each Fund, subject to the supervision and control of the Trust's
Board of Trustees. EIS provides the Funds with facilities, equipment and
personnel and is entitled to receive a fee at the annual rate of 0.06% of
each Fund's average daily net assets.
Below are the administrative fees paid by each Fund (under a prior fee
arrangement) for the last three fiscal years or periods.
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Fund/Fiscal Year or Period Administrative Fees Administrative Fees
Paid Waived
<S> <C> <C>
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Year Ended 1/31/2000
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Florida Municipal Money Market Fund $23,237 $0
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Money Market Fund $516,868 $0
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Municipal Money Maket Fund $61,148 $0
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
New Jersey Municipal Money Market $23,773 $0
Fund
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Pennsylvania Municipal Money Market $34,677 $0
Fund
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Treasury Money Market Fund $879,347 $0
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Year Ended 1/31/1999
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Florida Municipal Money Market
Fund (a) $6,149 $0
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Money Market Fund (b) N/A N/A
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Municipal Money Market Fund (b) N/A N/A
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
New Jersey Municipal Money Market $6,596 $0
Fund (a)
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Pennsylvania Municipal Money Market $25,298 $0
Fund
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Treasury Money Market Fund $1,069,575 $0
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Year or Period Ended 1/31/1998
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Money Market Fund (b) N/A N/A
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Municipal Money Maket Fund (b) N/A N/A
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Pennsylvania Municipal Money
Market Fund $9,122 $0
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
Treasury Money Market Fund $426,814 $0
- ----------------------------------- --------------------- ---------------------
- ----------------------------------- --------------------- ---------------------
(a) For the period 10/26/1998 (commencement of operations) through 1/31/1999.
(b) For periods prior to 01/03/2000 the administrative fees for Money Market
Fund and Municipal Money Market Fund were paid by the investment advisor.
</TABLE>
Transfer Agent
Evergreen Service Company (ESC), P.O. Box 2121, Boston, Massachusetts
02106-2121, a subsidiary of First Union Corporation, is the Funds' transfer
<PAGE>
agent. ESC issues and redeems shares, pays dividends and performs other duties
in connection with the maintenance of shareholder accounts. Each Fund pays ESC
annual fees as follows:
----------------------------- --------------- ==============
Fund Type Annual Fee Annual Fee
Per Open Per Closed
Account* Account**
----------------------------- --------------- ==============
----------------------------- --------------- ==============
Monthly Dividend Funds $25.50 $9.00
----------------------------- --------------- ==============
----------------------------- --------------- ==============
Quarterly Dividend Funds $24.50 $9.00
----------------------------- --------------- ==============
----------------------------- --------------- ==============
Semiannual Dividend Funds $23.50 $9.00
----------------------------- --------------- ==============
----------------------------- --------------- ==============
Annual Dividend Funds $23.50 $9.00
----------------------------- --------------- ==============
----------------------------- --------------- ==============
Money Market Funds $25.50 $9.00
----------------------------- --------------- ==============
*For shareholder accounts only. Each Fund pays ESC cost plus
15% for broker accounts.
**Closed accounts are maintained on the system in order to
facilitate historical and tax information.
Distributor
Evergreen Distributor, Inc.(EDI),90 Park Avenue, New York, New York 10016,
markets the Funds through broker-dealers and other financial representatives.
Independent Auditors
KPMG LLP, 99 High Street, Boston, Massachusetts 02110, audits the
financial statements of each Fund.
Custodian
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, keeps custody of each Fund's securities and cash and
performs other related duties.
Legal Counsel
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036, provides legal advice to the Funds.
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements and the reports thereon are hereby
incorporated by reference to the Funds' Annual Report, a copy of which may be
obtained without charge from ESC, P.O. Box 2121, Boston, Massachusetts 02106-
2121 or by calling (800) 343-2898, or by downloading it off our website at
www.evergreen-funds.com..
<PAGE>
ADDITIONAL INFORMATION CONCERNING FLORIDA
The financial condition of the State of Florida (State), its public and
its local governments, could affect the market values and marketability of,
and therefore the net asset value per share and the interest income of Florida
Municipal Money Market Fund, or result in the default of existing obligations,
including obligations which may be held by the Fund. The following section
provides only a brief summary of the complex factors affecting the financial
situation in Florida and is based on information obtained from Florida,
certain of its authorities and certain other localities within the State,
as publicly available on the date of this SAI. The information contained in
such publicly available documents has not been independently verified. It
should be noted that the creditworthiness of obligations issued by local
issuers may be unrelated to the creditworthiness of Florida, and that there is
no obligation on the part of Florida to make payment on such local obligations
in the event of default in the absence of a specific guarantee or pledge
provided by Florida.
State Economy
General.Florida is the nation's fourth most popular state with an
estimated population of 15,079,000 as of December 31, 1998. Only California,
New York and Texas have populations larger than Florida.The State's population
grew from 6,800,000 in 1970 to 12,937,000 in 1990 and to an estimated
15,079,000 in 1998. This represents a 16.5% growth since the 1990 Census.
Florida's population is primarily an urban population with approximately 85% of
its population located in urbanized areas. The University of Florida, Bureau of
Economic and Business Research projects Florida's population will exceed
17,942,000 by April 1, 2010.
Economic Conditions and Outlook. The current Florida Economic Consensus
Estimating Conference forecast shows that the Florida economy is expected to
grow at a slower pace than was experienced in the last years, but will
continue to outperform the U.S. as a whole. Total non-farm employment is
expected to increase 3.5% for the 1999-2000 fiscal year which began July 1,
1999. By the end of fiscal year 2000-01, non-farm employment is expected to
reach 7.3 million. Trade and service employment, the two largest sectors,
account for more than half of total non-farm employment. Florida's unemployment
rate is forecasted at 3.8% for 1999-2000, then to rise to 4.1% in 2000-01.
Tourism is an important element of Florida's economy. Tourist arrivals are
expected to increase 4.9% for 1999-2000 and 2.7% for 2000-01. Air tourists will
increase 6.3% and 4.3%, while auto tourists will increase 3.1% and 0.5%,
respectively. In 1999-2000, 51.2 million domestic and international tourists
are expected to visit the State. In 2000-01, tourist visits should reach 52.6
million.
Another important element of Florida's economy is construction. The number
of combined single and multi-family private housing starts is expected to
fall from 138,600 units in 1999-2000 to 134,900 units the following year. Total
construction expenditures, however, are expected to increase 3.5% and 0.8% in
the next two years.
Florida's Budget Process
Balanced Budget Requirement. Florida's constitution requires an annual
balanced budget. In addition, the constitution requires a Budget Stabilization
Fund equal to 5% of the last fully completed fiscal year's net revenue
collections for the General Revenue Fund. In the Governor's 2000-01
Recommended Budget, the Budget Stabilization Fund is required to be funded at a
total of $894 million.
<PAGE>
State Revenue Limitations. On November 8, 1994, the citizens of Florida
enacted a Constitutional Amendment on state revenue. This amendment provides
that the rate of growth in state revenues is limited to no more than the
average annual growth rate in Florida personal income during the past five
years. Revenue growth in excess of the limitation is to be deposited into the
Budget Stabilization Fund unless two-thirds of the members of both houses of
the Legislature vote to raise the limit. The revenue limit is determined by
multiplying the average annual growth rate in Florida personal income over the
past five years times state revenues for the previous year.
Budget Process. Chapter 216, Florida Statutes, promulgates the process
used to develop the budget for the State of Florida. By September 1 of each
year, the head of each State agency and the Chief Justice of the Supreme Court
for the Judicial Branch submit a final annual budget request to the Governor
and Legislature. Then, at least 45 days before the scheduled annual legislative
session in each year, the Governor, as chief budget officer, submits his
recommended budget to each legislator.
The Governor also provides estimates of revenues sufficient to fund the
recommended appropriations. Estimates for the General Revenue Fund, Budget
Stabilization Fund and Working Capital Fund are made by the Revenue Estimating
Conference. This group includes members of the executive and legislative
branches with forecasting experience who develop official information
regarding anticipated State and local government revenues as needed for the
state budgeting process. In addition to the Revenue Estimating Conference,
other consensus estimating conferences cover national and state economics,
national and state demographics, the state public education system, criminal
justice system, social services system, transportation planning and budgeting,
the child welfare system, the juvenile justice system and the career education
planning process.
Trust fund revenue estimates are generally made by the agency that
administers the fund. These estimates are reviewed by the Governor and then
incorporated into his recommended budget.
The Governor's recommended budget forms the basis of the
appropriations bill. As amended and approved by the Legislature (subject to
the line-item veto power of the Governor and override authority of the
Legislature), this bill becomes the General Appropriations Act.
The Governor and the Comptroller are responsible for detecting conditions
which could lead to a deficit in any agency's funds and reporting that fact to
the Administration Commission and the Chief Justice of the Supreme Court.
Article VII, Section 1(d) of the constitution states, "Provision shall be made
by law for raising sufficient revenue to defray the expenses of the State for
each fiscal year."
The Legislature is responsible for annually providing direction in
the General Appropriations Act regarding the use of the Working Capital Fund
to offset General Revenue Fund deficits. Absent any specific direction to
the contrary, the Governor and the Chief Justice of the Supreme Court
shall comply with guidelines provided in Section 216.221(5), Florida
Statutes, for reductions in the approved operating budgets of the executive
branch and the judicial branch.
The State of Florida is progressing toward full implementation of a
performance-based budgeting system. Chapter 216., Florida Statutes,
designates when each department will be phased into this new budgeting
method. Some agencies are already subject to the performance-based budgeting
standards and all agencies will be under this new system by the fiscal year
ended June 30, 2002. With performance-based budgeting, a department receives
a lump-sum appropriation from the Legislature for each designated program at
the beginning of the year. The Governor, for State agencies, or the Chief
Justice, for the judicial branch, is responsible for allocating the amounts
<PAGE>
among the traditional appropriation categories so that specified performance
standards can be met. At any time during the year, the agency head or Chief
Justice may transfer appropriations between categories within the
performance-based program with no limit on the amount of the transfer in order
for the designated program to accomplish its objectives. However, no
transfer from any other budget entity may be made into the performance-based
program, nor may any funds be transferred from the performance-based program
to another budget entity, except pursuant to Section 216.77, Florida Statues.
Line Item Veto. Florida's Constitution grants the Governor the power
to veto any specific appropriation in a general appropriation bill, but the
Governor may not veto any qualification or restriction without also vetoing
the appropriation to which it relates. A statement identifying the items
vetoed and containing his or her objections thereto must be delivered to the
appropriate house in which the bill originated, if in session, otherwise to the
Secretary of State. The legislature may reconsider and restate the vetoed
specific appropriation items by a two-thirds vote of each house.
Revenues. The State accounts for its receipts using fund accounting. It
has established the General Revenue Fund, the Working Capital Fund and various
other trust funds, which are maintained for the receipt of monies which under
law or trust agreements must be maintained separately. The General Revenue
Fund consists of all monies received by the State from every source whatsoever
which are not allocable to the other funds. Major sources of tax revenues for
the General Revenue Fund are the sales and use tax, the corporate income tax,
and the estate tax, which were 83%, 9% and 4%, respectively, of the total
receipts of that fund for fiscal year 1998-99. Florida's constitution and
statutes mandate that the state budget as a whole and each separate fund within
the State Budget be kept in balance from currently available revenues for each
fiscal year.
Sales and Use Tax. The greatest single source of tax receipts in Florida
is the sales and use tax, which is projected to amount to $14.0 billion for
fiscal year 1999-2000. The sales tax rate is 6% of the sales price of tangible
personal property sold at retail in the State. The use tax rate is 6% of the
cash price or fair market value of tangible personal property when it is not
sold but is used, or stored for use, in the State. In other words, the use tax
applies to the use of tangible personal property in Florida, which was
purchased in another state but would have been subject to the sales tax if
purchased in Florida. Approximately 10% of the sales tax is designated for
local governments and is distributed to the respective counties in which
collected for use by such counties and municipalities therein. In addition to
this distribution, local governments may (by referendum) assess a 1% sales
surtax within their county. Proceeds from this local option sales surtax can be
earmarked for funding countywide bus and rapid transit systems, local
infrastructure construction and maintenance, medical care for indigents and
capital projects for county school districts as set forth in Section
212.055(2), Florida Statutes.
The two taxes, sales and use, stand as complements to each other, and
taken together provide a uniform tax upon either the sale at retail or the
use of all tangible personal property irrespective of where it may have been
purchased. The sales tax also includes a levy on the following: (a) rentals
of tangible personal property and accommodations in hotels, motels, some
apartments, offices, real estate, parking and storage places in parking lots,
garages and marinas for motor vehicles or boats; (b) admissions to places of
amusements, most sports and recreation events; (c) utilities, except those used
in homes; and (d) restaurant meals and expendables used in radio and television
broadcasting. Exemptions include: groceries; medicines; hospital rooms and
meals; seeds, feeds, fertilizers and farm crop protection materials; purchases
by religious, charitable and educational nonprofit institutions; professional
services; insurance and certain personal service transactions; newspapers;
apartments used as permanent dwellings; and kindergarten through community
college athletic contests or amateur plays.
Other State Taxes. Other taxes which Florida levies include the motor fuel
<PAGE>
tax, intangible property tax, documentary stamp tax, gross-receipts utilities
tax and severance tax on the production of oil and gas and the mining of solid
minerals, such as phosphate and sulfur.
Tax Cuts. Due to recent budget surpluses, the state has begun to implement
a series of tax cuts in addition to funding the Budget Stabilization Fund,
Working Capital Fund and other reserve funds. The 1999-2000 budget contained
approximately $1 billion in tax cuts. The proposed 2000-01 budget contains an
additional $578 million in tax cuts. The most significant source of these tax
cuts has been a reduction in the intangible property tax rate, which tax is
projected to be eliminated by 2001-02.
Additionally, for nine days each year, the sales and use taxes are
suspended on purchases of certain essential items priced less than $100, such
as items of clothing. Another tax cut contained in the proposed 2000-01 budget
are one and two year waivers for licensing renewal fees for 14 professions;
which tax cut will save those professionals $8.2 million and $7.3 million in
the 2000-01 and 2001-02 fiscal years.
Government Debt. Florida maintains a high bond rating from Moody's
Investors Service "("Moody's") (Aa2), Standard and Poor's Ratings Services
("S&P") (AA+) and Fitch IBCA, Inc. ("Fitch") (AA) on all state general
obligation bonds. Outstanding general obligation bonds have been issued to
finance capital outlay for educational projects of local school districts,
community colleges and state universities, environmental protection and highway
construction.
Numerous government units, counties, cities, school districts and special
taxing districts, issue general obligation bonds backed by their taxing power.
State and local government units may issue revenue obligations, which are
supported by the revenues generated from the particular projects or
enterprises. Examples include obligations issued to finance the construction
of water and sewer systems, health care facilities and educational facilities.
In some cases, sewer or water revenue obligations may be further secured by the
full faith and credit of the State.
State revenue bonds may be issued without a vote of the electors to
finance or refinance the cost of state fixed capital outlay projects authorized
by law, as long as they are payable solely from funds derived directly from
sources other than State tax revenues. Revenue bonds may be issued to
establish a student loan fund, as well as to finance or refinance housing and
related facilities so long as repayments come solely from revenues derived
from the fund or projects so financed. The Constitution imposes no limit on
the principal amount of revenue bonds which may be issued by the state and
Local Governmental Agency. Local Governmental Agencies, such as counties,
school boards or municipalities may issue bonds, certificates of indebtedness
or any form of tax anticipation certificate, payable from ad valorem taxes and
maturing more than 12 months from the date of issuance only to finance or
refinance capital projects authorized by law, and only when approved by a vote
of the electors who are property owners living within boundaries of the agency.
Generally, ad valorem taxes levied by a Local Governmental Agency may not
exceed 10 mils on the value of real estate and tangible personal property
unless approved by the electors. Local Governmental Agencies may issue revenue
bonds to finance or refinance the cost of capital projects for airports or port
facilities or for industrial or manufacturing plants, without the vote of
electors, so long as the revenue bonds are payable solely from revenues derived
form the projects.
Florida's Constitution generally limits state bonds pledging the full faith
and credit of the state, to those necessary to finance or refinance the cost of
state fixed capital outlay projects authorized by law, and then only upon
approval by a vote of the electors. The constitution further limits the total
outstanding principal of such bonds to no more than 50% of the total tax
revenues of the state for the two preceding fiscal years, excluding any tax
revenues held in trust. Exceptions to the requirement for voter approval are:
(a) bonds issued for pollution control and abatement and solid waste disposal
facilities and other water facilities authorized by general law and operated by
state or local governmental agencies; and (b) bonds issued to finance or
refinance the cost of acquiring real property or rights thereto for state roads
<PAGE>
as defined by law, or to finance or refinance the cost of state bridge construc-
tion.
The state's outstanding debt which is primarily payable from state revenue
and secured by the full faith and credit of the state, increased from $8.7
billion in fiscal year 1998-99 to an estimated $9.3 billion in fiscal year 1999
- -2000. For the same two years, the state's debt service payments equaled $668
million and $864 million or 2.0% and 2.45% of total state expenditures for each
respective year.
Other Factors. The performance of the obligations issued by Florida, its
municipalities, subdivisions and instrumentalities are in part tied to state-
wide, regional and local conditions within Florida. Adverse changes to state-
wide, regional or local economies may adversely affect the creditworthiness of
Florida and its political subdivisions. Also, some revenue obligations may be
issued to finance construction of capital projects which are leased to nongove-
rnmental entities. Adverse economic conditions might affect those lessees'
ability to meet their obligations to the respective governmental authority which
in turn might jeopardize the repayment of the principal of, or the interest on,
the revenue obligations.
Litigation
Due to its size and broad range of activities, the State is involved in
numerous routine legal actions. The ultimate disposition and fiscal consequences
of these lawsuits are not presently determinable; however, according to the
departments involved, the results of such litigation pending or anticipated will
not materially affect the State of Florida's financial position. The information
disclosed in this Litigation Section has been deemed material by the Florida
Auditor General and has been derived in part from information disclosed in the
Florida Comptroller's Annual Report dated February 4, 2000. No assurance can be
made that other litigation has not been filed or is not pending which may have
a material impact on the State's financial position.
A. Barnett Bank v. Florida Department of Revenue
Case No. 97-02375, Duval County Circuit Court, 4th Judicial Circuit. This
case involved the issue of whether Florida's refund statute for dealer reposs-
essions authorizes the Department to grant a refund to a financial institution
as the assignee of numerous security agreements governing the sale of automob-
iles and other property sold by dealers. The question turns on whether the
Legislature intended the statute only to provide a refund or credit to the
dealer who actually sold the tangible personal property and collected and
remitted the tax or intended that right to be assignable. Judgment was granted
in the Plaintiff's favor; however, the First District Court of Appeal overturned
the trial court's decision on January 5, 2000, in favor of the Department.
