1933 Act File No. 33-23180
and 811-05579
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 23 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 24 X
EVERGREEN MUNICIPAL TRUST
(Exact Name of Registrant as Specified in Charter)
2500 WESTCHESTER AVENUE, PURCHASE, NEW YORK 10577
(Address of Principal Executive Offices)
(914) 694-2020
(Registrant's Telephone Number)
James P. Wallin, Esquire,
2500 Westchester Avenue
Purchase, New York 10577
(Name and Address of Agent for Service)
Copies to:
John A. Dudley, Esquire
Sullivan & Worcester
1025 Connecticut Ave., N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective (check appropriate box)
/X/ Immediately upon filing pursuant to paragraph (b) or
/ / on (date) pursuant to paragraph (b) or
/ / 60 days after filing pursuant to paragraph (a)(i) or
/ / on (date) pursuant to paragraph (a)(i) or
/ / 75 days after filing pursuant to paragraph (a)(ii) or
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has elected to register an indefinite number of its securities under the
Securities Act of 1933. A Rule 24f-2 Notice for Registrant's last fiscal year
was filed on April 28, 1997.
<PAGE>
EVERGREEN MUNICIPAL TRUST
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 23
to
REGISTRATION STATEMENT
This Post-Effective Amendment No.23 to
Registration Statement No. 33-23180/811-05579 consists of
the following pages, items of information, and documents:
The Facing Sheet
The Contents Page
The Cross-Reference Sheet
PART A
------
Prospectus
PART B
------
Statement of Additional Information
PART C
------
PART C - OTHER INFORMATION - ITEM 24(a) and (b)
Financial Statements
Listing of Exhibits
PART C - OTHER INFORMATION - ITEMS 25-32 - AND SIGNATURE PAGES
Number of Holders of Securities
Indemnification
Business and Other Connections of Investment Adviser
Principal Underwriter
Location of Accounts and Records
Signatures
Exhibits (including Powers of Attorney)
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No. Location in Prospectus(es)
Part A
Item 1. Cover Page Cover Page
Item 2. Synopsis and Fee Table Overview of the Fund(s);
Expense Information
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Cover Page; Description of
the Funds; General
Information
Item 5. Management of the Fund Management of the Fund(s);
General Information
Item 6. Capital Stock and Other Securities Dividends, Distributions and
Taxes; General
Information
Item 7. Purchase of Securities Being Offered Purchase and Redemption of
Shares
Item 8. Redemption or Repurchase Purchase and Redemption of
Shares
Item 9. Pending Legal Proceedings Not Applicable
Location in Statement of
Part B Additional Information
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Objectives and
Policies;Investment
Restrictions; Other
Restrictions and
Operating Policies
Item 14. Management of the Fund Management
Item 15. Control Persons and Principal Management
Holders of Securities
Item 16. Investment Advisory and Other Services Investment Adviser;
Purchase of Shares
Item 17. Brokerage Allocation Allocation of Brokerage
Item 18. Capital Stock and Other Securities Purchase of Shares
Item 19. Purchase, Redemption and Pricing of Distribution Plans; Purchase
Securities Being Offered of Shares; Net Asset Value
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Distribution Plans; Purchase
of Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
*******************************************************************************
<PAGE>
EVERGREEN MUNICIPAL TRUST
PART A
PROSPECTUS
<PAGE>
<PAGE>
PROSPECTUS May 20, 1997
EVERGREEN(SM) INSTITUTIONAL MONEY MARKET FUNDS (EVERGREEN LOGO GOES HERE)
Evergreen Institutional Money Market Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Institutional Treasury Money Market Fund
INSTITUTIONAL SHARES
The Evergreen Institutional Money Market Funds (the "Funds") are
designed to provide institutional investors with current income, stability
of principal and liquidity. This Prospectus provides information regarding
the Institutional shares offered by the Funds. Each Fund is, or is a series
of, an open-end, diversified, management investment company. This
Prospectus sets forth concise information about the Funds that a
prospective investor should know before investing. The address of the Funds
is 200 Berkeley Street, Boston, Massachusetts 02116.
A Statement of Additional Information for the Funds dated May 20,
1997 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Evergreen Keystone Funds at (800)
343-2898. The minimum investment in each Fund is $1,000,000. There can be
no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
The shares offered by this Prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank, are not insured or
otherwise protected by the U.S. Government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency, and
involve investment risks.
An investment in the Funds is neither insured nor guaranteed by
the U.S. Government, and there can be no assurance that the Funds will be
able to maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Keep This Prospectus For Future Reference
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1997, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 4
DESCRIPTION OF THE FUNDS 6
Investment Objectives And Policies 6
Investment Practices And Restrictions 9
MANAGEMENT OF THE FUNDS 10
Investment Adviser 10
PURCHASE AND REDEMPTION OF SHARES 11
How To Buy Shares 11
How To Redeem Shares 12
Exchange Privilege 13
Effect Of Banking Laws 14
OTHER INFORMATION 14
Dividends, Distributions And Taxes 14
General Information 15
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The investment adviser to Evergreen Institutional Money Market Fund,
Evergreen Institutional Tax Exempt Money Market Fund and Evergreen Institutional
Treasury Money Market Fund is the Capital Management Group of First Union
National Bank of North Carolina. First Union National Bank of North Carolina is
a wholly-owned subsidiary of First Union Corporation, the sixth largest bank
holding company in the United States.
Evergreen Institutional Money Market Fund seeks as high a level of
current income as is consistent with preserving capital and providing liquidity.
The Fund will invest only in high quality money market instruments.
Evergreen Institutional Tax Exempt Money Market Fund seeks as high a
level of current income exempt from Federal income tax as is consistent with
preserving capital and providing liquidity. The Fund invests substantially all
of its assets in short-term municipal securities, the interest from which is
exempt from Federal income tax.
Evergreen Institutional Treasury Money Market Fund seeks to maintain
stability of principal while earning current income.
Each Fund seeks to maintain a stable net asset value of $1.00 per share
although no assurances can be given that such a stable net asset value will be
maintained.
There is no assurance that the investment objective of any Fund will be
achieved.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Institutional shares of the Fund. For
further information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to the
Institutional shares of each Fund, together with examples of the cumulative
effect of such expenses on a hypothetical $1,000 investment for the periods
specified assuming (i) a 5% annual return and (ii) redemption at the end of each
period.
Evergreen Institutional Money Market Fund
<TABLE>
<CAPTION>
Annual Operating
Expenses Example
<S> <C> <C> <C>
Management Fee .15%
After 1 Year $ 3
Other Expenses .10%
After 3 Years $ 8
Total .25%
</TABLE>
Evergreen Institutional Tax Exempt Money Market Fund
<TABLE>
<CAPTION>
Annual Operating
Expenses Example
<S> <C> <C> <C>
Management Fee .15%
After 1 Year $ 3
Other Expenses .10%
After 3 Years $ 8
Total .25%
</TABLE>
Evergreen Institutional Treasury Money Market Fund
<TABLE>
<CAPTION>
Annual Operating
Expenses Example
<S> <C> <C> <C>
Management Fee .15%
After 1 Year $ 3
Other Expenses .10%
After 3 Years $ 8
Total .25%
</TABLE>
From time to time, the Funds' investment adviser may, at its discretion,
waive its fee or reimburse a Fund for certain of its expenses in order to reduce
a Fund's expense ratio. The investment adviser will reimburse these Funds to the
extent that any Fund's aggregate annual operating expenses (including the
investment adviser's fee, but excluding taxes, interest, brokerage commissions,
and extraordinary expenses) exceed .20 of 1.00% of the average net assets for
any fiscal year. The investment adviser may cease these voluntary waivers or
reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in Institutional
shares of the Funds will bear directly or indirectly. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL
EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more
complete description of the various costs and expenses borne by the Funds see
"Management of the Funds".
3
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the period ended February 28, 1997 for Evergreen
Institutional Money Market Fund, Evergreen Institutional Tax Exempt Money Market
Fund and Evergreen Institutional Treasury Money Market Fund has been audited by
Price Waterhouse LLP, each Fund's independent accountants. A report of Price
Waterhouse LLP is incorporated by reference in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
Evergreen Institutional Money Market Fund
<TABLE>
<CAPTION>
Period Ended
February 28, 1997
Institutional Institutional
Service Shares * Shares **
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......................................................... $1.000 $1.000
Net investment income........................................................................ 0.014 0.015
Less distributions to shareholders from net investment income................................ (0.014) (0.015)
Net asset value, end of period............................................................... $1.000 $1.000
TOTAL RETURN................................................................................. 1.40% 1.57%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................................................... $867,294 $575,331
Ratios to average net assets (annualized):
Expenses, net.............................................................................. 0.32% 0.07%
Expenses before waivers and reimbursements................................................. 0.68% 0.43%
Net investment income...................................................................... 5.24% 5.48%
</TABLE>
* Class commenced operations on November 26, 1996.