B. Barnett Banks, Inc. v. Florida Department of Revenue
Case No. 98-4104, 1st District Court of Appeal. In this case, the taxpayer
challenged the imposition of interest on additional amounts of corporate income
tax due as a result of Federal audit adjustments reported to Florida. The
Department's historical position was that interest is due from the due
date of the return until payment of the additional amount of tax is made. The
taxpayer contended that interest should be accrued from the date the Federal
audit adjustments were due to be reported to Florida. An Order was issued
adopting the position asserted by the Department; however, the taxpayer filed
and won an appeal. Potential refunds or lost revenue are estimated to be appro-
ximately $12 to $20 million per year.
C. Jenkins v. Florida Department of Health and Rehabilitative Services
Case No. 79-102-CIV-J-16, United States District court, Middle District of
<PAGE>
Florida. This was a class action suit on behalf of clients of residential
placement for the developmentally disabled seeking refunds for services where
children were entitled to free education under the Education for Handicapped
Act. The Department had been collecting maintenance fees from parents of the
placed children and various third parties such as SSI and Social Security. The
District Court ruled in favor of the Plaintiffs and ordered repayment of the
maintenance fees. Prior to July 1, 1998, the Department repaid the $217,694 in
maintenance fees paid by the parents; however, amounts due to various third
parties estimated up to $42 million have not been paid since the affected
parties have not been identified.
D. Nathan M. Hameroff, M.D., et al v. Agency for Health Care Admin., et al
Case No. 95-5936, Leon County Circuit Court, 2nd Judicial Circuit. This is
a class action suit, among other similar suits, wherein the plaintiffs challenge
the constitutionality of the Public Medical Assistance Trust Fund (PMATF) annual
assessment on net operating revenue of free-standing out-patient facilities
offering sophisticated radiology services. The case is now in the discovery
process. If the State is unsuccessful in its actions, the potential refund
liability for all such suits could total approximately $116.8 million.
E. Savona, et al v. Agency for Health Care Administration
Case No. 96-6323, Leon County Circuit Court, 2nd Judicial Circuit. In this
case, Plaintiffs seek retroactive and prospective relief on behalf of a class
of Medicaid providers (doctors), demanding reimbursement of differential between
Medicare and Medicaid rates for dual-enrolled eligibles. The Agency answered the
fourth Amended complaint; the case is at issue. Plaintiffs' motion for summary
judgment was heard on December 21, 1999, and is under advisement by the court.
If the Plaintiffs prevail, the State's potential liability could be up to $270
million. This would be the State's share, at 45 percent, within the Medicaid
program.
F. Tower Environmental v. Florida Department of Environmental Protection
Case No. 98-01312, Hillsborough County Circuit Court, 13th Judicial
Circuit. Tower Environmental has sued the state and the Florida Department of
Environmental Protection (FDEP) alleging that both the State and
FDEP breached contracts with them by changing the petroleum contamination
reimbursement program. Alternatively, Tower claims that these actions
constitute torts or impairment of contractual obligations. Tower also
alleges that the termination of the reimbursement program pursuant to Section
376.3071, Florida Statutes, is a breach of contract. In addition to damages,
Tower seeks recovery of attorneys' fees and costs. There has been a ruling
that the statute was a written contract and that the state's sovereign
immunity defense was therefore invalid. If attorneys' fees and costs are
awarded, the potential liability could amount to approximately $49 million;
however, the parties are currently negotiating a settlement.
G. Peter and Roy Geraci v. Florida Department of Transportation
Case No. 98-3904, Hillsborough County Circuit Court, 13th Judicial Circuit.
The Plaintiffs claim that the Florida Department of Transportation has been
responsible for construction of roads and attendant drainage facilities in
Hillsborough County and, as a result of its construction, has caused the
Plaintiffs' property to become subject to flooding, thereby amounting to an
uncompensated taking. On December 15, 1998, the court granted the State's Motion
for More Definite Statement as to certain portions of the Plaintiffs' complaint.
An amended complaint was filed on March 30, 1999. Trial is scheduled to begin
July 3, 2000. If the State is unsuccessful in its actions, potential losses
could exceed $10 million.
<PAGE>
H. State Contracting and Engineering Corp. v. Florida Department of
Transportation, et al
Case No. 97-7014-CIV-Dimitroulea, United States District Court, Southern
District of Florida. The Florida Department of Transportation used a Value
Engineering Change Proposal (VECP) design submit by State Contracting and Engi-
neering Corp. (SCEC) for the construction of a barrier soundwall in Broward
County and several subsequent Department projects. Subsequent to the initial
use of the VECP design, SCEC patented the design. SCEC claims that the Depart-
ment owes SCEC royalties and compensation for other damages involving the
Department's use of the VECP design on the subsequent projects. The case is
pending a ruling as to the application of recent U.S. Supreme Court cases to
certain legal issues in this lawsuit. If the State is unsuccessful in its
actions, potential losses could range from $30 to $60 million.
I. Riscorp Insurance Company, et al v. Florida Department of Labor and
Employment Security and Mary B. Hooks
Case No. 99-5027, Leon County Circuit Court, 2nd Judicial Circuit. Pursuant
to Section 440.51, Florida Statutes, the Department collects assessments on net
premiums collected and net premiums written from carriers of workers compens-
ation insurance and by self-insurers in the State. Claimants allege that there
is no statutory definition of "net premiums" and the Department does not curre-
ntly have a rule providing guidance as to how net premiums are calculated.
Claimants allege that industry standards would allow them to deduct various
costs of doing business in calculating net premiums. The litigation arose from
the Department's denial of claims for refunds totaling approximately $27
million. In addition, at least 20 other carriers have filed similar claims for
refund which, in the aggregate, total more than $39 million. The Department
cannot anticipate how many additional claims will be filed. The Department has
answered the Complaint and discovery is in progress.
J. Florida Department of Transportation v. 745 Property Investments, CSX
Transportation, Inc. and Continental Equities
Case No. 94-17739 CA 27, Dade County Circuit Court. This case involved the
Florida Department of Transportation (FDOT) and CSX Transportation, Inc. FDOT
filed an action against the adjoining property owners seeking a declaratory
judgment from the Dade County Circuit Court that the Department was not the
owner of the property that is subject to a claim by the U.S. Environmental
Protection Agency (EPA). The Department's Motion for Declaratory Judgment was
denied and the Third District Court of Appeal affirmed the denial on March 5,
1997. The EPA is now conducting additional tests at the site and has asserted a
claim for clean up costs against the Department for approximately $25.5 million.
K. Walden v. Department of Corrections
Case No. 95-40357-WS (USDC N.D. Fla.) This action was brought by one
captain and one lieutenant in the Department of Corrections seeking declaratory
judgment that they (and potentially 700 similarly situated others) are not
exempt employees under the fair Labor Standards Act (FLSA) and, therefore, are
entitled to overtime compensation at a rate of not less than one and one-half
times their regular rate of pay for overtime hours worked since April 1, 1992,
forward and including liquidated damages. The U.S. District Court for the
Northern District of Florida entered an order dismissing the case for lack of
jurisdiction on June 24, 1996. Plaintiffs filed a lawsuit against the Depart-
ment (Case No. 96-3955) in July 1996 at the state level (Circuit Court, Second
Judicial Circuit), making the same allegations at that level which plaintiffs
previously made before the U.S. District Court for the Northern District of
Florida. On December 20, 1996, that Court determined that it had jurisdiction
<PAGE>
over the FLSA claim. On December 10, 1997, the Court entered final summary
judgment. Plaintiffs were not awarded any damages, but were awarded attorneys'
fees and costs. The Department appealed, but later moved to voluntarily dismiss
their appeal. The Department's motion was granted on May 12, 1998.
ADDITIONAL INFORMATION CONCERNING NEW JERSEY
New Jersey Municipal Securities
The financial condition of the State of New Jersey (State), its public and
its local governments, could affect the market values and marketability of, and
therefore the net asset value per share and the interest income of New Jersey
Municipal Money Market Fund, or result in the default of existing obligations,
including obligations which may be held by the Fund. The following section
provides only a brief summary of the complex factors affecting the financial
situation in New Jersey and is based on information obtained from New Jersey,
certain of its authorities and certain other localities within the State, as
publicly available on the date of this SAI. The information contained in such
publicly available documents has not been independently verified. It should be
noted that the creditworthiness of obligations issued by local issuers may be
unrelated to the creditworthiness of New Jersey, and that there is no obligation
on the part of New Jersey to make payment on such local obligations in the event
of default in the absence of a specific guarantee or pledge provided by New
Jersey.
Economic Factors
New Jersey is the ninth largest state in population and the fifth smallest
in land area. According to the United States Bureau of the Census and the
Department of Labor, the population of New Jersey was 7,170,000 in 1970,
7,365,000 in 1980, 7,730,000 in 1990 and 8,143,000 in 1999. Historically, New
Jersey's average per capita income has been well above the national average, and
in 1998 the State ranked second among the states in per capita personal income
$33,953).
The State's economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural areas
with selective commercial agriculture. The extensive facilities of the Port
Authority of New York and New Jersey, the Delaware River Port Authority and the
South Jersey Port Corporation across the Delaware River from Philadelphia
augment the air, land and water transportation complex which has influenced much
of the State's economy. The State's central location in the northeastern
corridor, the transportation and port facilities and proximity to New York City
make the State an attractive location for corporate headquarters and interna-
tional business offices.
While New Jersey's economy continued to expand during the late 1980s, the
level of growth slowed considerably after 1987. By the beginning of the national
recession in July 1990 (according to the National Bureau of Economic Research),
construction activity had already been declining in New Jersey for nearly two
years, growth had tapered off markedly in the service sectors and the long-term
downward trend of factory employment had accelerated, partly because of a
leveling off of industrial demand nationally. The onset of recession caused an
acceleration of New Jersey's job losses in construction and manufacturing, as
well as an employment downturn in such previously growing sectors as wholesale
trade, retail trade, finance, utilities and trucking and warehousing. The net
effect was a decline in the State's total nonfarm wage and salary employment,
according to the U.S. Dept. of Labor, from a peak of 3.69 million in 1989 to a
low of 3.46 million in 1992. This low has been followed by an employment gain,
reaching 3.80 million at year-end 1998. The New Jersey Dept. of Labor reports
<PAGE>
that employment growth continued in 1999 to an estimated to 3.87 million.
The annual average jobless rate has fallen from 8.5 percent in 1992, to 5.1
percent in 1997, to 4.6 percent in 1998, reaching an estimated 4.5% in 1999.
In March 2000, the State's unemployment rate of 3.7% was the lowest monthly rate
since the 3.6% level in February 1989.
The New Jersey Department of Labor reports that on a seasonally adjusted
basis, private nonfarm employment climbed to 3.26 million in January 1999 to
3.32 million in December 1999.
Conditions have slowly improved in the construction industry, where
employment has risen by 21,100 since its low in May 1992. Between 1992 and 1996,
this sector's hiring rebound was driven primarily by increased homebuilding and
nonresidential projects. During 1996 and early 1997, public works projects and
homebuilding became the growth segments while nonresidential construction
lessened but remained positive. Construction employment, after falling from
163,400 in 1987 to 110,200 in 1992, has recovered to a level of 143,100 in
January 2000, its highest level since August 1990.
In the manufacturing sector, employment losses have continued during the
past twelve years. Total manufacturing employment in New Jersey was 672,200 in
1987, 530,400 in 1992, and 463,500 in 1999, reduction of 31%.
Total employment in New Jersey has changed from 3.824 million in 1988, to
3.690 million in 1992, to 4.014 million in 1999. Looking forward, the New
Jersey Department of Labor projects that the State's non-farm employment growth
will occur almost exclusively in the service industries, such as
transportation, communications, utilities, wholesale and retail trade,
financial services, insurance, real estate and public education. The State
projects continuing slow decline in manufactured goods employment.
State Finances
The State operates on a fiscal year beginning July 1 and ending June 30.
For example, "Fiscal Year 2000" refers to the State's fiscal year beginning July
1, 2000 and ending June 30, 2000.
The General Fund is the fund into which all State revenues not otherwise
restricted by statute are deposited and from which appropriations are made. The
largest part of the total financial operations of the State are accounted for
in the General Fund. Revenues received from taxes, most Federal revenue and
certain miscellaneous revenue items are recorded in the General Fund. The
Appropriations Act provide the basic framework for the operation of the General
Fund. Undesignated Fund Balances are available for appropriation in succeeding
fiscal years. There have been positive Undesignated Fund Balances in the General
Fund at the end of each year since the State Constitution was adopted in 1947.
The estimates for Fiscal Year 2000 and Fiscal Year 2001 reflect the
amounts contained in the Governor's Fiscal Year 2000 Budget Message delivered
on January 24, 2000.
General Fund balances for Fiscal Years 2000 and 2001 are projected to be
$206.2 million and $130.8 million. Total Undesignated Fund balances for Fiscal
Years 2000 and 2001 are projected to be $1,176.2 million and $850.4 million.
<PAGE>
Fiscal Years 2000 and 2001 State Revenue Estimates
The January estimate of $19.8 billion in total fiscal 2000 revenue is $503
million more than when the Governor certified revenues in June 1999. Revenues
for fiscal 2001 are expected to increase more modestly as the national economy
slows to more sustainable long-run growth levels.
The three largest taxes, Gross Income, Sales and Use, and Corporation Busi-
ness, account for 71% of total revenues and are expected to yield $14 billion.
Sales and Use Tax. The revised estimate forecasts Sales and Use tax
collections for Fiscal Year 2000 as $5.6 billion, a 10.3% rate of growth rather
than the 5.5% rate originally expected. This reflects a stronger than expected
level of consumer and business purchases in the last half of 1999 and the succ-
essful transition to the year 2000 without any major Y2K disruptions.
The Fiscal Year 2001 estimate of $6.0 billion, is a 7.5% increase from the
revised Fiscal Year 2000 estimate. This reflects an expectation of continued
growth, but a moderation of the underlying economic forces compared to Fiscal
Year 2000. Spending in the two key consumer sectors of housing and autos is
expected to decline slightly from high 1999 levels and then remain fairly stable
for the next two years.
Gross Income Tax. The January revised estimate forecasts Gross Income Tax
collections for Fiscal Year 2000 of $7.0 billion, an increase of $215 million
over the June 1999 certified revenue estimate. Stronger than anticipated income
and employment growth in 1999 account for part of the change.
The Fiscal Year 2001 estimate of $7.6 billion is a 7.7% increase from the
Fiscal Year 2000 estimate. This assumes continuation of the strong growth in New
Jersey personal income forecasted to grow at 5.8% in 1999, 6.1% in 2000, and
5.2% in 2001. Growth in wage income, which was 7.9% in 1998 and is projected to
be 7.4% in 1999, is expected to ease back to 6.1% in 200 and 4.7% in 2001.
Capital gains income that had been growing at annual rates of 25-40% between
1995 and 1999 is expected to grow at 5% in 2000 and 9% in 2001. The tax base,
which is New Jersey Gross Income, is anticipated to grow 5.9% in 2000 after
exceptionally strong growth of 11.6% in 1998 and 8.4% in 1999, fueled in part
by the strong performance of the financial markets.
Corporation Business Tax. Corporate Business Tax is revised down by $44
million to $1.4 billion. Anticipated fiscal 2000 growth of 0.1% compared to
fiscal 1999 is low in part because of adjustments for one-time revenues in
fiscal 1999 and the provision of $50 million in expected refunds associated with
a new program for the transfers of unused tax credits.
The Fiscal Year 2001 estimate of $1.5 billion, is a 6.4% increase from the
Fiscal Year 2000 estimate. This increase assumes that the growth of U.S. Corp-
oration before-tax profits, which is a rough proxy for New Jersey business
profitability, while still positive, will be lower than in 1999. Profit growth
is anticipated to continue in the low single digits through the year 2002.
Gross payments for fiscal 2001 are expected to grow at 4% compared to the
current 5.4%.
General Considerations. Estimated receipts from State taxes and revenues,
including the three principal taxes set forth above, are forecasts based on the
best information available at the time of such forecasts. Changes in economic
activity in the State and the nation, consumption of durable goods, corporate
financial performance and other factors that are difficult to predict may result
in actual collections being more or less than forecasted.
<PAGE>
Should revenues be less than the amount anticipated in the budget for a
fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. There are additional means by which the
Governor may ensure that the State is operated efficiently and does not incur a
deficit. No supplemental appropriation may be enacted after adoption of an
appropriations act except where there are sufficient revenues on hand or antic-
ipated, as certified by the Governor, to meet such appropriation. In the past
when actual revenues have been less than the amount anticipated in the budget,
the Governor has exercised her plenary powers leading to, among other actions,
implementation of a hiring freeze for all State departments and the discontin-
uation of programs for which appropriations were budgeted but not yet spent.
Under the State Constitution, no general appropriations law or other law appro-
priating money for any State purpose may be enacted if the amount of money
appropriated therein, together with all other prior appropriations made for the
same fiscal year, exceeds the total amount of revenue on hand and anticipated to
be available for such fiscal year, as certified by the Governor.
ADDITIONAL INFORMATION CONCERNING PENNSYLVANIA
The financial condition of the Commonwealth of Pennsylvania (Commonwealth),
its public authorities and its local governments could affect the market values
and marketability of, and therefore the net asset value per share and the int-
erest income of the Pennsylvania Municipal Money Market Fund, or result in the
default of existing obligations, including obligations which may be held by the
Fund. The following section provides only a brief summary of the complex factors
that may affect the financial situation in Pennsylvania and is based on inform-
ation obtained from Pennsylvania, certain of its public authorities and certain
other localities within the Commonwealth as publicly available on the date of
this SAI. The information contained in such publicly available documents has not
been independently verified. It should be noted that the creditworthiness of
obligations issued by local issuers may be unrelated to the creditworthiness of
Pennsylvania. There is no obligation on the part of Pennsylvania to make payment
on such local obligations in the event of default in the absence of a specific
guarantee or pledge provided by Pennsylvania.
General
The Commonwealth of Pennsylvania, the fifth most populous state,
historically has been identified as a heavy industry state, although that
reputation has changed with the decline of the coal, steel and railroad indust-
ries and the resulting diversification of the Commonwealth's industrial
composition. The major new sources of growth are in the service sector, includ-
ing trade, medical and health services, educational and financial institutions.
Manufacturing has fallen behind in both the service sector and the trade sector
as a source of employment in Pennsylvania. The Commonwealth is the headquarters
for many major corporations. Pennsylvania's average annual unemployment rate for
each year since 1986 has generally not been more than one percent greater or
lesser than the nation's annual average unemployment rate. The seasonally adju-
sted unemployment rate for Pennsylvania for December, 1998 was 4.0% and for the
United States for December, 1998 was 4.0%. The population of Pennsylvania, 12.02
million people in 1997 according to the U.S. Bureau of the Census, represents an
increase from the 1988 estimate of 11.846 million. Per capita income in Pennsyl-
vania for 1998 of $26,792 was higher than the per capita income of the United
States of $26,412. The Commonwealth's General Fund, which receives all tax
receipts and most other revenues and through which debt service on all general
obligations of the Commonwealth are made, closed fiscal years ended June 30,
1997, June 30, 1998 and June 30, 1999 with positive fund balances of $1,365
million, $1,959 million and $ 2,863 million respectively.
<PAGE>
Debt
The Commonwealth may incur debt to rehabilitate areas affected by disaster,
debt approved by the electorate, debt for certain capital projects (for projects
such as highways, public improvements, transportation assistance, flood control,
redevelopment assistance, site development and industrial development) and tax
anticipation debt payable in the fiscal year of issuance. The Commonwealth had
outstanding general obligation debt of $4,924.5 million at June 30, 1999. The
Commonwealth is not permitted to fund deficits between fiscal years with
any form of debt. All year-end deficit balances must be funded within the
succeeding fiscal year's budget. At January 15, 2000 all outstanding general
obligation bonds of the Commonwealth were rated AA by S&P and Aa3 by
Moody's (see Part 2 of this SAI). There can be no assurance that these ratings
will remain in effect in the future. Over the five-year period ending June 30,
2004, the Commonwealth has projected that it will issue notes and bonds totaling
$3,449 million and retire bonded debt in the principal amount of $2,542.4
million.
Certain agencies created by the Commonwealth have statutory authorization
to incur debt for which Commonwealth appropriations to pay debt service thereon
are not required. As of June 30, 1999, the Combined total debt outstanding for
all these agencies was $9,802 million. The debt of these agencies is supported
by assets of, or revenues derived from, the various projects financed and is not
an obligation of the Commonwealth. Some of these agencies, however, are indir-
ectly dependent on Commonwealth appropriations. The only obligations of agencies
in the Commonwealth that bear a moral obligation of the Commonwealth are those
issued by the Pennsylvania Housing Finance Agency (PHFA), a state-created agency
which provides housing for lower and moderate income families, and The Hospitals
and Higher Education Facilities Authority of Philadelphia (the "Hospital Auth-
ority"), an agency created by the City of Philadelphia to acquire and prepare
various sites for use as intermediate care facilities for the mentally retarded.
Local Government Debt
Numerous local government units in Pennsylvania issue general obligation
(i.e., backed by taxing power) debt, including counties, cities, boroughs,
townships and school districts. School district obligations are supported indi-
rectly by the Commonwealth. The issuance of non-electoral general obligation
debt is limited by constitutional and statutory provisions. Electoral debt,
i.e.,that approved by the voters, is unlimited. In addition, local government
units and municipal and other authorities may issue revenue obligations that are
supported by the revenues generated from particular projects or enterprises.
Examples include municipal authorities (frequently operating water and sewer
systems), municipal authorities formed to issue obligations benefiting hospitals
and educational institutions, and industrial development authorities, whose
obligations benefit industrial or commercial occupants. In some cases, sewer or
water revenue obligations are guaranteed by taxing bodies and have the credit
characteristics of general obligations debt.
Litigation
Pennsylvania is currently involved in certain litigation where adverse
decisions could have an adverse impact on its ability to pay debt service.
For example, County of Allegheny v. Commonwealth of Pennsylvania involves lit-
igation regarding the state constitutionality of the statutory scheme for county
funding of the judicial system and in Pennsylvania Association of Rural and
Small Schools v. Casey, the constitutionality of Pennsylvania's system for
funding local school districts has been challenged. No estimates for the amount
of these claims are available.
Other Factors
The performance of the obligations held by the Fund issued by the
Commonwealth, its agencies, subdivisions and instrumentalities are in part tied
<PAGE>
to state-wide, regional and local conditions within the Commonwealth and to the
creditworthiness of certain non-Commonwealth related obligers, depending upon
the Pennsylvania Municipal Money Market Fund's portfolio mix at any given time.
Adverse changes to the state-wide, regional or local economies or changes in
government may adversely affect the creditworthiness of the Commonwealth, its
agencies and municipalities, and certain other non-government related obligers
of Pennsylvania tax-free obligations (e.g., a university, a hospital or a
corporate obligor). The City of Philadelphia, for example, experienced severe
financial problems which impaired its ability to borrow money and adversely
affected the ratings of its obligations and their marketability. Conversely,
some obligations held by the Fund will be almost exclusively dependent on the
creditworthiness of one underlying obligor, such as a project occupant or
provider of credit or liquidity support.
<PAGE>
EVERGREEN FUNDS
Statement of Additional Information ("SAI")
PART 2
ADDITIONAL INFORMATION ON SECURITIES
AND INVESTMENT PRACTICES
The prospectus describes the Fund's investment objective and the securities
in which it primarily invests. The following describes other securities the Fund
may purchase and investment strategies it may use. Some of the information below
will not apply to the Fund or the Class in which you are interested. See
the list under Other Securities and Practices in Part 1 of this SAI to determine
which of the sections below are applicable.
Money Market Instruments
The Fund may invest up to 100% of its assets in high quality money market
instruments, such as notes, certificates of deposit, commercial paper, banker's
acceptances, bank deposits or U.S. government securities if, in the opinion of
the investment advisor, market conditions warrant a temporary defensive
investment strategy. Evergreen Equity Income Fund may also invest in debt
securities and high grade preferred stocks for defensive purposes when its
investment advisor determines a temporary defensive strategy is warranted.
U.S. Government Securities
The Fund may invest in securities issued or guaranteed by U.S. Government
agencies or instrumentalities.
These securities are backed by (1) the discretionary authority of the U.S.
Government to purchase certain obligations of agencies or instrumentalities or
(2) the credit of the agency or instrumentality issuing the obligations.
Some government agencies and instrumentalities may not receive financial
support from the U.S. Government. Examples of such agencies are:
(i) Farm Credit System, including the National Bank for Cooperatives,
Farm Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association; and Student Loan Marketing
Association.
Securities Issued by the Government National Mortgage Association ("GNMA").
The Fund may invest in securities issued by the GNMA, a corporation wholly-owned
by the U.S. Government. GNMA securities or "certificates" represent ownership
in a pool of underlying mortgages. The timely payment of principal and interest
due on these securities is guaranteed.
Unlike conventional bonds, the principal on GNMA certificates is not paid
at maturity but over the life of the security in scheduled monthly payments.
While mortgages pooled in a GNMA certificate may have maturities of up to 30
years, the certificate itself will have a shorter average maturity and less
principal volatility than a comparable 30-year bond.
The market value and interest yield of GNMA certificates can vary due not
only to market fluctuations, but also to early prepayments of mortgages within
the pool. Since prepayment rates vary widely, it is impossible to accurately
predict the average maturity of a GNMA pool. In addition to the guaranteed
principal payments, GNMA certificates may also make unscheduled principal
payments resulting from prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available
from other types of U.S. Government securities, they may be less effective as a
means of locking in attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, prepayments are likely to
increase as the holders of the underlying mortgages seek refinancing. As a
result, the value of a GNMA certificate is not likely to rise as much as the
value of a comparable debt security would in response to same decline. In
addition, these prepayments can cause the price of a GNMA certificate originally
purchased at a premium to decline in price compared to its par value, which may
result in a loss.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
<PAGE>
The Fund may purchase securities on a when-issued or delayed delivery basis
and may purchase or sell securities on a forward commitment basis. Settlement of
such transactions normally occurs within a month or more after the purchase or
sale commitment is made.
The Fund may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, the Fund may be required to pay
more at settlement than the security is worth. In addition, the purchaser is not
entitled to any of the interest earned prior to settlement.
Upon making a commitment to purchase a security on a when-issued, delayed
delivery or forward commitment basis the Fund will hold liquid assets worth at
least the equivalent of the amount due. The liquid assets will be monitored on a
daily basis and adjusted as necessary to maintain the necessary value.
Purchases made under such conditions may involve the risk that yields
secured at the time of commitment may be lower than otherwise available by the
time settlement takes place, causing an unrealized loss to the Fund.In addition,
when the Fund engages in such purchases, it relies on the other party to
consummate the sale. If the other party fails to perform its obligations, the
Fund may miss the opportunity to obtain a security at a favorable price or
yield.
<PAGE>
Repurchase Agreements
The Fund may enter into repurchase agreements with entities that are
registered as U.S. Government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed by the
investment advisor to be creditworthy. In a repurchase agreement the Fund
obtains a security and simultaneously commits to return the security to the
seller at a set price (including principal and interest) within a period of time
usually not exceeding seven days. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security.
The Fund's custodian or a third party will take possession of the secur-
ities subject to repurchase agreements, and these securities will be marked to
market daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund's investment advisor believes
that under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or disposition
of such securities. The Fund will only enter into repurchase agreements with
banks and other recognized financial institutions, such as broker-dealers, which
are deemed by the investment advisor to be creditworthy pursuant to guidelines
established by the Board of Trustees.
Reverse Repurchase Agreements
As described herein, the Fund may also enter into reverse repurchase
agreements. These transactions are similar to borrowing cash. In a reverse
repurchase agreement, the Fund transfers possession of a portfolio instrument
to another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
Dollar Roll Transactions
The Fund may enter into dollar rolls in which the Fund sells securities
and simultaneously contracts to repurchase substantially similar securities on a
specified future date. In the case of dollar rolls involving mortgage-related
securities, the mortgage-related securities that are purchased typically will be
of the same type and will have the same or similar interest rate and maturity as
those sold, but will be supported by different pools of mortgages. The Fund
<PAGE>
forgoes principal and interest paid during the roll period on the securities
sold in a dollar roll, but it is compensated by the difference between the
current sales price and the price for the future purchase as well as by any
interest earned on the proceeds of the securities sold. The Fund could also be
compensated through receipt of fee income.
Dollar rolls may be viewed as a borrowing by the Fund, secured by the
security which is the subject of the agreement. In addition to the general risks
involved in leveraging, dollar rolls are subject to the same risks as repurchase
and reverse repurchase agreements.
Securities Lending
The Fund may lend portfolio securities to brokers, dealers and other
financial institutions to earn additional in come for the Fund. These transacti-
ons must be fully collateralized at all times with cash or short-term debt
obligations, but involve some risk to the Fund if the other party should
default on its obligation and the Fund is delayed or prevented from exercising
its rights in respect of the collateral. Any investment of collateral by the
Fund would be made in accordance with the Fund's investment objective and
policies described in the prospectus.
Convertible Securities
The Fund may invest in convertible securities. Convertible securities
include fixed-income securities that may be exchanged or converted into a
predetermined number of shares of the issuer's underlying common stock at the
option of the holder during a specified period. Convertible securities may take
the form of convertible preferred stock, convertible bonds or debentures, bonds
with warrants attached or bonds with a combination of the features of several of
these securities. The investment characteristics of each convertible security
vary widely, which allow convertible securities to be employed for a variety of
investment strategies.
The Fund will exchange or convert convertible securities into shares of
underlying common stock when, in the opinion of its investment advisor, the
investment characteristics of the underlying common shares will assist the Fund
in achieving its investment objective. The Fund may also elect to hold or trade
convertible securities. In selecting convertible securities, the investment
advisor evaluates the investment characteristics of the convertible security as
a fixed-income instrument, and the investment potential of the underlying equity
security for capital appreciation. In evaluating these matters with respect to a
particular convertible security, the investment advisor considers numerous
factors, including the economic and political outlook, the value of the security
relative to other investment alternatives, trends in the determinants of
the issuer's profits, and the issuer's management capability and practices.
Preferred Stocks
The Fund may purchase preferred stock. Preferred stock, unlike common
stock, has a stated dividend rate payable from the corporation's earnings.
Preferred stock dividends may be cumulative or non-cumulative,
participating, or auction rate. "Cumulative" dividend provisions require all or
a portion of prior unpaid dividends to be paid.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as call/redemption
<PAGE>
provisions prior to maturity, which can be a negative feature when interest
rates decline. Preferred stock also generally has a preference over common stock
on the distribution of a corporation's assets in the event of liquidation of the
corporation. Preferred stock may be "participating" stock, which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stock on distribution of a corporation's assets in the
event of a liquidation are generally subordinate to the rights associated with
a corporation's debt securities.
Warrants
The Fund may invest in warrants. Warrants are options to purchase common
stock at a specific price (usually at a premium above the market value of the
optioned common stock at issuance) valid for a specific period of time. Warrants
may have a life ranging from less than one year to twenty years, or they may be
perpetual. However, most warrants have expiration dates after which they are
worthless. In addition, a warrant is worthless if the market price of the common
stock does not exceed the warrant's exercise price during the life of the
warrant. Warrants have no voting rights, pay no dividends, and have no rights
with respect to the assets of the corporation issuing them. The percentage
increase or decrease in the market price of the warrant may tend to be greater
than the percentage increase or decrease in the market price of the optioned
common stock.
Swaps, Caps, Floors and Collars
The Fund may enter into interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars. The Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund would use these transactions as hedges and not as
speculative investments and would not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to
the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of a floor entitles the purchaser to receive payments on a
notional principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. The Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the counterparty, combined with any
credit enhancements, is rated at least A by Standard & Poor's Ratings Services
("S&P") or Moody's Investors Service, Inc. ("Moody's") or has an equivalent
rating from another nationally recognized securities rating organization or is
<PAGE>
determined to be of equivalent credit quality by the Fund's investment advisor.
If there is a default by the counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. As a result, the
swap market has become relatively liquid. Caps, floors and collars are more
recent innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
Indexed Securities
The Fund may invest in indexed securities, the values of which are linked
to currencies, interest rates, commodities, indices or other financial
indicators ("reference instruments"). Most indexed securities have maturities
of three years or less.
Indexed securities differ from other types of debt securities in which the
Fund may invest in several respects. First, the interest rate or, unlike other
debt securities, the principal amount payable at maturity of an indexed security
may vary based on changes in one or more specified reference instruments, such
as an interest rate compared with a fixed interest rate or the currency exchange
rates between two currencies (neither of which need be the currency in which the
instrument is denominated). The reference instrument need not be related to the
terms of the indexed security. For example, the principal amount of a U.S.
dollar denominated indexed security may vary based on the exchange rate of two
foreign currencies. An indexed security may be positively or negatively indexed;
that is, its value may increase or decrease if the value of the reference
instrument increases. Further, the change in the principal amount payable or the
interest rate of an indexed security may be a multiple of the percentage change
(positive or negative) in the value of the underlying reference instrument(s).
Investment in indexed securities involves certain risks. In addition to the
credit risk of the security's issuer and the normal risks of price changes in
response to changes in interest rates, the principal amount of indexed
securities may decrease as a result of changes in the value of reference
instruments. Further, in the case of certain indexed securities in which the
interest rate is linked to a reference instrument, the interest rate may be
reduced to zero, and any further declines in the value of the security may then
reduce the principal amount payable on maturity. Finally, indexed securities may
be more volatile than the reference instruments underlying indexed securities.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund is
exposed is difficult to hedge or to hedge against the dollar. Proxy hedging
entails entering into a forward contract to sell a currency whose changes in
value are generally considered to be linked to a currency or currencies in which
some or all of the Fund's securities are or are expected to be denominated, and
to buy U.S. dollars. The amount of the contract would not exceed the value of
the Fund's securities denominated in linked currencies. For example, if the
Fund's investment advisor considers that the Austrian schilling is linked to
the German deutschmark (the "D-mark"), the Fund holds securities denominated in
schillings and the investment advisor believes that the value of schillings will
decline against the U.S. dollar, the investment advisor may enter into a
contract to sell D-marks and buy dollars.
Options and Futures Strategies
The Fund may at times seek to hedge against either a decline in the value
of its portfolio securities or an increase in the price of securities which the
investment advisor plans to purchase through the writing and purchase of options
<PAGE>
and the purchase or sale of futures contracts and related options. Expenses and
losses incurred as a result of such hedging strategies will reduce the Fund's
current return.
The ability of the Fund to engage in the options and futures strategies
described below will depend on the availability of liquid markets in such
instruments. It is impossible to predict the amount of trading interest that may
exist in various types of options or futures. Therefore, no assurance can be
given that the Fund will be able to utilize these instruments effectively for
the purposes stated below.
Writing Covered Options on Securities. The Fund may write covered call
options and covered put options on optionable securities of the types in which
it is permitted to invest from time to time as the investment advisor determines
is appropriate in seeking to attain the Fund's investment objective. Call
options written by the Fund give the holder the right to buy the underlying
security from the Fund at a stated exercise price; put options give the holder
the right to sell the underlying security to the Fund at a stated price.
The Fund may only write call options on a covered basis or for
cross-hedging purposes and will only write covered put options. A put option
would be considered "covered" if the Fund owns an option to sell the
underlying security subject to the option having an exercise price equal to or
greater than the exercise price of the "covered" option at all time while the
put option is outstanding. A call option is covered if the Fund owns or has the
right to acquire the underlying securities subject to the call option (or
comparable securities satisfying the cover requirements of securities exchanges)
at all times during the option period. A call option is for cross-hedging
purposes if it is not covered, but is designed to provide a hedge against
another security which the Fund owns or has the right to acquire. In the case of
a call written for cross-hedging purposes or a put option, the Fund will
maintain in a segregated account at the Fund's custodian bank cash or short-term
U.S. government securities with a value equal to or greater than the Fund's
obligation under the option. The Fund may also write combinations of covered
puts and covered calls on the same underlying security.
The Fund will receive a premium from writing an option, which increases
the Fund's return in the event the option expires unexercised or is terminated
at a profit. The amount of the premium will reflect, among other things, the
relationship of the market price of the underlying security to the exercise
price of the option, the term of the option, and the volatility of the market
price of the underlying security. By writing a call option, the Fund will limit
its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, the Fund will assume the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
price, resulting in a potential capital loss if the purchase price exceeds
market price plus the amount of the premium received.
The Fund may terminate an option which it has written prior to its
expiration, by entering into a closing purchase transaction in which it
purchases an option having the same terms as the option written. The Fund will
realize a profit (or loss) from such transaction if the cost of such transaction
is less (or more) than the premium received from the writing of the option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option may be offset in whole or in part
by unrealized appreciation of the underlying security owned by the Fund.
Purchasing Put and Call Options on Securities. The Fund may purchase put
options to protect its portfolio holdings in an underlying security against a
decline in market value. This protection is provided during the life of the put
<PAGE>
option since the Fund, as holder of the put, is able to sell the underlying
security at the exercise price regardless of any decline in the underlying
security's market price. For the purchase of a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs. By using put options
in this manner, any profit which the Fund might otherwise have realized on the
underlying security will be reduced by the premium paid for the put option and
by transaction costs.
The Fund may also purchase a call option to hedge against an increase in
price of a security that it intends to purchase. This protection is provided
during the life of the call option since the Fund, as holder of the call, is
able to buy the underlying security at the exercise price regardless of any
increase in the underlying security's market price. For the purchase of a call
option to be profitable, the market price of the underlying security must rise
sufficiently above the exercise price to cover the premium and
transaction costs. By using call options in this manner, any profit which the
Fund might have realized had it bought the underlying security at the time it
purchased the call option will be reduced by the premium paid for the call
option and by transaction costs.
The Fund may enter into financial futures contracts and write options on
such contracts. The Fund intends to enter into such contracts and related
options for hedging purposes. The Fund will enter into futures on securities or
index-based futures contracts in order to hedge against changes in interest or
exchange rates or securities prices. A futures contract on securities is an
agreement to buy or sell securities at a specified price during a designated
month. A futures contract on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. The Fund does not make payment or
deliver securities upon entering into a futures contract. Instead, it puts down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which continues until the contract is terminated.