** Class commenced operations on November 19, 1996.
Evergreen Institutional Tax Exempt Money Market Fund
<TABLE>
<CAPTION>
Period Ended
February 28, 1997
Institutional Institutional
Service Shares * Shares **
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......................................................... $1.000 $1.000
Net investment income........................................................................ 0.008 0.010
Less distributions to shareholders from net investment income................................ (0.008) (0.010)
Net asset value, end of period............................................................... $1.000 $1.000
TOTAL RETURN................................................................................. 0.85% 0.96%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................................................... $14,295 $206,124
Ratios to average net assets (annualized):
Expenses, net.............................................................................. 0.30% 0.05%
Expenses before waivers and reimbursements................................................. 0.70% 0.45%
Net investment income...................................................................... 3.19% 3.50%
</TABLE>
* Class commenced operations on November 25, 1996.
** Class commenced operations on November 20, 1996.
4
<PAGE>
Evergreen Institutional Treasury Money Market Fund
<TABLE>
<CAPTION>
Period Ended
February 28, 1997
Institutional Institutional
Service Shares * Shares **
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......................................................... $1.000 $1.000
Net investment income........................................................................ 0.013 0.015
Less distributions to shareholders from investment income.................................... (0.013) (0.015)
Net asset value, end of period............................................................... $1.000 $1.000
TOTAL RETURN................................................................................. 1.33% 1.49%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................................................... $509,369 $367,771
Ratios to average net assets (annualized):
Expenses, net.............................................................................. 0.31% 0.06%
Expenses before waivers and reimbursements................................................. 0.70% 0.45%
Net investment income...................................................................... 4.98% 5.24%
</TABLE>
* Class commenced operations on November 27, 1996.
** Class commenced operations on November 20, 1996.
5
<PAGE>
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies, which are discussed in
"Investment Practices and Restrictions".
Evergreen Institutional Money Market Fund
The investment objective of Evergreen Institutional Money Market Fund is
to achieve as high a level of current income as is consistent with preserving
capital and providing liquidity. This objective is a fundamental policy and may
not be changed without shareholder approval. The Fund invests in high quality
money market instruments, which are determined to be of eligible quality under
Securities and Exchange Commission ("SEC") rules and to present minimal credit
risk. Under SEC rules, eligible securities include First Tier Securities (i.e.,
securities rated in the highest short-term rating category) and Second Tier
Securities (i.e., securities which are otherwise eligible but not in the First
Tier). The rules prohibit the Fund from holding more than 5% of its value in
Second Tier Securities. The Fund's permitted investments include:
1. Marketable obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities, including issues of the United
States Treasury, such as bills, certificates of indebtedness, notes and bonds,
and issues of agencies and instrumentalities established under the authority of
an act of Congress. Some of these securities are supported by the full faith and
credit of the United States Government, others are supported by the right of the
issuer to borrow from the Treasury, and still others are supported only by the
credit of the agency or instrumentality. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority.
Agencies or instrumentalities whose securities are supported only by the
credit of the agency or instrumentality, and not the credit of the United States
Government, include the Interamerican Development Bank and the International
Bank for Reconstruction and Development. These obligations are supported by
appropriated but unpaid commitments of its member countries. There are no
assurances that the commitments will be undertaken in the future.
2. Commercial paper, including variable amount master demand notes, that
is rated in one of the two highest short-term rating categories by any two of
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Services, Inc.
("Moody's") or any other nationally recognized statistical rating organization
("SRO") (or by a single rating agency if only one of these agencies has assigned
a rating). The Fund will not invest more than 10% of its total assets, at the
time of the investment in question, in variable amount master demand notes. For
a description of these ratings see the Statement of Additional Information.
3. Corporate debt securities and bank obligations that are rated in one
of the three highest short-term rating categories by any two of S&P, Moody's and
any other SRO (or by a single rating agency if only one of these agencies has
assigned a rating).
4. Unrated corporate debt securities, commercial paper and bank
obligations that are issued by an issuer that has outstanding a class of
short-term debt instruments (i.e., instruments having a maturity of 366 days or
less) that (A) is comparable in priority and security to the unrated securities
and (B) meets the rating requirements of paragraphs 2 or 3 above.
5. Unrated corporate debt securities, commercial paper and bank
obligations issued by domestic and foreign companies which have an outstanding
long-term debt issue rated in the top two rating categories by a SRO and
determined by the investment adviser to be of comparable quality.
6. Unrated corporate debt securities, commercial paper and bank
obligations otherwise determined by the investment adviser to be of comparable
quality.
7. Repurchase agreements with respect to the securities described in
paragraphs 1 through 6 above.
6
<PAGE>
The Fund may invest up to 30% of its total assets in bank certificates of
deposit and bankers' acceptances payable in U.S. dollars and issued by foreign
banks (including U.S. branches of foreign banks) or by foreign branches of U.S.
banks. These investments involve risks that are different from investments in
domestic securities. These risks may include future unfavorable political and
economic developments, possible withholding taxes, seizure of foreign deposits,
currency controls, interest limitations or other governmental restrictions which
might affect the payment of principal or interest on the securities in the
Fund's portfolio. Additionally, foreign banks are subject to less extensive
regulation and disclosure requirements than U.S. banks and, accordingly, there
may be less publicly available information about such banks and greater risks
associated with their obligations.
The Fund may invest in commercial paper and other short-term corporate
obligations which meet the rating criteria specified in paragraphs 3 and 4 above
which are issued in private placements pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Act"). Such securities are not
registered for purchase and sale by the public under the Act. The Fund has been
informed that the staff of the SEC does not consider such securities to be
readily marketable. The Fund will not invest more than 10% of its total assets
in securities which are not readily marketable (including private placement
securities) and in repurchase agreements maturing in more than seven days.
Evergreen Institutional Tax Exempt Money Market Fund
The investment objective of Evergreen Institutional Tax Exempt Money
Market Fund is to achieve as high a level of current income exempt from Federal
income tax, as is consistent with preserving capital and providing liquidity.
This objective is a fundamental policy and may not be changed without
shareholder approval. The Fund will seek to achieve its objective by investing
substantially all of its assets in a diversified portfolio of short-term (i.e.,
with remaining maturities not exceeding 397 days) debt obligations issued by
states, territories and possessions of the United States and by the District of
Columbia, and their political subdivisions and duly constituted authorities, the
interest from which is exempt from Federal income tax. Such securities are
generally known as Municipal Obligations. (See "Municipal Obligations" below.)
The Fund will invest in Municipal Obligations only if they are determined
to be of eligible quality under SEC rules and to present minimum credit risk.
Municipal Obligations in which the Fund may invest include: (i) municipal
securities that are rated in one of the top three short-term rating categories
by any two of S&P, Moody's or any other nationally recognized SRO (or by a
single rating agency if only one of these agencies has assigned a rating); (ii)
municipal securities that are issued by an issuer that has outstanding a class
of short-term debt instruments (i.e., having a maturity of 366 days or less)
that (A) is comparable in priority and security to such instruments and (B)
meets the rating requirements above; and (iii) bonds with a remaining maturity
of 397 days or less that are rated no lower than one of the top two long-term
rating categories by any SRO and determined by the investment adviser to be of
comparable quality. For a description of such ratings see the Statement of
Additional Information. The Fund may also purchase Municipal Obligations which
are unrated at the time of purchase up to a maximum of 20% of its total assets,
if such securities are determined by the Fund's investment adviser to be of
comparable quality. Certain Municipal Obligations (primarily variable rate
demand notes) may be entitled to the benefit of standby letters of credit or
similar commitments issued by banks or other financial institutions and, in such
instances, the investment adviser will take into account the obligation of the
bank in assessing the quality of such security. The ability of the Fund to meet
its investment objective is necessarily subject to the ability of municipal
issuers to meet their payment obligations.
Interest income on certain types of bonds issued after August 7, 1986 to
finance nongovernmental activities is an item of "tax-preference" subject to the
Federal alternative minimum tax for individuals and corporations. To the extent
the Fund invests in these "private activity" bonds (some of which were formerly
referred to as "industrial development" bonds), individual and corporate
shareholders, depending on their status, may be subject to the alternative
minimum tax on the part of the Fund's distributions derived from the bonds. As a
matter of fundamental policy, which may not be changed without shareholder
approval, the Fund will invest at least 80% of its net assets in Municipal
Obligations, the interest from which is not subject to the Federal alternative
minimum tax.