The Fund may sell or purchase futures contracts. When a futures contract
is sold by the Fund, the value of the contract will tend to rise when the value
of the underlying securities declines and to fall when the value of such
securities increases. Thus, the Fund sells futures contracts in order to offset
a possible decline in the value of its securities. If a futures contract is
purchased by the Fund, the value of the contract will tend to rise when the
value of the underlying securities increases and to fall when the value of such
securities declines. The Fund intends to purchase futures contracts in order to
establish what is believed by the investment advisor to be a favorable price or
rate of return for securities the Fund intends to purchase.
The Fund also intends to purchase put and call options on futures contracts
for hedging purposes. A put option purchased by the Fund would give it the right
to assume a position as the seller of a futures contract. A call option
purchased by the Fund would give it the right to assume a position as the
purchaser of a futures contract. The purchase of an option on a futures contract
requires the Fund to pay a premium. In exchange for the premium, the Fund
becomes entitled to exercise the benefits, if any, provided by the futures
contract, but is not required to take any action under the contract. If the
option cannot be exercised profitably before it expires, the Fund's loss will be
limited to the amount of the premium and any transaction costs.
The Fund may enter into closing purchase and sale transactions in order to
terminate a futures contract and may sell put and call options for the purpose
of closing out its options positions. The Fund's ability to enter into closing
transactions depends on the development and maintenance of a liquid secondary
market. There is no assurance that a liquid secondary market will exist for any
particular contract or at any particular time. As a result, there can be no
assurance that the Fund will be able to enter into an offsetting transaction
with respect to a particular contract at a particular time. If the Fund is not
able to enter into an offsetting transaction, the Fund will continue to be
required to maintain the margin deposits on the contract and to complete the
contract according to its terms, in which case it would continue to bear market
risk on the transaction.
Although futures and options transactions are intended to enable the Fund
to manage market, interest rate or exchange rate risk, unanticipated changes in
interest rates or market prices could result in poorer performance than if it
had not entered into these transactions. Even if the investment advisor
correctly predicts interest rate movements, a hedge could be unsuccessful if
<PAGE>
changes in the value of the Fund's futures position did not correspond to
changes in the value of its investments. This lack of correlation between the
Fund's futures and securities positions may be caused by differences between the
futures and securities markets or by differences between the securities
underlying the Fund's futures position and the securities held by or to be
purchased for the Fund. The Fund's investment advisor will attempt to minimize
these risks through careful selection and monitoring of the Fund's futures and
options positions.
The Fund does not intend to use futures transactions for speculation or
leverage. The Fund has the ability to write options on futures, but currently
intends to write such options only to close out options purchased by the Fund.
The Fund will not change these policies without supplementing the information in
the prospectus and SAI.
The Fund will not maintain open positions in futures contracts it has sold
or call options it has written on futures contracts if, in the aggregate, the
value of the open positions (marked to market) exceeds the current market value
of its securities portfolio plus or minus the unrealized gain or loss on those
open positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at any
time, the Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
"Margin" in Futures Transactions. Unlike the purchase or sale of a
security, the Fund does not pay or receive money upon the purchase or sale of a
futures contract. Rather the Fund is required to deposit an amount of
"initial margin" in cash or U.S. Treasury bills with its custodian (or the
broker, if legally permitted). The nature of initial margin in futures transa-
ctions is different from that of margin in securities transactions in that
futures contract initial margin does not involve the borrowing of funds by the
Fund to finance the transactions. Initial margin is in the nature of a perfo-
rmance bond or good faith deposit on the contract which is returned to the Fund
upon termination of the futures contract, assuming all contractual obligations
have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market". Variation
margin does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe the
other if the futures contract expired. In computing its daily net asset value
the Fund will mark-to-market its open futures positions. The Fund is also
required to deposit and maintain margin when it writes call options on futures
contracts.
Limitations. The Fund will not purchase or sell futures contracts or
options on futures contracts if, as a result, the sum of the initial margin
deposits on its existing futures contracts and related options positions and
premiums paid for options on futures contracts would exceed 5% of the net assets
of the Fund unless the transaction meets certain "bona fide hedging" criteria.
Risks of Options and Futures Strategies. The effective use of options and
futures strategies depends, among other things, on the Fund's ability to
terminate options and futures positions at times when the investment advisor
deems it desirable to do so. Although the Fund will not enter into an option or
futures position unless the investment advisor believes that a liquid market
exists for such option or future, there can be no assurance that the Fund will
be able to effect closing transactions at any particular time or at an
acceptable price. The investment advisor generally expects that options and
futures transactions for the Fund will be conducted on recognized exchanges.
In certain instances, however, the Fund may purchase and sell options in the
over-the-counter market. The staff of the Securities and Exchange Commission
<PAGE>
(SEC) considers over-the-counter options to be illiquid. The Fund's ability to
terminate option positions established in the over-the-counter market may be
more limited than in the case of exchange traded options and may also involve
the risk that securities dealers participating in such transactions would fail
to meet their obligations to the Fund.
The use of options and futures involves the risk of imperfect correlation
between movements in options and futures prices and movements in the price of
the securities that are the subject of the hedge. The successful use of these
strategies also depends on the ability of the Fund's investment advisor to
forecast correctly interest rate movements and general stock market price
movements. The risk increases as the composition of the securities held by the
Fund diverges from the composition of the relevant option or futures contract.
Foreign Securities
The Fund may invest in foreign securities or U.S. securities traded in
foreign markets. In addition to securities issued by foreign companies,
permissible investments may also consist of obligations of foreign branches of
U.S. banks and of foreign banks, including European certificates of deposit,
European time deposits, Canadian time deposits and Yankee certificates of
deposit. The Fund may also invest in Canadian commercial paper and Europaper.
These instruments may subject the Fund to investment risks that differ in
some respects from those related to investments in obligations of U.S. issuers.
Such risks include the possibility of adverse political and economic
developments; imposition of withholding taxes on interest or other income;
seizure, nationalization, or expropriation of foreign deposits; establishment
of exchange controls or taxation at the source; greater fluctuations in value
due to changes in exchange rates, or the adoption of other foreign governmental
restrictions which might adversely affect the payment of principal and interest
on such obligations. Such investments may also entail higher custodial fees and
sales commissions than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those respecting domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks.
The Fund may also invest in the stocks of companies located in emerging
markets. These countries generally have economic structures that are less
diverse and mature, and political systems that are less stable than those of
developed countries. Emerging markets may be more volatile than the markets of
more mature economies, and the securities of companies located in emerging
markets are often subject to rapid and large price fluctuations; however, these
markets may also provide higher long-term rates of return.
Foreign Currency Transactions
As one way of managing exchange rate risk, the Fund may enter into forward
currency exchange contracts (agreements to purchase or sell currencies at a
specified price and date). The exchange rate for the transaction (the amount of
currency the Fund will deliver and receive when the contract is completed) is
fixed when the Fund enters into the contract. The Fund usually will enter into
these contracts to stabilize the U.S. dollar value of a security it has agreed
to buy or sell. The Fund intends to use these contracts to hedge the U.S. dollar
value of a security it already owns, particularly if the Fund expects a decrease
in the value of the currency in which the foreign security is denominated.
Although the Fund will attempt to benefit from using forward contracts, the
success of its hedging strategy will depend on the investment advisor's ability
to predict accurately the future exchange rates between foreign currencies and
the U.S. dollar. The value of the Fund's investments denominated in foreign
currencies will depend on the relative strengths of those currencies and the
U.S. dollar, and the Fund may be affected favorably or unfavorably by changes in
the exchange rates or exchange control regulations between foreign currencies
and the U.S. dollar. Changes in foreign currency exchange rates also may affect
<PAGE>
the value of dividends and interest earned, gains and losses realized on the
sale of securities and net investment income and gains, if any, to be
distributed to shareholders by the Fund. The Fund may also purchase and sell
options related to foreign currencies in connection with hedging strategies.
Premium Securities
The Fund may at times invest in premium securities which are securities
bearing coupon rates higher than prevailing market rates. Such "premium"
securities are typically purchased at prices greater than the principal amount
payable on maturity. Although the Fund generally amortizes the amount of any
such premium into income, the Fund may recognize a capital loss if such premium
securities are called or sold prior to maturity and the call or sale price is
less than the purchase price. Additionally, the Fund may recognize a capital
loss if it holds such securities to maturity.
High Yield, High Risk Bonds
The Fund may invest a portion of its assets in lower rated bonds. Bonds
rated below BBB by S&P or Fitch IBCA, Inc. ("Fitch") or below Baa by Moody's,
commonly known as "junk bonds," offer high yields, but also high risk. While
investment in junk bonds provides opportunities to maximize return over time,
they are considered predominantly speculative with respect to the ability of the
issuer to meet principal and interest payments. Investors should be aware of the
following risks:
(1) The lower ratings of junk bonds reflect a greater possibility that
adverse changes in the financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates may impair the
ability of the issuer to make payments of interest and principal, especially if
the issuer is highly leveraged. Such issuer's ability to meet its debt
obligations may also be adversely affected by the issuer's inability to meet
specific forecasts or the unavailability of additional financing. Also, an
economic downturn or an increase in interest rates may increase the potential
for default by the issuers of these securities.
(2) The value of junk bonds may be more susceptible to real or perceived
adverse economic or political events than is the case for higher quality bonds.
(3) The value of junk bonds, like those of other fixed income securities,
fluctuates in response to changes in interest rates, generally rising when
interest rates decline and falling when interest rates rise. For example, if
interest rates increase after a fixed income security is purchased, the
security, if sold prior to maturity, may return less than its cost. The prices
of junk bonds, however, are generally less sensitive to interest rate changes
than the prices of higher-rated bonds, but are more sensitive to news about an
issuer or the economy which is, or investors perceive as, negative.
(4) The secondary market for junk bonds may be less liquid at certain times
than the secondary market for higher quality bonds, which may adversely effect
(a) the bond's market price, (b) the Fund's ability to sell the bond, and (c)
the Fund's ability to obtain accurate market quotations for purposes of valuing
its assets.
For bond ratings descriptions, see "Corporate and Municipal Bond Ratings"
below.
Illiquid and Restricted Securities
The Fund may not invest more than 15% (10% for money market funds) of its
<PAGE>
net assets in securities that are illiquid. A security is illiquid when the Fund
cannot dispose of it in the ordinary course of business within seven days at
approximately the value at which the Fund has the investment on its books.
The Fund may invest in "restricted" securities, i.e., securities subject to
restrictions on resale under federal securities laws. Rule 144A under the
Securities Act of 1933 ("Rule 144A") allows certain restricted securities to
trade freely among qualified institutional investors. Since Rule 144A securities
may have limited markets, the Board of Trustees will determine whether such
securities should be considered illiquid for the purpose of determining the
Fund's compliance with the limit on illiquid securities indicated above. In
determining the liquidity of Rule 144A securities, the Trustees will consider:
(1) the frequency of trades and quotes for the security; (2) the number of
dealers willing to purchase or sell the security and the number of other
potential buyers; (3) dealer undertakings to make a market in the security;
and (4) the nature of the security and the nature of the marketplace trades.
Investment in Other Investment Companies
The Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, the Fund may not (1) own more
than 3% of the outstanding voting stocks of another investment company, (2)
invest more than 5% of its assets in any single investment company, and
(3) invest more than 10% of its assets in investment companies. However, the
Fund may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund. Investing in other investment
companies may expose a Fund to duplicate expenses and lower its value.
Short Sales
A short sale is the sale of a security the Fund has borrowed. The Fund
expects to profit from a short sale by selling the borrowed security for more
than the cost of buying it to repay the lender. After a short sale is completed,
the value of the security sold short may rise. If that happens, the cost of
buying it to repay the lender may exceed the amount originally received for the
sale by the Fund.
The Fund may engage in short sales, but it may not make short sales of
securities or maintain a short position unless, at all times when a short
position is open, it owns an equal amount of such securities or of securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities of the same issue as, and equal in amount to, the
securities sold short. The Fund may effect a short sale in connection with an
underwriting in which the Fund is a participant.
Municipal Bonds
The Fund may invest in municipal bonds of any state, territory or
possession of the United States ("U.S."), including the District of Columbia.
The Fund may also invest in municipal bonds of any political subdivision, agency
or instrumentality (e.g., counties, cities, towns, villages, districts,
authorities) of the U.S. or its possessions. Municipal bonds are debt
instruments issued by or for a state or local government to support its general
financial needs or to pay for special projects such as airports, bridges,
highways, public transit, schools, hospitals, housing and water and sewer works.
Municipal bonds may also may be issued to refinance public debt.
Municipal bonds are mainly divided between "general obligation" and
<PAGE>
"revenue" bonds. General obligation bonds are backed by the full faith and
credit of governmental issuers with the power to tax. They are repaid from the
issuer's general revenues. Payment, however, may be dependent upon legislative
approval and may be subject to limitations on the issuer's taxing power.
Enforcement of payments due under general obligation bonds varies according to
the law applicable to the issuer. In contrast, revenue bonds are supported only
by the revenues generated by the project or facility.
The Fund may also invest in industrial development bonds. Such bonds are
usually revenue bonds issued to pay for facilities with a public purpose
operated by private corporations. The credit quality of industrial development
bonds is usually directly related to the credit standing of the owner or user of
the facilities. To qualify as a municipal bond, the interest paid on an
industrial development bond must qualify as fully exempt from federal income
tax. However, the interest paid on an industrial development bond may be subject
to the federal alternative minimum tax.
The yields on municipal bonds depend on such factors as market conditions,
the financial condition of the issuer and the issue's size, maturity date and
rating. Municipal bonds are rated by S&P, Moody's and Fitch. Such ratings,
however, are opinions, not absolute standards of quality. Municipal bonds with
the same maturity, interest rates and rating may have different yields, while
municipal bonds with the same maturity and interest rate, but different ratings,
may have the same yield. Once purchased by the Fund, a municipal bond may cease
to be rated or receive a new rating below the minimum required for purchase by
the Fund. Neither event would require the Fund to sell the bond, but the Fund's
investment advisor would consider such events in determining whether the Fund
should continue to hold it.
The ability of the Fund to achieve its investment objective depends upon
the continuing ability of issuers of municipal bonds to pay interest and
principal when due. Municipal bonds are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors. Such
laws extend the time for payment of principal and/or interest, and may otherwise
restrict the Fund's ability to enforce its rights in the event of default. Since
there is generally less information available on the financial condition of
municipal bond issuers compared to other domestic issuers of securities, the
Fund's investment advisor may lack sufficient knowledge of an issue's
weaknesses. Other influences, such as litigation, may also materially affect the
ability of an issuer to pay principal and interest when due. In addition, the
market for municipal bonds is often thin and can be temporarily affected by
large purchases and
sales, including those by the Fund.
From time to time, Congress has considered restricting or eliminating the
federal income tax exemption for interest on municipal bonds. Such actions could
materially affect the availability of municipal bonds and the value of those
already owned by the Fund. If such legislation were passed, the Trust's Board of
Trustees may recommend changes in the Fund's investment objectives and policies
or dissolution of the Fund.
U.S. Virgin Islands, Guam and Puerto Rico
The Fund may invest in obligations of the governments of the U.S. Virgin
Islands, Guam and Puerto Rico to the extent such obligations are exempt from the
income or intangibles taxes, as applicable, of the state for which the Fund is
named. The Fund does not presently intend to invest more than (a) 10% of its net
assets in the obligations of each of the U.S. Virgin Islands and Guam or (b) 25%
of its net assets in the obligations of Puerto Rico. Accordingly, the Fund may
be adversely affected by local political and economic conditions and
developments within the U.S. Virgin Islands, Guam and Puerto Rico affecting the
issuers of such obligations.
<PAGE>
Master Demand Notes
The Fund may invest in master demand notes. These are unsecured obligations
that permit the investment of fluctuating amounts by the Fund at varying rates
of interest pursuant to direct arrangements between the Fund, as lender, and the
issuer, as borrower. Master demand notes may permit daily fluctuations in the
interest rate and daily changes in the amounts borrowed. The Fund has the right
to increase the amount under the note at any time up to the full amount provided
by the note agreement, or to decrease the amount. The borrower may repay up to
the full amount of the note without penalty. Master demand notes permit the Fund
to demand payment of principal and accrued interest at any time (on not more
than seven days' notice). Notes acquired by the Fund may have maturities of more
than one year, provided that (1) the Fund is entitled to payment of principal
and accrued interest upon not more than seven days' notice, and (2) the rate
of interest on such notes is adjusted automatically at periodic intervals, which
normally will not exceed 31 days, but may extend up to one year. The notes are
deemed to have a maturity equal to the longer of the period remaining to the
next interest rate adjustment or the demand notice period. Because these types
of notes are direct lending arrangements between the lender and borrower, such
instruments are not normally traded and there is no secondary market for these
notes, although they are redeemable and thus repayable by the borrower at face
value plus accrued interest at any time. Accordingly, the Fund's right to redeem
is dependent on the ability of the borrower to pay principal and interest on
demand. In connection with master demand note arrangements, the Fund's
investment advisor considers, under standards established by the Board of
Trustees, earning power, cash flow and other liquidity ratios of the borrower
and will monitor the ability of the borrower to pay principal and interest on
demand. These notes are not typically rated by credit rating agencies. Unless
rated, the Fund may invest in them only if at the time of an investment the
issuer meets the criteria established for high quality commercial paper, i.e.,
rated A-1 by S&P, Prime-1 by Moody's or F-1 by Fitch.
Brady Bonds
The Fund may also invest in Brady Bonds. Brady Bonds are created through
the exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructurings under a plan introduced by
former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Bonds have been issued only recently, and, accordingly, do not have a
long payment history. They may be collateralized or uncollateralized and issued
in various currencies (although most are U.S. dollar-denominated) and they are
actively traded in the over-the-counter secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed-
rate par bonds or floating rate discount bonds, are generally collateralized in
full as to principal due at maturity by U.S. Treasury zero coupon obligations
that have the same maturity as the Brady Bonds. Interest payments on these
Brady Bonds generally are collateralized by cash or securities in an amount
that, in the case of fixed rate bonds, is equal to at least one year of rolling
interest payments based on the applicable interest rate at that time and is
adjusted at regular intervals thereafter. Certain Brady Bonds are entitled to
"value recovery payments" in certain circumstances, which in effect constitute
supplemental interest payments, but generally are not collateralized. Brady
Bonds are often viewed as having up to four valuation components:
(1) collateralized repayment of principal at final maturity, (2) collateralized
interest payments, (3) uncollateralized interest payments, and (4) any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In the event of a default with respect
to collateralized Brady Bonds as a result of which the payment obligations of
the issuer are accelerated, the U.S. Treasury zero coupon obligations held as
collateral for the payment of principal will not be distributed to investors,
nor will such obligations be sold and the proceeds distributed. The collateral
<PAGE>
will be held by the collateral agent to the scheduled maturity of the
defaulted Brady Bonds, which will continue to be outstanding, at which time the
face amount of the collateral will equal the principal payments that would have
then been due on the Brady Bonds in the normal course. In addition, in light
of the residual risk of Brady Bonds and, among other factors, the history of
defaults with respect to commercial bank loans by public and private entities
of countries issuing Brady Bonds, investments in Brady Bonds are to be viewed
as speculative.
Obligations of Foreign Branches of United States Banks
The Fund may invest in obligations of foreign branches of U.S. banks.
These may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by
government regulation. Payment of interest and principal upon these obligations
may also be affected by governmental action in the country of domicile of the
branch (generally referred to as sovereign risk). In addition, evidences of
ownership of such securities may be held outside the U.S. and the Fund may be
subject to the risks associated with the holding of such property overseas.
Examples of governmental actions would be the imposition of currency controls,
interest limitations, withholding taxes, seizure of assets or the declaration
of a moratorium. Various provisions of federal law governing domestic branches
do not apply to foreign branches of domestic banks.
Obligations of United States Branches of Foreign Banks
The Fund may invest in obligations of U.S. branches of foreign banks.
These may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by federal
and state regulation as well as by governmental action in the country in
which the foreign bank has its head office. In addition, there may be less
publicly available information about a U.S. branch of a foreign bank than about
a domestic bank.
Payment-in-kind Securities
The Fund may invest in payment-in-kind ("PIK") securities. PIKs pay
interest in either cash or additional securities, at the issuer's option, for a
specified period. The issuer's option to pay in additional securities typically
ranges from one to six years, compared to an average maturity for all PIK
securities of eleven years. Call protection and sinking fund features are
comparable to those offered on traditional debt issues.
PIKs, like zero coupon bonds, are designed to give an issuer flexibility
in managing cash flow. Several PIKs are senior debt. In other cases, where PIKs
are subordinated, most senior lenders view them as equity equivalents.
An advantage of PIKs for the issuer -- as with zero coupon securities -- is
that interest payments are automatically compounded (reinvested) at the stated
coupon rate, which is not the case with cash-paying securities. However, PIKs
are gaining popularity over zeros since interest payments in additional
securities can be monetized and are more tangible than accretion of a discount.
As a group, PIK bonds trade flat (i.e., without accrued interest). Their
price is expected to reflect an amount representing accredit interest since the
last payment. PIKs generally trade at higher yields than comparable cash-paying
securities of the same issuer. Their premium yield is the result of the lesser
desirability of non-cash interest, the more limited audience for non-cash paying
securities, and the fact that many PIKs have been issued to equity investors who
do not normally own or hold such securities.
<PAGE>
Calculating the true yield on a PIK security requires a discounted cash
flow analysis if the security (ex interest) is trading at a premium or a
discount because the realizable value of additional payments is equal to the
current market value of the underlying security, not par.
Regardless of whether PIK securities are senior or deeply subordinated,
issuers are highly motivated to retire them because they are usually their most
costly form of capital.
Zero Coupon "Stripped" Bonds
The Fund may invest in zero coupon "stripped" bonds. These represent
ownership in serially maturing interest payments or principal payments on
specific underlying notes and bonds, including coupons relating to such notes
and bonds. The interest and principal payments are direct obligations of the
issuer. Interest zero coupon bonds of any series mature periodically from the
date of issue of such series through the maturity date of the securities related
to such series. Principal zero coupon bonds mature on the date specified
therein, which is the final maturity date of the related securities. Each zero
coupon bond entitles the holder to receive a single payment at maturity. There
are no periodic interest payments on a zero coupon bond. Zero coupon bonds are
offered at discounts from their face amounts.
In general, owners of zero coupon bonds have substantially all the rights
and privileges of owners of the underlying coupon obligations or principal
obligations. Owners of zero coupon bonds have the right upon default on the
underlying coupon obligations or principal obligations to proceed directly and
individually against the issuer and are not required to act in concert with
other holders of zero coupon
bonds.
For federal income tax purposes, a purchaser of principal zero coupon
bonds or interest zero coupon bonds (either initially or in the secondary
market) is treated as if the buyer had purchased a corporate obligation issued
on the purchase date with an original issue discount equal to the excess of the
amount payable at maturity over the purchase price. The purchaser is required
to take into income each year as ordinary income an allocable portion of such
discounts determined on a "constant yield" method. Any such income increases
the holder's tax basis for the zero coupon bond, and any gain or loss on a sale
of the zero coupon bonds relative to the holder's basis, as so adjusted, is a
capital gain or loss. If the holder owns both principal zero coupon bonds and
interest zero coupon bonds representing an interest in the same underlying issue
of securities, a special basis allocation rule (requiring the aggregate basis to
be allocated among the items sold and retained based on their relative fair
market value at the time of sale) may apply to determine the gain or loss on a
sale of any such zero coupon bonds.
Mortgage-Backed or Asset-Backed Securities
The Fund may invest in mortgage-backed securities and asset-backed
securities. Two principal types of mortgage-backed securities are collatera-
lized mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs"). CMOs are securities collateralized by mortgages, mortgage pass-
throughs, mortgage pay-through bonds (bonds representing an interest in a pool
of mortgages where the cash flow generated from the mortgage collateral pool is
dedicated to bond repayment), and mortgage-backed bonds (general obligations of
the issuers payable out of the issuers' general funds and additionally secured
by a first lien on a pool of single family detached properties). Many CMOs are
issued with a number of classes or series which have different maturities and
are retired in sequence.
Investors purchasing CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
<PAGE>
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligation is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-throughs to be prepaid prior to their
stated maturity. Although some of the mortgages underlying CMOs may be
supported by various types of insurance, and some CMOs may be backed by GNMA
certificates or other mortgage pass-throughs issued or guaranteed by U.S.
government agencies or instrumentalities, the CMOs themselves are not generally
guaranteed.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
In addition to mortgage-backed securities, the Fund may invest in
securities secured by other assets including company receivables, truck and auto
loans, leases, and credit card receivables. These issues may be traded
over-the-counter and typically have a short-intermediate maturity structure
depending on the pay down characteristics of the underlying financial assets
which are passed through to the security holder.
Credit card receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. Most issuers of asset-
backed securities backed by automobile receivables permit the servicers of such
receivables to retain possession of the underlying obligations. If the servicers
were to sell these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
related asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of related asset-backed securities backed by
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
In general, issues of asset-backed securities are structured to include
additional collateral and/or additional credit support to protect against the
risk that a portion of the collateral supporting the asset-backed securities may
default and/or may suffer from these defects. In evaluating the strength of
particular issues of asset-backed securities, the investment advisor considers
the financial strength of the guarantor or other provider of credit support, the
type and extent of credit enhancement provided as well as the documentation and
structure of the issue itself and the credit support.
Collateralized Mortgage Obligation "Residual" Interests
The Fund may invest in other types of mortgage-related securities,
including any securities that directly or indirectly represent a participation
in, or are secured by and payable from, mortgage loans or real property,
including collateralized mortgage obligation "residual" interests. Residual
interests are derivative mortgage securities issued by agencies or instrum-
entalities of the U.S. Government or by private originators of, or investors in,
mortgage loans. The cash flow generated by the mortgage assets underlying a
series of mortgage securities is applied first to make required payments of
principal of and interest on the mortgage securities and second to pay the
related administrative expenses of the issuer. The residual generally represents
the right to any excess cash flow remaining after making the foregoing
payments. Each payment of such excess cash flow to a holder of the related
residual represents income and/or a return of capital. The amount of residual
<PAGE>
cash flow resulting from a series of mortgage securities will depend on,
among other things, the characteristics of the mortgage assets, the coupon rate
of each class of the mortgage securities, prevailing interest rates, the amount
of administrative expenses, and the prepayment experience on the mortgage
assets. The values of residuals are extremely sensitive to changes in interest
rates. The yield to maturity on residual interests may be extremely sensitive to
prepayments on the related underlying mortgage assets in the same manner as an
interest-only class of stripped mortgaged-backed securities. In addition, if a
series of mortgage securities includes a class that bears interest at an
adjustable rate, the yield to maturity on the related residual interest may also
be extremely sensitive to changes in the level of the index upon which interest
rate adjustments are based. In certain circumstances, there may be little or no
excess cash flow payable to residual holders. The Fund may fail to recoup fully
its initial investment in a residual.
Residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The
residual interest market has only recently developed and residuals currently may
not have the liquidity of other more established securities trading in other
markets.
Residuals also may be subject to certain restrictions on transferability. As a
result, the Fund may be unable to dispose of these interests at prices
approximating the values the Fund had previously assigned to them.
Variable or Floating Rate Instruments
The Fund may invest in variable or floating rate instruments which may
involve a demand feature and may include variable amount master demand notes
which may or may not be backed by bank letters of credit. Variable or floating
rate instruments bear interest at a rate which varies with changes in market
rates. The holder of an instrument with a demand feature may tender the
instrument back to the issuer at par prior to maturity. A variable amount
master demand note is issued pursuant to a written agreement between the issuer
and the holder, its amount may be increased by the holder or decreased by the
holder or issuer, it is payable on demand, and the rate of interest varies based
upon an agreed formula. The quality of the underlying credit must, in the
opinion of the investment advisor, be equivalent to the long-term bond or
commercial paper ratings applicable to permitted investments for the Fund.
The investment advisor will monitor, on an ongoing basis, the earning power,
cash flow, and liquidity ratios of the issuers of such instruments and will
similarly monitor the ability of an issuer of a demand instrument to pay
principal and interest on demand.
Real Estate Investment Trusts
The Fund may invest in investments related to real estate including real
estate investment trusts ("REITs"). Risks associated with investments in
securities of companies in the real estate industry include: decline in the
value of real estate; risks related to general and local economic conditions,
overbuilding and increased competition; increases in property taxes and
operating expenses; changes in zoning laws; casualty or condemnation losses;
variations in rental income; changes in neighborhood values; the appeal of
properties to tenants; and increases in interest rates. In addition, equity
REITs may be affected by changes in the values of the underlying property owned
by the trusts, while mortgage real estate investment trusts may be affected by
the quality of credit extended. REITs are dependent upon management skills, may
not be diversified and are subject to the risks of financing projects. Such
REITs are also subject to heavy cash flow dependency, defaults by borrowers,
self liquidation and the possibility of failing to qualify for tax-free
pass-through of income under the Internal Revenue Code of 1986, as amended
(the "Code") and to maintain exemption from the 1940 Act. In the event an
issuer of debt securities collateralized by real estate defaults, it is
conceivable that the REITs could end up holding the underlying real estate.
<PAGE>
Limited Partnerships
The Fund may invest in limited and master limited partnerships. A limited
partnership is a partnership consisting of one or more general partners,
jointly and severally responsible as ordinary partners, and by whom the
business is conducted, and one or more limited partners who contribute cash as
capital to the partnership and who generally are not liable for the debts of
the partnership beyond the amounts contributed. Limited partners are not
involved in the day-to-day management of the partnership. They receive income,
capital gains and other tax benefits associated with the partnership project in
accordance with terms established in the partnership agreement. Typical
limited partnerships are in real estate, oil and gas and equipment leasing, but
they also finance movies, research and development, and other projects.
For an organization classified as a partnership under the Code, each item
of income, gain, loss, deduction, and credit is not taxed at the partnership
level but flows through to the holder of the partnership unit. This allows the
partnership to avoid double taxation and to pass through income to the holder
of the partnership unit at lower individual rates.
A master limited partnership is a publicly traded limited partnership. The
partnership units are registered with the SEC and are freely exchanged on a
securities exchange or in the over-the-counter market.
PURCHASE AND REDEMPTION OF SHARES
You may buy shares of the Fund through Evergreen Distributor, Inc.
("EDI"), broker-dealers that have entered into special agreements with EDI or
certain other financial institutions. With certain exceptions, the Fund may
offer up to four different classes of shares that differ primarily with respect
to sales charges and distribution fees. Depending upon the class of shares,
you will pay an initial sales charge when you buy the Fund's shares, a
contingent deferred sales charge (a "CDSC") when you redeem the Fund's shares
or no sales charges at all. Each Fund offers different classes of shares.
Refer to the prospectus to determine which classes of shares are offered by
each Fund.
Class A Shares
With certain exceptions, when you purchase Class A shares you will pay a
maximum sales charge of 4.75%. The prospectus contains a complete table of
applicable sales charges and a discussion of sales charge reductions or waivers
that may apply to purchases. If you purchase Class A shares in the amount of
$1 million or more, without an initial sales charge, the Fund will charge a
CDSC of 1.00% if you redeem during the month of your purchase or the 12-month
period following the month of your purchase (see "Contingent Deferred Sales
Charge" below).
No front-end sales charges are imposed on Class A shares purchased by
(a) institutional investors, which may include bank trust departments and
registered investment advisors; (b) investment advisors, consultants or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge such clients a management, consulting, advisory or
other fee; (c) clients of investment advisors or financial planners who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisors or financial planners on the books of the broker-
dealer through whom shares are purchased; (d) institutional clients of broker-
<PAGE>
dealers, including retirement and deferred compensation plans and the trusts
used to fund these plans, which place trades through an omnibus account
maintained with the Fund by the broker-dealer; (e) shareholders of record on
October 12, 1990 in any series of Evergreen Investment Trust in existence on
that date, and the members of their immediate families; and (f) current and
retired employees of First Union National Bank ("FUNB") and its affiliates, EDI
and any broker-dealer with whom EDI has entered into an agreement to sell shares
of the Fund, and members of the immediate families of such employees. These
provisions are generally intended to provide additional job-related incentives
to persons who serve the Fund or work for companies associated with the Fund and
selected dealers and agents of the Fund. Since these persons are in a position
to have a basic understanding of the nature of an investment company as well as
a general familiarity with the Fund, sales to these persons, as compared to
sales in the normal channels of distribution, require substantially less sales
effort. Similarly, these provisions extend the privilege of purchasing shares at
net asset value (NAV) to certain classes of institutional investors who,
because of their investment sophistication, can be expected to require
significantly less than normal sales effort on the part of the Fund and EDI.
In addition, the provisions allow the Funds to be competitive in the mutual
fund industry, where similar allowances are common.
Class B Shares
The Fund offers Class B shares at NAV without an initial sales charge.
With certain exceptions, however, the Fund will charge a CDSC on shares
you redeem within 72 months after the month of your purchase, in accordance
with the following schedule:
REDEMPTION TIME CDSC RATE
Month of purchase and the first 12-month
period following the month of purchase............................. 5.00%
Second 12-month period following the month of purchase.............. 4.00%
Third 12-month period following the month of purchase............... 3.00%
Fourth 12-month period following the month of purchase.............. 3.00%
Fifth 12-month period following the month of purchase............... 2.00%
Sixth 12-month period following the month of purchase............... 1.00%
Thereafter.......................................................... 0.00%
Class B shares that have been outstanding for seven years after the month
of purchase will automatically convert to Class A shares without imposition of
a front-end sales charge or exchange fee. Conversion of Class B shares
represented by stock certificates will require the return of the stock
certificate to ESC.
Class C Shares
Class C shares are available only through broker-dealers who have entered
into special distribution agreements with EDI. The Fund offers Class C shares
at NAV without an initial sales charge. With certain exceptions, however, the
Fund will charge a CDSC on shares you redeem within 24 months after the month
of your purchase, in accordance with the following schedule:
REDEMPTION TIME CDSC RATE
Month of purchase and the first 12-month
period following the month of purchase...............................2.00%
Second 12-month period following the month of purchase................1.00%
Thereafter............................................................0.00%
<PAGE>
See "Contingent Deferred Sales Charge" below.
Class C shares purchased through an omnibus account with Merrill Lynch will
be charged a 1.00% CDSC if redeemed within 12 months after the month of
purchase. Redemptions made thereafter will not be charged a CDSC.
Class Y Shares
No CDSC is imposed on the redemption of Class Y shares. Class Y shares are
not offered to the general public and are available only to (1) persons who at
or prior to December 31, 1994 owned shares in a mutual fund advised by (2)
certain institutional investors and (3) investment advisory clients of an
investment advisor of an Evergreen Fund or the advisor's affiliates. Class Y
shares are offered at net asset value without a front-end or back-end sales
charge and do not bear any Rule 12b-1 distribution expenses.
Class S Shares
Class S shares of the Evergreen Money Market Funds are offered at NAV
without an initial or deferred sales charge through certain broker-dealers and
financial institutions who have entered into selling agreements with EDI.
Investors should refer to their broker-dealer or financial institution as
appropriate for instructions and further information.
Institutional Shares, Institutional Service Shares
Each institutional class of shares is sold without a front-end sales charge
or contingent deferred sales charge. Institutional Service shares pay an ongoing
service fee. The minimum initial investment in any institutional class of shares
is $1 million, which may be waived in certain circumstances. There is no
minimum amount required for subsequent purchases.
Contingent Deferred Sales Charge
The Fund charges a CDSC as reimbursement for certain expenses, such as
commissions or shareholder servicing fees, that it has incurred in connection
with the sale of its shares (see "Distribution Expenses Under Rule 12b-1,"
below). Institutional and Institutional Service shares do not charge a CDSC.
If imposed, the Fund deducts the CDSC from the redemption proceeds you would
otherwise receive. The CDSC is a percentage of the lesser of (1) the net asset
value of the shares at the time of redemption or (2) the shareholder's original
net cost for such shares. Upon request for redemption, to keep the CDSC a
shareholder must pay as low as possible, the Fund will first seek to redeem
shares not subject to the CDSC and/or shares held the longest, in that order.
The CDSC on any redemption is, to the extent permitted by the National
Association of Securities Dealers, Inc., paid to EDI or its predecessor.
SALES CHARGE WAIVERS AND REDUCTIONS
The following information is not applicable to Class B, Class C, Class Y,
Class S, Institutional and Institutional Service shares.
If you are making a large purchase, there are several ways you can combine
multiple purchases of Class A shares in Evergreen Funds and take advantage of
lower sales charges. These are described below.
<PAGE>
Combined Purchases
You can reduce your sales charge by combining purchases of Class A shares
of multiple Evergreen Funds. For example, if you invested $75,000 in each of two
different Evergreen Funds, you would pay a sales charge based on a $150,000
purchase (i.e., 3.75% of the offering price, rather than 4.75%).
Rights of Accumulation
You can reduce your sales charge by adding the value of Class A shares of
Evergreen Funds you already own to the amount of your next Class A investment.
For example, if you hold Class A shares valued at $99,999 and purchase an
additional $5,000, the sales charge for the $5,000 purchase would be at the next
lower sales charge of 3.75%, rather than 4.75%.
Your account, and therefore your rights of accumulation, can be linked to
immediate family members which includes father and mother, brothers and sisters,
and sons and daughters. The same rule applies with respect to individual
retirement plans. Please note, however, that retirement plans involving
employees stand alone and do not pass on rights of accumulation.
Letter of Intent
You can, by completing the "Letter of Intent" section of the application,
purchase Class A shares over a 13-month period and receive the same sales
charge as if you had invested all the money at once. All purchases of Class A
shares of an Evergreen Fund during the period will qualify as Letter of Intent
purchases.