Municipal Obligations. As noted above, the Fund will invest substantially all of
its assets in Municipal Obligations. These include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds" are debt
obligations issued to obtain funds for various public purposes that are exempt
from Federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing
7
<PAGE>
power for the payment of principal and interest. Revenue bonds are payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other specific
source such as from the user of the facility being financed. The term "municipal
bonds" also includes "moral obligation" issues which are normally issued by
special purpose authorities.
Industrial development bonds ("IDBs") and private activity bonds ("PABs")
are in most cases revenue bonds and are not payable from the unrestricted
revenues of the issuer. The credit quality of IDBs and PABs is usually directly
related to the credit standing of the corporate user of the facilities being
financed. Participation interests are interests in municipal bonds, including
IDBs and PABs, and floating and variable rate obligations that are owned by
banks. These interests carry a demand feature permitting the holder to tender
them back to the bank, which demand feature is backed by an irrevocable letter
of credit or guarantee of the bank. A put bond is a municipal bond which gives
the holder the unconditional right to sell the bond back to the issuer at a
specified price and exercise date, which is typically well in advance of the
bond's maturity date. "Short-term municipal notes" and "tax exempt commercial
paper" include tax anticipation notes, bond anticipation notes, revenue
anticipation notes and other forms of short-term loans. Such notes are issued
with a short-term maturity in anticipation of the receipt of tax funds, the
proceeds of bond placements and other revenues.
Floating Rate and Variable Rate Obligations. Municipal Obligations also include
certain variable rate and floating rate municipal obligations with or without
demand features. These variable rate securities do not have fixed interest
rates; rather, those rates fluctuate based upon changes in specified market
rates, such as the prime rate, or are adjusted at predesignated periodic
intervals. Such securities must comply with conditions established by the SEC
under which they may be considered to have remaining maturities of 397 days or
less. Certain of these obligations may carry a demand feature that gives the
Fund the right to demand prepayment of the principal amount of the security
prior to its maturity date. The demand obligation may or may not be backed by
letters of credit or other guarantees of banks or other financial institutions.
Such guarantees may enhance the quality of the security. The Fund will limit the
value of its investments in any floating or variable rate securities which are
not readily marketable and in all other not readily marketable securities to 10%
or less of its net assets.
Stand-by Commitments. The Fund may also acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at the Fund's option, specified
Municipal Obligations at a specified price. The Fund expects that stand-by
commitments generally will be available without the payment of direct or
indirect consideration. However, if necessary and advisable, the Fund may pay
for stand-by commitments either separately in cash or by paying a higher price
for portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the Fund's portfolio will not exceed 10% of the value of the Fund's net assets
calculated immediately after each stand-by commitment is acquired. The Fund will
enter into stand-by commitments only with banks and broker-dealers that, in the
judgment of the Fund's investment adviser, present minimal credit risks.
Taxable Investments. The Fund may temporarily invest up to 20% of the Fund's
total assets in taxable securities under any one or more of the following
circumstances: (a) pending investment of proceeds of 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. In addition, the Fund may temporarily invest up to 100% of its
total assets in taxable securities for defensive purposes. The Fund may invest
for defensive purposes during periods when the Fund's assets available for
investment exceed the available Municipal Obligations that meet the Fund's
quality and other investment criteria. Taxable securities in which the Fund may
invest on a short-term basis include obligations of the United States
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 ratings assigned by an SRO; commercial paper rated in the highest grade
by Moody's or S&P; and certificates of deposit issued by United States branches
of United States banks with assets of $1 billion or more.
Evergreen Institutional Treasury Money Market Fund
The investment objective of Evergreen Institutional Treasury Money Market
Fund, which is a matter of fundamental policy that may not be changed without
shareholder approval, is to maintain stability of principal while earning
current income. However, the Fund will only attempt to seek income to the extent
consistent with stability of principal and, therefore, investments will only be
made in short-term United States Treasury obligations with an
8
<PAGE>
average dollar-weighted maturity of 90 days or less. As a matter of investment
strategy, the Fund's investment adviser intends to maintain a dollar-weighted
average maturity for the Fund of 60 days or less.