Waiver of Initial Sales Charges
The Fund may sell its shares at net asset value without an initial sales
charge to:
1. purchasers of shares in the amount of $1 million or more;
2. a corporate or certain other qualified retirement plan or a non-
qualified deferred compensation plan or a Title 1 tax-sheltered annuity or
TSA plan sponsored by an organization having 100 or more eligible employees
(a "Qualifying Plan") or a TSA plan sponsored by a public educational
entity having 5,000 or more eligible employees (an "Educational TSA Plan");
3. institutional investors, which may include bank trust departments
and registered investment advisors;
4. investment advisors, consultants or financial planners who place
trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee;
5. clients of investment advisors or financial planners who place trades
for their own accounts if the accounts are linked to a master account of
such investment advisors or financial planners on the books of the broker-
dealer through whom shares are purchased;
6. institutional clients of broker-dealers, including retirement and
deferred compensation plans and the trusts used to fund these plans, which
<PAGE>
place trades through an omnibus account maintained with the Fund by the
broker-dealer;
7. employees of FUNB, its affiliates, EDI, any broker-dealer with whom
EDI has entered into an agreement to sell shares of the Fund, and members
of the immediate families of such employees;
8. certain Directors, Trustees, officers and employees of the Evergreen
Funds, EDI or their affiliates and to the immediate families of such
persons; or
9. a bank or trust company acting as trustee for a single account in the
name of such bank or trust company if the initial investment in any of the
Evergreen Funds made pursuant to this waiver is at least $500,000 and any
commission paid at the time of such purchase is not more than 1% of the
amount invested.
With respect to items 8 and 9 above, the Fund will only sell shares to
these parties upon the purchasers written assurance that the purchase is for
their personal investment purposes only. Such purchasers may not resell the
securities except through redemption by the Fund. The Fund will not charge any
CDSC on redemptions by such purchasers.
Waiver of CDSCs
The Fund does not impose a CDSC when the shares you are redeeming
represent:
1. an increase in the share value above the net cost of such shares;
2. certain shares for which the Fund did not pay a commission on
issuance, including shares acquired through reinvestment of dividend income
and capital gains distributions;
3. shares that are in the accounts of a shareholder who has died or
become disabled;
4. a lump-sum distribution from a 401(k) plan or other benefit plan
qualified under the Employee Retirement Income Security Act of 1974
("ERISA");
5. an automatic withdrawal from the ERISA plan of a shareholder who is
at least 59-years old;
6. shares in an account that we have closed because the account has an
aggregate net asset value of less than $1,000;
7. an automatic withdrawal under a Systematic Income Plan of up to 1.0%
per month of your initial account balance;
8. a withdrawal consisting of loan proceeds to a retirement plan
participant;
9. a financial hardship withdrawal made by a retirement plan
participant;
10. a withdrawal consisting of returns of excess contributions or excess
deferral amounts made to a retirement plan; or
11. a redemption by an individual participant in a Qualifying Plan that
purchased Class C shares (this waiver is not available in the event a
Qualifying Plan, as a whole, redeems substantially all of its assets).
<PAGE>
Exchanges
Investors may exchange shares of the Fund for shares of the same class of
any other Evergreen Fund which offers the same class of shares. Shares of any
class of the Evergreen Select Funds may be exchanged for the same class of
shares of any other Evergreen Select Fund. See "By Exchange" under "How to Buy
Shares" in the prospectus. Before you make an exchange, you should read the
prospectus of the Evergreen Fund into which you want to exchange. The Trust's
Board of Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.
Automatic Reinvestment
As described in the prospectus, a shareholder may elect to receive
dividends and capital gains distributions in cash instead of shares. However,
ESC will automatically reinvest all dividends and distributions in additional
shares when it learns that the postal or other delivery service is unable to
deliver checks or transaction confirmations to the shareholder's address of
record. When a check is returned, the Fund will hold the check amount in a
no-interest account in the shareholder's name until the shareholder updates his
or her address or automatic reinvestment begins. Uncashed or returned
redemption checks will also be handled in the manner described above.
PRICING OF SHARES
Calculation of Net Asset Value
The Fund calculates its net asset value ("NAV") once daily (or twice daily,
for money market funds) on Monday through Friday, as described in the prospec-
tus. The Fund will not compute its NAV on the days the New York Stock Exchange
is closed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The NAV of the Fund is calculated by dividing the value of the Fund's net
assets attributable to that class by all of the shares issued for that class.
Valuation of Portfolio Securities
Current values for the Fund's portfolio securities are determined as
follows:
(1) Securities that are traded on an established securities exchange or the
over-the-counter National Market System ("NMS") are valued on the basis of
the last sales price on the exchange where primarily traded or on the NMS
prior to the time of the valuation, provided that a sale has occurred.
(2) Securities traded on an established securities exchange or in the over-
the-counter market for which there has been no sale and other securities
traded in the over-the-counter market are valued at the mean of the bid and
asked prices at the time of valuation.
(3) Short-term investments maturing in more than 60 days, for which market
quotations are readily available, are valued at current market value.
<PAGE>
(4) Short-term investments maturing in sixty days or less are valued at
amortized cost, which approximates market.
(5) Securities, including restricted securities, for which market
quotations are notreadily available; listed securities or those on NMS if,
in the investment advisor's opinion, the last sales price does not reflect
an accurate current market value; and other assets are valued at prices
deemed in good faith to be fair under procedures established by the Board
of Trustees.
(6) Municipal bonds are valued by an independent pricing service at fair
value using a variety of factors which may include yield, liquidity,
interest rate risk, credit quality, coupon, maturity and type of issue.
Foreign securities are generally valued on the basis of valuations provided
by a pricing service, approved by the Trust's Board of Trustees, which uses
information with respect to transactions in such securities, quotations from
broker-dealers, market transactions in comparable securities, and various
relationships between securities and yield to maturity in determining value.
PERFORMANCE CALCULATIONS
Total Return
Total return quotations for a class of shares of the Fund as they may
appear from time to time in advertisements are calculated by finding the average
annual compounded rates of return over one, five and ten year periods, or the
time periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. To the initial
investment all dividends and distributions are added, and all recurring
fees charged to all shareholder accounts are deducted. The ending redeemable
value assumes a complete redemption at the end of the relevant periods.
The following is the formula used to calculate average annual total
return:
P(1+T)n=ERV
P = initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of the initial $1,000
Yield
Described below are yield calculations the Fund may use. Yield quotations
are expressed in annualized terms and may be quoted on a compounded basis.
Yields based on these calculations do not represent the Fund's yield for any
future period.
30-Day Yield
If the Fund invests primarily in bonds, it may quote its 30-day yield in
<PAGE>
advertisements or in reports or other communications to shareholders. It is
calculated by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
a-b 6
Yield=2[(---- +1) -1]
cd
Where:
a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the period
7-Day Current and Effective Yield
If the Fund invests primarily in money market instruments, it may quote its
7-day current yield or effective yield in advertisements or in reports or other
communications to shareholders.
The current yield is calculated by determining the net change, excluding
capital changes and income other than investment income, in the value of a
hypothetical, pre-existing account having a balance of one share at the
beginning of the 7-day base period, subtracting a hypothetical charge reflec-
ting deductions from shareholder accounts, and dividing the difference by the
value of the account at the beginning of the base period to obtain the base
period return, and then multiplying the base period return by (365/7).
The effective yield is based on a compounding of the current yield,
according to the following formula:
Effective Yield = [(base period return)] + 1)365/7]-1
Tax Equivalent Yield
If the Fund invests primarily in municipal bonds, it may quote in advert-
isements or in reports or other communications to shareholders a tax equivalent
yield, which is what an investor would generally need to earn from a fully
taxable investment in order to realize, after income taxes, a benefit equal to
the tax free yield provided by the Fund. Tax equivalent yield is calculated
using the following formula:
Yield
Tax Equivalent Yield = ---------------------
1 - Income Tax Rate
The quotient is then added to that portion, if any, of the Fund's yield
that is not tax exempt. Depending on the Fund's objective, the income tax rate
used in the formula above may be federal or a combination of federal and state.
PRINCIPAL UNDERWRITER
EDI is the principal underwriter for the Trust and with respect to each
<PAGE>
class of shares of the Fund. The Trust has entered into a Principal Underwriting
Agreement ("Underwriting Agreement") with EDI with respect to each class of the
Fund. EDI is a subsidiary of The BISYS Group, Inc.
EDI, as agent, has agreed to use its best efforts to find purchasers for
the shares. EDI may retain and employ representatives to promote distribution
of the shares and may obtain orders from broker-dealers, and others, acting as
principals, for sales of shares to them. The Underwriting Agreement provides
that EDI will bear the expense of preparing, printing, and distributing adverti-
sing and sales literature and prospectuses used by it.
All subscriptions and sales of shares by EDI are at the public offering
price of the shares, which is determined in accordance with the provisions of
the Trust's Declaration of Trust, By-Laws, current prospectuses and SAI. All
orders are subject to acceptance by the Fund and the Fund reserves the right, in
its sole discretion, to reject any order received. Under the Underwriting
Agreement, the Fund is not liable to anyone for failure to accept any order.
EDI has agreed that it will, in all respects, duly conform with all state
and federal laws applicable to the sale of the shares. EDI has also agreed that
it will indemnify and hold harmless the Trust and each person who has been, is,
or may be a Trustee or officer of the Trust against expenses reasonably incurred
by any of them in connection with any claim, action, suit, or proceeding to
which any of them may be a party that arises out of or is alleged to arise out
of any misrepresentation or omission to state a material fact on the part of EDI
or any other person for whose acts EDI is responsible or is alleged to be
responsible, unless such misrepresentation or omission was made in reliance
upon written information furnished by the Trust.
The Underwriting Agreement provides that it will remain in effect as long
as its terms and continuance are approved annually (i) by a vote of a majority
of the Trust's Trustees who are not interested persons of the Fund, as defined
in the 1940 Act (the "Independent Trustees"), and (ii) by vote of a majority
of the Trust's Trustees, in each case, cast in person at a meeting called for
that purpose.
The Underwriting Agreement may be terminated, without penalty, on 60 days'
written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment," as that term is defined in the
1940 Act.
From time to time, if, in EDI's judgment, it could benefit the sales of
shares, EDI may provide to selected broker-dealers promotional materials and
selling aids, including, but not limited to, personal computers, related
software, and data files.
DISTRIBUTION EXPENSES UNDER RULE 12b-1
The Fund bears some of the costs of selling its Class A, Class B, Class C,
Class S and Institutional Service shares, as applicable, including certain
advertising, marketing and shareholder service expenses, pursuant to Rule 12b-1
of the 1940 Act. These 12b-1 fees are indirectly paid by the shareholder, as
shown by the Fund's expense table in the prospectus.
Under the Distribution Plans (each a "Plan," together, the "Plans") that
the Fund has adopted for its Class A, Class B, Class C, Class S and
Institutional Service shares, as applicable, the Fund may incur expenses for
12b-1 fees up to a maximum annual percentage of the average daily net assets
<PAGE>
attributable to a class, as follows:
------------------------------- ---------------
Class A 0.75%*
------------------------------- ---------------
------------------------------- ---------------
Class B 1.00%
------------------------------- ---------------
------------------------------- ---------------
Class C 1.00%
------------------------------- ---------------
------------------------------- ---------------
Class S 0.75%
------------------------------- ---------------
------------------------------- ---------------
Institutional Service 0.75%*
------------------------------- ---------------
*Currently limited to 0.30% or less on Evergreen Money
Market Funds and Evergreen Select Money Market Funds
and 0.25% or less for all other Evergreen Funds. See
the expense table in the prospectus of the Fund in
which you are interested.
Of the amounts above, each class may pay under its Plan a maximum service
fee of 0.25% to compensate organizations, which may include the Fund's invest-
ment advisor or its affiliates, for personal services provided to shareholders
and the maintenance of shareholder accounts. The Fund may not, during any
fiscal period, pay distribution or service fees greater than the amounts above.
Amounts paid under the Plans are used to compensate EDI pursuant to
Distribution Agreements (each an "Agreement," together, the "Agreements") that
the Fund has entered into with respect to its Class A, Class B, Class C, Class
S and Institutional Service shares, as applicable. The compensation is based
on a maximum annual percentage of the average daily net assets attributable to
a class, as follows:
----------------------------- -------------
Class A 0.30%*
----------------------------- -------------
----------------------------- -------------
Class B 1.00%
----------------------------- -------------
----------------------------- -------------
Class C 1.00%
----------------------------- -------------
----------------------------- -------------
Class S 0.60%*
----------------------------- -------------
----------------------------- -------------
Institutional Service 0.30%*
----------------------------- -------------
*May be lower. See the expense table in the prospectus
of the Fund in which you are interested.
The Agreements provide that EDI will use the distribution fees received
from the Fund for the following purposes:
(1) to compensate broker-dealers or other persons for distributing Fund
shares;
(2) to compensate broker-dealers, depository institutions and other
financial intermediaries for providing administrative, accounting and other
services with respect to the Fund's shareholders; and
(3) to otherwise promote the sale of Fund shares.
The Agreements also provide that EDI may use distribution fees to make
interest and principal payments in respect of amounts that have been financed
to pay broker-dealers or other persons for distributing Fund shares. EDI may
assign its rights to receive compensation under the Plans to secure such
financings. FUNB or its affiliates may finance payments made by EDI to
compensate broker-dealers or other persons for distributing shares of the Fund.
<PAGE>
In the event the Fund acquires the assets of another mutual fund, compens-
ation paid to EDI under the Agreements may be paid by the Fund's Distributor to
the acquired fund's distributor or its predecessor.
Since EDI's compensation under the Agreements is not directly tied to the
expenses incurred by EDI, the compensation received by it under the Agreements
during any fiscal year may be more or less than its actual expenses and may
result in a profit to EDI. Distribution expenses incurred by EDI in one fiscal
year that exceed the compensation paid to EDI for that year may be paid from
distribution fees received from the Fund in subsequent fiscal years.
Distribution fees are accrued daily and paid at least annually on Class B
and Class C shares and are charged as class expenses, as accrued. The distri-
bution fees attributable to the Class B and Class C shares are designed to
permit an investor to purchase such shares through broker-dealers without the
assessment of a front-end sales charge, while at the same time permitting EDI to
compensate broker-dealers in connection with the sale of such shares.
Service fees are accrued daily and paid at least annually on Class A, Class
B, Class C, Class S and Institutional Service shares and are charged as class
expenses, as accrued.
Under the Plans, the Treasurer of the Trust reports the amounts expended
under the Plans and the purposes for which such expenditures were made to the
Trustees of the Trust for their review on a quarterly basis. Also, each Plan
provides that the selection and nomination of the Independent Trustees are
committed to the discretion of such Independent Trustees then in office.
The investment advisor may from time to time from its own funds or such
other resources as may be permitted by rules of the SEC make payments for
distribution services to EDI; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.
Each Plan and the Agreement will continue in effect for successive
12-month periods provided, however, that such continuance is specifically
approved at least annually by the Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of that class and,
in either case, by a majority of the Independent Trustees of the Trust.
The Plans permit the payment of fees to brokers and others for distribution
and shareholder-related administrative services and to broker-dealers, deposi-
tory institutions, financial intermediaries and administrators for administr-
ative services as to Class A, Class B, Class C, Class S and Institutional
Service shares. The Plans are designed to (i) stimulate brokers to provide
distribution and administrative support services to the Fund and holders of
Class A, Class B, Class C, Class S and Institutional Service shares and
(ii) stimulate administrators to render administrative support services to the
Fund and holders of Class A, Class B, Class C, Class S and Institutional Service
shares. The administrative services are provided by a representative who has
knowledge of the shareholder's particular circumstances and goals, and include,
but are not limited to providing office space, equipment, telephone facilities,
and various personnel including clerical, supervisory, and computer, as
necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client inquiries
regarding Class A, Class B, Class C, Class S and Institutional Service shares;
assisting clients in changing dividend options, account designations, and
addresses; and providing such other services as the Fund reasonably requests
for its Class A, Class B, Class C, Clas S and Institutional Service shares.
In the event that the Plan or Distribution Agreement is terminated or not
<PAGE>
continued with respect to one or more classes of the Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to EDI with respect to that class or classes, and (ii) the Fund would not
be obligated to pay EDI for any amounts expended under the Distribution
Agreement not previously recovered by the EDI from distribution services fees in
respect of shares of such class or classes through deferred sales charges.
All material amendments to any Plan or Agreement must be approved by a vote
of the Trustees of the Trust or the holders of the Fund's outstanding voting
securities, voting separately by class, and in either case, by a majority of
the Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval; and any Plan or Distribution Agreement may not be
amended in order to increase materially the costs that a particular class of
shares of the Fund may bear pursuant to the Plan or Distribution Agreement
without the approval of a majority of the holders of the outstanding voting
shares of the class affected. Any Plan or Distribution Agreement may be
terminated (i) by the Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting separately by
class or by a majority vote of the Independent Trustees, or (ii) by EDI. To
terminate any Distribution Agreement, any party must give the other parties 60
days' written notice; to terminate a Plan only, the Fund need give no notice to
EDI. Any Distribution Agreement will terminate automatically in the event of its
assignment. For more information about 12b-1 fees, see "Expenses" in the
prospectus and "12b-1 Fees" under "Expenses" in Part 1 of this SAI.
TAX INFORMATION
Requirements for Qualifications as a Regulated Investment Company
The Fund intends to qualify for and elect the tax treatment applicable to
regulated investment companies ("RIC") under Subchapter M of the Code, as
amended. (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a RIC, the Fund must, among other things, (i) derive at least 90% of
its gross income from dividends, interest, payments with respect to proceeds
from securities loans, gains from the sale or other disposition of securities
or foreign currencies and other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in such
securities; and (ii) diversify its holdings so that, at the end of each quarter
of its taxable year, (a) at least 50% of the market value of the Fund's total
assets is represented by cash, U.S. government securities and other securities
limited in respect of any one issuer, to an amount not greater than 5% of the
Fund's total assets and 10% of the outstanding voting securities of such issuer,
and (b) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. government securities and secu-
rities of other regulated investment companies). By so qualifying, the Fund is
not subject to federal income tax if it timely distributes its investment
company taxable income and any net realized capital gains. A 4% nondeductible
excise tax will be imposed on the Fund to the extent it does not meet certain
distribution requirements by the end of each calendar year. The Fund anticipates
meeting such distribution requirements.
Taxes on Distributions
Unless the Fund is a municipal bond fund, distributions will be taxable to
shareholders whether made in shares or in cash. Shareholders electing to receive
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share so received equal to the net asset
value of a share of the Fund on the reinvestment date.
<PAGE>
To calculate ordinary income for federal income tax purposes, shareholders
must generally include dividends paid by the Fund from its investment company
taxable income (net taxable investment income plus net realized short-term
capital gains, if any). The Fund will include dividends it receives from
domestic corporations when the Fund calculates its gross investment income.
Unless the Fund is a municipal bond fund or U.S. Treasury or U.S. Government
money market fund, it anticipates that all or a portion of the ordinary
dividends which it pays will qualify for the 70% dividends-received deduction
for corporations. The Fund will inform shareholders of the amounts that so
qualify. If the Fund is a municipal bond fund or U.S. Treasury or U.S.