Evergreen Institutional Treasury Money Market Fund is suitable for
conservative investors seeking high current yields plus relative safety. The
Fund provides a reasonable means of maximizing opportunities and minimizing
risks resulting from changing interest rates.
The short-term United States Treasury obligations in which the Fund
invests are issued by the U.S. Government and are fully guaranteed as to
principal and interest by the United States. Such securities will have a
maturity date that is 397 days or less from the date of acquisition unless they
are purchased under an agreement that provides for repurchase of the securities
from the Fund within 397 days from the date of acquisition. The Fund may also
retain Fund assets in cash.
INVESTMENT PRACTICES AND RESTRICTIONS
General. The Funds invest only in securities that have remaining maturities of
397 days (thirteen months) or less at the date of purchase. For this purpose,
floating rate or variable rate obligations (described under Evergreen
Institutional Tax Exempt Money Market Fund, above), which are payable on demand,
but which may otherwise have a stated maturity in excess of this period, will be
deemed to have remaining maturities of less than 397 days pursuant to conditions
established by the SEC. The Funds maintain a dollar-weighted average portfolio
maturity of ninety days or less. The Funds follow these policies to maintain a
stable net asset value of $1.00 per share, although there is no assurance they
can do so on a continuing basis. The market value of the obligations in a Fund's
portfolio can be expected to vary inversely to changes in prevailing interest
rates. If a portfolio security is no longer of eligible quality, a Fund shall
dispose of such security in an orderly fashion as soon as reasonably
practicable, unless the investment adviser determines, in light of market
conditions or other factors, that disposal of the instrument would not be in the
best interests of the Fund and its shareholders.
The ability of each Fund to meet its investment objective is necessarily
subject to the ability of the issuers of securities in which the Funds invest to
meet their payment obligations. In addition, the portfolio of each Fund will be
affected by general changes in interest rates which will result in increases or
decreases in the value of the obligations held by the Fund. Investors should
recognize that, in periods of declining interest rates, the yield of a Fund will
tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, the yield of a Fund will tend to be somewhat lower. Also,
when interest rates are falling, the inflow of net new money to a Fund from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of the Fund's portfolio, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
Repurchase Agreements. The Funds may enter into repurchase agreements. A
repurchase agreement is an arrangement pursuant to which a buyer purchases a
security and simultaneously agrees to resell it to the vendor at a price that
results in an agreed-upon market rate of return which is effective for the
period of time (which is normally one to seven days, but may be longer) the
buyer's money is invested in the security. The arrangement results in a fixed
rate of return that is not subject to market fluctuations during a Fund's
holding period. Repurchase agreements may be entered into with member banks of
the Federal Reserve System, including, the Fund's custodian or "primary dealers"
(as designated by the Federal Reserve Bank of New York) in United States
Government securities. Each Fund will require continued maintenance of
collateral with its custodian in an amount equal to, or in excess of, the
repurchase price (including accrued interest). In the event a vendor defaults on
its repurchase obligation, a Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, a Fund might be
delayed in selling the collateral. The Funds investment adviser will review and
continually monitor the creditworthiness of each institution with which the Fund
enters into a repurchase agreement to evaluate these risks. A Fund may not enter
into repurchase agreements if, as a result, more than 10% of a Fund's net assets
would be invested in repurchase agreements maturing in more than seven days and
in other securities that are not readily marketable.
Securities Lending. In order to generate income and to offset expenses, the
Funds may lend portfolio securities to brokers, dealers and other financial
organizations. The Funds investment adviser will monitor the creditworthiness of
such borrowers. Loans of securities may not exceed 30% of a Fund's total assets
and will be collateralized by cash, letters of credit or United States
Government securities that are maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities, including
accrued interest. While such securities are on loan, the borrower will pay a
Fund any income accruing thereon, and the Fund may invest the cash
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collateral in portfolio securities, thereby increasing its return. A Fund will
have the right to call any such loan and obtain the securities loaned at any
time on five days' notice. Any gain or loss in the market price of the loaned
securities which occurs during the term of the loan would affect a Fund and its
investors. A Fund may pay reasonable fees in connection with such loans.
When-Issued Securities. Evergreen Institutional Tax Exempt Money Market Fund and
Evergreen Institutional Treasury Money Market Fund may purchase securities on a
"when-issued" basis (i.e., for delivery beyond the normal settlement date at a
stated price and yield). A Fund generally would not pay for such securities or
start earning interest on them until they are received. However, when a