Government money market fund, none of its income will consist of corporate
dividends; therefore, none of its distributions will qualify for the 70%
dividends-received deduction for corporations.
From time to time, the Fund will distribute the excess of its net long-term
capital gains over its short-term capital loss to shareholders (i.e., capital
gain dividends). For federal tax purposes, shareholders must include such
capital gain dividends when calculating their net long-term capital gains.
Capital gain dividends are taxable as net long-term capital gains to a
shareholder, no matter how long the shareholder has held the shares.
Distributions by the Fund reduce its NAV. A distribution that reduces the
Fund's NAV below a shareholder's cost basis is taxable as described above,
although from an investment standpoint, it is a return of capital.In
particular, if a shareholder buys Fund shares just before the Fund makes a
distribution, when the Fund makes the distribution the shareholder will receive
what is in effect a return of capital. Nevertheless, the shareholder may incur
taxes on the distribution. Therefore, shareholders should carefully consider
the tax consequences of buying Fund shares just before a distribution.
All distributions, whether received in shares or cash, must be reported by
each shareholder on his or her federal income tax return. Each shareholder
should consult a tax advisor to determine the state and local tax implications
of Fund distributions.
If more than 50% of the value of the Fund's total assets at the end of a
fiscal year is represented by securities of foreign corporations and the Fund
elects to make foreign tax credits available to its shareholders, a shareholder
will be required to include in his gross income both cash dividends and the
amount the Fund advises him is his pro rata portion of income taxes withheld by
foreign governments from interest and dividends paid on the Fund's investments.
The shareholder may be entitled, however, to take the amount of such foreign
taxes withheld as a credit against his U.S. income tax, or to treat the foreign
tax withheld as an itemized deduction from his gross income, if that should be
to his advantage. In substance, this policy enables the shareholder to benefit
from the same foreign tax credit or deduction that he would have received if he
had been the individual owner of foreign securities and had paid foreign income
tax on the income therefrom. As in the case of individuals receiving income
directly from foreign sources, the credit or deduction is subject to a number
of limitations.
Special Tax Information for Shareholders of Municipal Bond Funds
The Fund expects that substantially all of its dividends will be "exempt
interest dividends," which should be treated as excludable from federal gross
income. In order to pay exempt interest dividends, at least 50% of the value of
the Fund's assets must consist of federally tax-exempt obligations at the close
of each quarter. An exempt interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by the Fund with respect to its net
federally excludable municipal obligation interest and designated as an exempt
<PAGE>
interest dividend in a written notice mailed to each shareholder not later than
60 days after the close of its taxable year. The percentage of the total
dividends paid by the Fund with respect to any taxable year that qualifies as
exempt interest dividends will be the same for all shareholders of the Fund
receiving dividends with respect to such year. If a shareholder receives an
exempt interest dividend with respect to any share and such share has been held
for six months or less, any loss on the sale or exchange of such share will be
disallowed to the extent of the exempt interest dividend amount.
Any shareholder of the Fund who may be a "substantial user" (as defined by
the Code, as amended.) of a facility financed with an issue of tax-exempt
obligations or a "related person" to such a user should consult his tax advisor
concerning his qualification to receive exempt interest dividends should the
Fund hold obligations financing such facility.
Under regulations to be promulgated, to the extent attributable to interest
paid on certain private activity bonds, the Fund's exempt interest dividends,
while otherwise tax-exempt, will be treated as a tax preference item for
alternative minimum tax purposes. Corporate shareholders should also be aware
that the receipt of exempt interest dividends could subject them to alternative
minimum tax under the provisions of Section 56(g) of the Code (relating to
"adjusted current earnings").
Interest on indebtedness incurred or continued by shareholders to purchase
or carry shares of the Fund will not be deductible for federal income tax
purposes to the extent of the portion of the interest expense relating to exempt
interest dividends. Such portion is determined by multiplying the total amount
of interest paid or accrued on the indebtedness by a fraction, the numerator of
which is the exempt interest dividends received by a shareholder in his taxable
year and the denominator of which is the sum of the exempt interest dividends
and the taxable distributions out of the Fund's investment income and long-term
capital gains received by the shareholder.
Taxes on The Sale or Exchange of Fund Shares
Upon a sale or exchange of Fund shares, a shareholder will realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Capital gain on assets held for more than 12
months is generally subject to a maximum federal income tax rate of 20% for an
individual. Generally, the Code will not allow a shareholder to realize a loss
on shares he or she has sold or exchanged and replaced within a 61-day period
beginning 30 days before and ending 30 days after he or she sold or exchanged
the shares. The Code will not allow a shareholder to realize a loss on the sale
of Fund shares held by the shareholder for six months or less to the extent
the shareholder received exempt interest dividends on such shares. Moreover,
the Code will treat a shareholder's loss on shares held for six months or less
as a long-term capital loss to the extent the shareholder received distributions
of net capital gains on such shares.
Shareholders who fail to furnish their taxpayer identification numbers to
the Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends
or capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own
tax advisors about the applicability of the backup withholding provisions.
Other Tax Considerations
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisors regarding specific questions relating to federal,
state and local tax consequences of investing in shares of the Fund. Each
shareholder who is not a U.S. person should consult his or her tax advisor
regarding the U.S. and foreign tax consequences of ownership of shares of the
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 30% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
BROKERAGE
Brokerage Commissions
If the Fund invests in equity securities, it expects to buy and sell them
through brokerage transactions for which commissions are payable. Purchases
from underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark-up
or reflect a dealer's mark-down. Where transactions are made in the over-the-
counter market, the Fund will deal with primary market makers unless more
favorable prices are otherwise obtainable.
If the Fund invests in fixed income securities, it expects to buy and sell
them directly from the issuer or an underwriter or market maker for the
securities. Generally, the Fund will not pay brokerage commissions for such
purchases. When the Fund buys a security from an underwriter, the purchase price
will usually include an underwriting commission or concession. The purchase
price for securities bought from dealers serving as market makers will similarly
include the dealer's mark up or reflect a dealer's mark down. When the Fund
executes transactions in the over-the-counter market, it will deal with primary
market makers unless more favorable prices are otherwise obtainable.
Masters Fund may incur higher brokerage costs than would be the case if a
single investment advisor or sub-advisor were managing the entire portfolio.
Selection of Brokers
When buying and selling portfolio securities, the advisor seeks brokers who
can provide the most benefit to the Fund. When selecting a broker, the
investment advisor will primarily look for the best price at the lowest
commission, but in the context of the broker's:
1. ability to provide the best net financial result to the Fund;
2. efficiency in handling trades;
3. ability to trade large blocks of securities;
4. readiness to handle difficult trades;
5. financial strength and stability; and
6. provision of "research services," defined as (a) reports and analyses
concerning issuers, industries, securities and economic factors and (b)
other information useful in making investment decisions.
The Fund may pay higher brokerage commissions to a broker providing it with
research services, as defined in item 6, above. Pursuant to Section 28(e) of the
Securities Exchange Act of 1934, this practice is permitted if the commission is
reasonable in relation to the brokerage and research services provided. Research
services provided by a broker to the investment advisor do not replace, but
<PAGE>
supplement, the services the investment advisor is required to deliver to the
Fund. It is impracticable for the investment advisor to allocate the cost,
value and specific application of such research services among its clients
because research services intended for one client may indirectly benefit
another.
When selecting a broker for portfolio trades, the investment advisor may
also consider the amount of Fund shares a broker has sold, subject to the other
requirements described above.
If the Fund is advised by Evergreen Asset Management Corp. ("EAMC"),
Lieber & Company, an affiliate of EAMC and a member of the New York and
American Stock Exchanges, will, to the extent practicable, effect substantially
all of the portfolio transactions effected on those exchanges for the Fund.
Simultaneous Transactions
The investment advisor makes investment decisions for the Fund independ-
ently of decisions made for its other clients. When a security is suitable for
the investment objective of more than one client, it may be prudent for the
investment advisor to engage in a simultaneous transaction, that is, buy or sell
the same security for more than one client. The investment advisor strives for
an equitable result in such transactions by using an allocation formula. The
high volume involved in some simultaneous transactions can result in greater
value to the Fund, but the ideal price or trading volume may not always be
achieved for the Fund.
ORGANIZATION
The following is qualified in its entirety by reference to the Trust's
Declaration of Trust.
Description of Shares
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
the Fund represents an equal proportionate interest with each other share of
that series and/or class. Upon liquidation, shares are entitled to a pro rata
share of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable
and transferable.
Voting Rights
Under the terms of the Declaration of Trust, the Trust is not required to
hold annual meetings. At meetings called for the initial election of Trustees or
to consider other matters, each share is entitled to one vote for each dollar of
"NAV" applicable to such share. Shares generally vote together as one class on
all matters. Classes of shares of the Fund have equal voting rights. No
amendment may be made to the Declaration of Trust that adversely affects any
class of shares without the approval of a majority of the votes applicable to
the shares of that class. Shares have non-cumulative voting rights, which means
that the holders of more than 50% of the votes applicable to shares voting for
the election of Trustees can elect 100% of the Trustees to be elected at a
meeting and, in such event, the holders of the remaining shares voting
will not be able to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
<PAGE>
by law (for such reasons as electing or removing Trustees, changing fundamental
policies, and approving advisory agreements or 12b-1 plans), unless and until
such time as less than a majority of the Trustees holding office have been
elected by shareholders, at which time, the Trustees then in office will call
a shareholders' meeting for the election of Trustees.
Limitation of Trustees' Liability
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration
of Trust protects a Trustee against any liability to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
Code of Ethics
The Trust and its various advisors have each adopted a code of ethics
pursuant to the requirements of Rule 17j-1 of the 1940 Act ("Code of Ethics").
Each of these Codes of Ethics permits Fund personnel to invest in securities
for their own accounts and is on file with, and available from, the SEC.
INVESTMENT ADVISORY AGREEMENT
On behalf of the Fund, the Trust has entered into an investment advisory
agreement with the Fund's investment advisor (the "Advisory Agreement"). Under
the Advisory Agreement, and subject to the supervision of the Trust's Board of
Trustees, the investment advisor furnishes to the Fund (unless the Fund is
Evergreen Masters Fund) investment advisory, management and administrative
services, office facilities, and equipment in connection with its services for
managing the investment and reinvestment of the Fund's assets. The investment
advisor pays for all of the expenses incurred in connection with the provision
of its services.
If the Fund is Evergreen Masters Fund, the Advisory Agreement is similar
to the above except that the investment advisor selects sub-advisors (herein-
after referred to as "Managers") for the Fund and monitors each Manager's
investment program and results. The investment advisor has primary responsibi-
lity under the multi-manager strategy to oversee the Managers, including making
recommendations to the Trust regarding the hiring, termination and replacement
of Managers.
The Fund pays for all charges and expenses, other than those specifically
referred to as being borne by the investment advisor, including, but not limited
to, (1) custodian charges and expenses; (2) bookkeeping and auditors' charges
and expenses; (3) transfer agent charges and expenses; (4) fees and expenses of
Independent Trustees; (5) brokerage commissions, brokers' fees and expenses;
(6) issue and transfer taxes; (7) applicable costs and expenses under the
Distribution Plan (as described above) (8) taxes and trust fees payable to
governmental agencies; (9) the cost of share certificates; (10) fees and
expenses of the registration and qualification of the Fund and its shares with
the SEC or under state or other securities laws; (11) expenses of preparing,
printing and mailing prospectuses, SAIs, notices, reports and proxy materials to
shareholders of the Fund; (12) expenses of shareholders' and Trustees' meetings;
(13) charges and expenses of legal counsel for the Fund and for the Independent
Trustees on matters relating to the Fund; (14) charges and expenses of filing
annual and other reports with the SEC and other authorities; and (15) all
extraordinary charges and expenses of the Fund. For information on advisory fees
paid by the Fund, see "Expenses" in Part 1 of this SAI.
<PAGE>
The Advisory Agreement continues in effect for two years from its effective
date and, thereafter, from year to year only if approved at least annually by
the Board of Trustees of the Trust or by a vote of a majority of the Fund's
outstanding shares. In either case, the terms of the Advisory Agreement and
continuance thereof must be approved by the vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreement may be terminated, without
penalty, on 60 days' written notice by the Trust's Board of Trustees or by a
vote of a majority of outstanding shares. The Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
Managers (Evergreen Masters Fund only)
Evergreen Masters Fund's investment program is based upon the investment
advisor's multi-manager concept. The investment advisor allocates the Fund's
portfolio assets on an equal basis among a number of investment management
organizations - currently four in number - each of which employs a different
investment style, and periodically rebalances the Fund's portfolio among the
Managers so as to maintain an approximate equal allocation of the portfolio
among them throughout all market cycles. Each Manager provides these services
under a Portfolio Management Agreement. Each Manager has discretion, subject to
oversight by the Trustees and the investment advisor, to purchase and sell
portfolio assets consistent with the Fund's investment objectives, policies and
restrictions and specific investment strategies developed by the investment
advisor. The Fund's current Managers are EAMC, MFS Institutional Advisors, Inc.,
OppenheimerFunds, Inc. and Putnam Investment Management, Inc.
The Trust and FUNB have received an order from the SEC that permits the
investment advisor to employ a "manager of managers" strategy in connection with
its management of the Fund. The exemptive order permits the investment advisor,
subject to certain conditions, and without shareholder approval, to: (a) select
new Managers who are unaffiliated with the investment advisor with the approval
of the Trust's Board of Trustees; (b) change the material terms of the Portfolio
Management Agreements with the Managers; and (c) continue the employment of a
Manager after an event which would otherwise cause the automatic termination of
a Portfolio Management Agreement. Shareholders would be notified of any Manager
changes. Shareholders have the right to terminate arrangements with a Manager
by vote of a majority of the outstanding shares of the Fund. The order also
permits the Fund to disclose the Managers' fees only in the aggregate.
Transactions Among Advisory Affiliates
The Trust has adopted procedures pursuant to Rule 17a-7 of the 1940 Act
("Rule 17a-7 Procedures"). The Rule 17a-7 Procedures permit the Fund to buy or
sell securities from another investment company for which a subsidiary of First
Union Corporation is an investment advisor. The Rule 17a-7 Procedures also allow
the Fund to buy or sell securities from other advisory clients for whom a
subsidiary of First Union Corporation is an investment advisor. The Fund may
engage in such transaction if it is equitable to each participant and consistent
with each participant's investment objective.
MANAGEMENT OF THE TRUST
The Trust is supervised by a Board of Trustees that is responsible for
representing the interest of the shareholders. The Trustees meet periodically
<PAGE>
throughout the year to oversee the Fund's activities, reviewing, among other
things, the Fund's performance and its contractual arrangements with various
service providers. Each Trustee is paid a fee for his or her services. See
"Expenses-Trustee Compensation" in Part 1 of this SAI.
The Trust has an Executive Committee which consists of the Chairman of the
Board, Michael S. Scofield, K. Dun Gifford and Russell Salton, each of whom is
an Independent Trustee. The Executive Committee recommends Trustees to fill
vacancies, prepares the agenda for Board Meetings and acts on routine matters
between scheduled Board meetings.
Set forth below are the Trustees and officers of the Trust and their
principal occupations and affiliations over the last five years. Unless
otherwise indicated, the address for each Trustee and officer is 200 Berkeley
Street, Boston, Massachusetts 02116. Each Trustee is also a Trustee of each of
the other Trusts in the Evergreen Fund complex.
<TABLE>
<CAPTION>
Name Position with Trust Principal Occupations for Last Five Years
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and construction consultant; and
(DOB: 2/28/28) President of Centrum Equities (real estate development) and
Centrum Properties, Inc.(real estate development).
Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc.(investment
(DOB: 10/23/34) advice); former Director, Executive Vice President and
Treasurer, State Street Research & Management Company
(investment advice); Director, The Andover Companies
(insurance); and Trustee, Arthritis Foundation of New
England.
Arnold H. Dreyfuss Trustee Chairman, Eskimo Pie Corporation (food manufacturer);
(DOB: 9/2/28) Trustee, Mentor Funds, Mentor Variable Investment
Portfolios, Mentor Institutional Trust, and Cash Resource
Trust; Director, America's Utility Fund, Inc.; Formerly,
Chairman and Chief Executive Officer, Hamilton
Beach/Proctor-Silex, Inc. (small appliance manufacturer).
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the Finance Committee,
(DOB: 10/23/38) Cambridge College; Chairman Emeritus and Director, American
Institute of Food and Wine; Chairman and President, Oldways
Preservation and Exchange Trust (education); former
Chairman of the Board, Director, and Executive Vice
President, The London Harness Company (leather goods
purveyor); former Managing Partner, Roscommon Capital
Corp.; former Chief Executive Officer, Gifford Gifts of
Fine Foods; former Chairman, Gifford, Drescher & Associates
(environmental consulting).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer, Carson
(DOB: 2/14/39) Products Company (manufacturing); Director of Phoenix Total
<PAGE>
Return Fund and Equifax, Inc. (worldwide information
management); Trustee of Phoenix Series Fund, Phoenix
Multi-Portfolio Fund, and The Phoenix Big Edge Series Fund;
and former President, Morehouse College.
Gerald M. McDonnell Trustee Sales and Marketing Management with Nucor-Yamoto, Inc.
(DOB: 7/14/39) (steel producer).
Thomas L. McVerry Trustee Former Vice President and Director of Rexham Corporation
(DOB: 8/2/39) (manufacturing); and Director of Carolina Cooperative
Credit Union.
Louis W. Moelchert, Jr. (DOB: Trustee President, Private Advisors, LLC; Vice President for
12/20/41) Investments, University of Richmond; Director, America's
Utility Fund, Inc.; Trustee, The Common Fund, Mentor
Variable Investment Portfolios, Mentor Funds, Mentor
Institutional Trust, and Cash Resource Trust.
William Walt Pettit Trustee Partner in the law firm of William Walt Pettit, P.A.
(DOB: 8/26/55)
David M. Richardson Trustee President, Thomas Richardson, Runden & Company (executive
(DOB: 9/14/41) search and advisory services); former Vice Chairman, DHR
International, Inc. (executive recruitment); former Senior
Vice President, Boyden International Inc. (executive
recruitment); and Director, Commerce and Industry
Association of New Jersey, 411 International, Inc.
(communications), and J&M Cumming Paper Co.
Russell A. Salton, III MD Trustee Medical Director, U.S. Health Care/Aetna Health Services;
(DOB: 6/2/47) former Managed Health Care Consultant; and former
President, Primary Physician Care.
Michael S. Scofield Chairman of the Board Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43) of Trustees
Richard J. Shima Trustee Independent Consultant; former Chairman, Environmental
(DOB: 8/11/39) Warranty, Inc. (insurance agency); former Executive
Consultant, Drake Beam Morin, Inc. (executive
outplacement); Director of CTG Resources, Inc. (natural
gas), Hartford Hospital, Old State House Association, and
Enhance Financial Services, Inc.; former Director Middlesex
Mutual Assurance Company; former Chairman, Board of
Trustees, Hartford Graduate Center; Trustee, Greater
Hartford YMCA.
Richard K. Wagoner, CFA Trustee Former Chief Investment Officer, Executive Vice President
(DOB: 12/12/37) and Head of Capital Management Group, First Union
Corporation; former consultant to the Board of Trustees of
<PAGE>
the Evergreen Funds; former member, New York Stock
Exchange; member, North Carolina Securities Traders
Association; member, Financial Analysts Society.
William M. Ennis President President and Chief Executive Officer, Evergreen Investment
(DOB: 6/26/60) Company and Chief Operating Officer, Capital Management
Group, First Union Corporation.
Carol Kosel Treasurer Senior Vice President Evergreen Investment Services, Inc.
(DOB: 12/25/63) and Treasurer, Vestaur Securities, Inc.; former Senior
Manager, KPMG LLP.
Nimish S. Bhatt* Vice President and Vice President, Tax, BISYS Fund Services; former Assistant
(DOB: 6/6/63) Assistant Treasurer Vice President, EAMC/First Union National Bank; former
Senior Tax Consulting/Acting Manager, Investment Companies
Group, PricewaterhouseCoopers LLP, New York.
Bryan Haft* Vice President Team Leader, Fund Administration, BISYS Fund Services.
(DOB: 1/23/65)
* Address: BISYS, 3435 Stelzer Road, Columbus, Ohio 43219-8001
</TABLE>
CORPORATE AND MUNICIPAL BOND RATINGS
The Fund relies on ratings provided by independent rating services to help
determine the credit quality of bonds and other obligations the Fund intends to
purchase or already owns. A rating is an opinion of an issuer's ability to pay
interest and/or principal when due. Ratings reflect an issuer's overall
financial strength and whether it can meet its financial commitments under
various economic conditions.
If a security held by the Fund loses its rating or has its rating reduced
after the Fund has purchased it, the Fund is not required to sell or otherwise
dispose of the security, but may consider doing so.
The principal rating services, commonly used by the Fund and investors
generally, are S&P and Moody's. The Fund may also rely on ratings provided by
Fitch. Rating systems are similar among the different services. As an example,
the chart below compares basic ratings for long-term bonds. The "Credit Quality"
terms in the chart are for quick reference only. Following the chart are the
specific definitions each service provides for its ratings.
<PAGE>
<TABLE>
<CAPTION>
COMPARISON OF LONG-TERM BOND RATINGS
----------------- ---------------- --------------- =================================================
<S> <C> <C> <C>
MOODY'S S&P FITCH Credit Quality
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Aaa AAA AAA Excellent Quality (lowest risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Aa AA AA Almost Excellent Quality (very low risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
A A A Good Quality (low risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Baa BBB BBB Satisfactory Quality (some risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Ba BB BB Questionable Quality (definite risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
B B B Low Quality (high risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Caa/Ca/C CCC/CC/C CCC/CC/C In or Near Default
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
D DDD/DD/D In Default
----------------- ---------------- --------------- =================================================
</TABLE>
CORPORATE BONDS
LONG-TERM RATINGS
Moody's Corporate Long-Term Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations, (i.e.
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
<PAGE>
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. The modifier 1 indicates that the company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range raking and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S&P Corporate Long-Term Bond Ratings
AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher-
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC, CC, and
C are regarded as having significant speculative characteristics. BB indicates
the least degree of speculation and C the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions, which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet it financial
commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment and is
<PAGE>
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the
obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation
are being continued.
D The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred--and not where a default is only
expected. S&P changes ratings to D either:
On the day an interest and/or principal payment is due and is not
paid. An exception is made if there is a grace period and S&P believes
that a payment will be made, in which case the rating can be
maintained; or
Upon voluntary bankruptcy filing or similar action. An exception is
made if S&P expects that debt service payments will continue to be
made on a specific issue. In the absence of a payment default or
bankruptcy filing, a technical default (i.e., covenant violation) is
not sufficient for assigning a D rating.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Fitch Corporate Long-Term Bond Ratings
Investment Grade
AAA Highest credit quality. AAA ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments.This capacity is not significantly vulnerable to foreseeable events.
A High credit quality. A ratings denote a lower expectation of credit risk.
The capacity for timely payment of financial commitments is considered strong.
This capacity may, nevertheless, be more vulnerable to changes in circumstances
or in economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
<PAGE>
Speculative Grade
BB Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade.
B Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is
contingent upon a sustained, favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitment is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. For U.S. corporates, for
example, DD indicates expected recovery of 50%-90% of such outstandings, and D
the lowest recovery potential, i.e. below 50%.
+ or - may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the AAA rating category or
to categories below CCC.
CORPORATE SHORT-TERM RATINGS
Moody's Corporate Short-Term Issuer Ratings
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics.
- -- Leading market positions in well-established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- -- Broad margins in earnings coverage of fixed financial changes and high
internal cash generation.
- -- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
<PAGE>
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt
protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.
S&P Corporate Short-Term Obligation Ratings
A-1 A short-term obligation rated A-1 is rated in the highest category by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred--and not where a default is only
expected. S&P changes ratings to D either:
On the day an interest and/or principal payment is due and is not paid.
An exception is made if there is a grace period and S&P believes that
a payment will be made, in which case the rating can be maintained; or
Upon voluntary bankruptcy filing or similar action, An exception is
made if S&P expects that debt service payments will continue to be made
on a specific issue. In the absence of a payment default or bankruptcy
filing, a technical default (i.e., covenant violation) is not
sufficient for assigning a D rating.
Fitch Corporate Short-Term Obligation Ratings
F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
<PAGE>
F2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the case
of the higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in a
reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business
and economic environment.
D Default. Denotes actual or imminent payment default.
MUNICIPAL BONDS
LONG-TERM RATINGS
Moody's Municipal Long-Term Bond Ratings
Aaa Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the long-
term risk appear somewhat larger than the Aaa securities.
A Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa Bonds rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well-assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds
in this class.
B Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small.
<PAGE>
Caa Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca Bonds rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C Bonds rated C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range raking and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S&P Municipal Long-Term Bond Ratings
AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher-
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC, CC,
and C are regarded as having significant speculative characteristics. BB
indicates the least degree of speculation and C the highest. While such
obligations will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions, which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet it financial
commitment on the obligation.
<PAGE>
CCC An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation
are being continued.
D An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments
on an obligation are jeopardized.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Fitch Municipal Long-Term Bond Ratings
Investment Grade
AAA Highest credit quality. AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments.This capacity is not significantly vulnerable to foreseeable events.
A High credit quality. A ratings denote a lower expectation of credit risk.
The capacity for timely payment of financial commitments is considered strong.
This capacity may, nevertheless, be more vulnerable to changes in circumstances
or in economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade
BB Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met.Securities rated in this category are not investment
grade.
<PAGE>
B Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is
contingent upon a sustained, favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. DD designates lower recovery
potential and D the lowest.
+ or - may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the AAA rating category or
to categories below CCC.
SHORT-TERM MUNICIPAL RATINGS
Moody's Municipal Short-Term Issuer Ratings
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidence by many of the following characteristics.
- -- Leading market positions in well-established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- -- Broad margins in earnings coverage of fixed financial changes and high
internal cash generation.
- -- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.
<PAGE>
Moody's Municipal Short-Term Loan Ratings
MIG 1 This designation denotes best quality. There is strong protection by
established cash flows, superior liquidity support, or demonstrated broad-based
access to the market for refinancing.
MIG 2 This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3 This designation denotes favorable quality. Liquidity and cash-flow
protection may be narrow and market access for refinancing is likely to be less
well established.
SG This designation denotes speculative quality. Debt instruments in this
category may lack margins of protection.
S&P Commercial Paper Ratings
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.
A-3 Issues carrying this designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes
in circumstances than obligations carrying the higher designations.
B Issues rated B are regarded as having only speculative capacity for timely
payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes such payments
will be made during such grace period.
S&P Municipal Short-Term Obligation Ratings
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3 Speculative capacity to pay principal and interest.
<PAGE>
Fitch Municipal Short-Term Obligation Ratings
F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the case
of the higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in a
reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business
and economic environment.
D Default. Denotes actual or imminent payment default.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectus or required by law, the Fund
reserves the right to change the terms of the offer stated in its prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
No dealer, salesman or other person is authorized to give any information
or to make any representation not contained in the Fund's prospectus, SAI or in
supplemental sales literature issued by the Fund or EDI, and no person is
entitled to rely on any information or representation not contained therein.
The Fund's prospectus and SAI omit certain information contained in the
Trust's registration statement, which you may obtain for a fee from the SEC in
Washington, D.C.
<PAGE>
Statement of Additional Information for Evergreen Money Market Fund,
Evergreen Pennsylvania Municipal Money Market Fund, Evergreen Municipal Money
Market Fund, Evergreen Treasury Municipal Money Market Fund, Evergreen Florida
Municipal Money Market Fund and Evergreen New Jersey Municipal Money Market Fund
is incorporated by reference to Post-Effective Amendment No. 9 filed on
May 28, 1999.
<PAGE>
EVERGREEN MONEY MARKET TRUST
PART C
OTHER INFORMATION
Item 23 Exhibits
Unless otherwise indicated, each of the Exhibits listed below is filed
herewith.
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------- ----------- -----------
<S> <C>
<C>
(a) Declaration of Trust Incorporated by reference to
Registrant's Registration Statement
Filed on December 12, 1997
(b) By-laws Incorporated by reference to
Registrant's Registration Statement
Filed on December 12, 1997
(c) Provisions of instruments defining the rights
of holders of the securities being registered
are contained in the Declaration of Trust
Articles II, III.(6)(c), VI.(3), IV.(8), V, VI,
VII, VIII and By-laws Articles II, III and VIII
included as part of Exhibits 1 and 2 of this
Registration Statement
(d)(1) Investment Advisory and Management Incorporated by reference to
Agreement between the Registrant and First Registrant's Registration Statement
Union National Bank Filed on August 6, 1999
(d)(2) Investment Advisory and Management Incorporated by reference to
Agreement between the Registrant and Evergreen Registrant's Registration Statement
Asset Management Corp. Filed on August 6, 1999
(e)(1) Class A and Class C Principal Underwriting Incorporated by reference to
Agreement between the Registrant and Evergreen Registrant's Registration Statement
Distributor, Inc. Filed on August 6, 1999
(e)(2) Class B Principal Underwriting Agreement Incorporated by reference to
between the Registrant and Evergreen Distributor, Post-Effective Amendment No. 4 to
Inc. (Evergreen) Registrant's Registration Statement
Filed on May 31, 1998 ("Post-
Effective Amendment No. 4")
(e)(3) Class Y Principal Underwriting Agreement Incorporated by reference to
between the Registrant and Evergreen Distributor, Registrant's Registration Statement
Inc. Filed on August 6, 1999
(e)(4) Specimen of Dealer Agreement used by Evergreen Incorporated by reference to
Distributor, Inc. Registrant's Registration Statement
Filed on December 12, 1997
(f) Form of Deferred Compensation Plan Incorporated by reference to
Registrant's Registration Statement
Filed on December 12, 1997
(g)(1) Custodian Agreement between the Registrant Post-Effective Amendment No. 4
and State Street Bank and Trust Company
(g)(2) Letter Amendment to Custodian Agreement Incorporated by reference to
(California & U.S. Government Money Market Funds) Registrant's Registration Statement
Filed on August 6, 1999
(h)(1) Administration Agreement between Evergreen Incorporated by reference to
Investment Services, Inc. and the Registrant Registrant's Registration Statement
Filed on May 15, 2000
(h)(2) Transfer Agent Agreement between the Post-Effective Amendment No. 4
Registrant and Evergreen Service Company
(h)(3) Letter Amendment to Transfer Agent Agreement Incorporated by reference to
(California & U.S. Government Money Market Funds) Registrant's Registration Statement
Filed on August 6, 1999
(i) Opinion and Consent of Sullivan & Worcester LLP Incorporated by reference to
Registrant's Registration Statement
(j)(1) Consent of PriceWaterhouseCoopers, LLP. Contained herein.
(Money Market & Municipal Money Market Funds)
(j)(2) Consent of KPMG Peat Marwick, LLP. Contained herein.
(FL, NJ PA Municipal and Treasury Money
Market Funds)
(k) Not applicable
(l) Not applicable
(m)(1) 12b-1 Distribution Plan for Class A Incorporated by reference to
Registrant's Registration Statement
Filed on August 6, 1999
(m)(2) 12b-1 Distribution Plan for Class B Post-Effective Amendment No. 4
(m)(3) 12b-1 Distribution Plan for Class C Post-Effective Amendment No. 4
(n) Not applicable
(o) Multiple Class Plan. Incorporated by reference to
Registrant's Registration Statement
Filed on May 15, 2000
(p) Code of Ethics Incorporated by reference to
Registrant's Registration Statement
Filed on May 15, 2000
</TABLE>
Item 24. Persons Controlled by or Under Common Control with Registrant.
None
Item 25. Indemnification.
Registrant has obtained from a major insurance carrier a trustees and
officers liability policy covering certain types of errors and ommissions.
Provisions for the indemnification of the Registrant's Trustees and
officers are also contained in the Registrant's Declaration of Trust.
Provisions for the indemnification of the Registrant's Investment
Advisors are contained in their respective Investment Advisory and Management
Agreements.
Provisions for the indemnification of Evergreen Distributor, Inc., the
Registrant's principal underwriter, are contained in the Principal Underwriting
Agreement between Evergreen Distributor, Inc. and the Registrant.
Provisions for the indemnification of Evergreen Service Company, the
Registrant's transfer agent, are contained in the Master Transfer and
Recordkeeping Agreement between Evergreen Service Company and the Registrant.
Provisions for the indemnification of State Street Bank and Trust Co., the
Registrant's custodian, are contained in the Custodian Agreement between State
Street Bank and Trust Co., and the Registrant.
Item 26. Business or Other Connections of Investment Adviser.
The Directors and principal executive officers of First Union National
Bank are:
Edward E. Crutchfield, Jr. Chairman, First Union Corporation and First
Union National Bank
G. Kennedy Thompson Chief Executive Officer, President and
Director, First Union Corporation and First
Union National Bank
Mark C. Treanor Executive Vice President, Secretary &
General Counsel, First Union Corporation;
Secretary and Executive Vice President,
First Union National Bank
Robert T. Atwood Executive Vice President and Chief Financial
Officer, First Union Corporation; Chief
Financial Officer and Executive Vice
President, First Union National Bank
All of the above persons are located at the following address: First
Union National Bank, One First Union Center, Charlotte, NC 28288.
The information required by this item with respect to Evergreen Asset
Management Corp. is incorporated by reference to the Form ADV (File No.
801-46522) of Evergreen Asset Management Corp.
Item 27. Principal Underwriters.
Evergreen Distributor, Inc., acts as principal underwriter for each
registered investment company or series thereof that is a part of the Evergreen
"fund complex" as such term is defined in Item 22(a) of Schedule 14A under the
Securities Exchange Act of 1934.
The Directors and principal executive officers of Evergreen
Distributor, Inc. are:
Dennis Sheehan Director, Chief Financial Officer
Maryann Bruce President
Kevin J. Dell Vice President, General Counsel and Secretary
Messrs. Sheehan and Dell are located at the following address:
Evergreen Distributor, Inc., 90 Park Avenue, New York, New York 10019.
Ms. Bruce is located at 201 South College Street, Charlotte, NC 28288.
Item 28. Location of Accounts and Records.
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
All accounts and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Evergreen Investment Services, Inc., Evergreen Service Company and
Evergreen Investment Management Company (formerly Keystone Investment Management
Company), all located at 200 Berkeley Street, Boston, Massachusetts 02110
First Union National Bank, One First Union Center, 301 S. College
Street, Charlotte, North Carolina 28288
Evergreen Asset Management Corp., 1311 Mamaroneck Avenue, White Plains,
New York 10605
Iron Mountain, 3431 Sharp Slot Road, Swansea, Massachusetts 02777
State Street Bank and Trust Company, 2 Heritage Drive, North Quincy,
Massachusetts 02171
Item 29. Management Services.
Not Applicable
Item 30. Undertakings.
The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, and Commonwealth of Massachusetts, on the
25th day of May, 2000.
EVERGREEN MONEY MARKET TRUST
By: /s/ Carol Kosel
-----------------------------
Name: Carol Kosel
Title: Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 25th day of May, 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ William M. Ennis /s/ Laurence B. Ashkin /s/ Charles A. Austin, III
- ---------------------- --------------------- -------------------------
William M. Ennis* Laurence B. Ashkin* Charles A. Austin III *
President Trustee Trustee
(Principal Financial and
Accounting Officer)
/s/ K. Dun Gifford /s/ Arnold H. Dreyfuss /s/ William Walt Pettit
- ------------------ ---------------------- ------------------------
K. Dun Gifford* Arnold H. Dreyfuss* William Walt Pettit*
Trustee Trustee Trustee
/s/ Gerald M. McDonnell /s/ Thomas L. McVerry /s/ Michael S. Scofield
- ---------------------- --------------------- ----------------------
Gerald M. McDonnell* Thomas L. McVerry* Michael S. Scofield*
Trustee Trustee Chairman of the Board
and Trustee
/s/ David M. Richardson /s/ Russell A. Salton, III MD /s/ Leroy Keith, Jr.
- ---------------------- ---------------------------- ----------------------
David M. Richardson* Russell A. Salton, III MD* Leroy Keith, Jr.*
Trustee Trustee Trustee
/s/ Richard J. Shima /s/ Louis W. Moelchert, Jr. /s/ Richard K. Wagoner
- -------------------- ---------------------------- ----------------------
Richard J. Shima* Louis W. Moelchert, Jr.* Richard K. Wagoner*
Trustee Trustee Trustee
/s/ Carol Kosel
- ----------------------
Carol Kosel*
Treasurer
(Principal Financial and
Accounting Officer)
</TABLE>
*By: /s/ Beth K. Werths
- -------------------------------
Beth K. Werths
Attorney-in-Fact
*Beth Werths, by signing her name hereto, does hereby sign this document on
behalf of each of the above-named individuals pursuant to powers of attorney
duly executed by such persons.
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
- -------------- -------
(j)(1) Consent of PriceWaterhouseCoopers, LLP. (Money Market &
Municipal Money Market Fund)
(j)(2) Consent of KPMG Peat Marwick, LLP. (FL, NJ PA Municipal
and Treasury Money Market Funds)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 11 to the registration statement on Form N-1A (the
"Registration Statement") of Evergreen Money Market Trust of our report
dated March 12, 1999, relating to the financial statements and financial
highlights of Evergreen Money Market Fund and Evergreen Municipal Money Market
Fund (the "Funds"), appearing in the Funds' January 31, 1999 Annual
Report to Shareholders, which is also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
heading "Financial Highlights" in the Prospectus.
PricewaterhouseCoopers LLP
Boston, MA
May 25, 2000
CONSENT OF INDEPENDENT AUDITORS
The Trustees and Shareholders
Evergreen Money Market Trust
We consent to the use of our report dated March 3, 2000, incorporated herein
by reference and to the references to our firm under the captions "FINANCIAL
HIGHLIGHTS" in the prospectus and "Independent Auditors" in the Statement of
Additional Information.
/s/ KPMG LLP
Boston, Massachusetts
May 25, 2000
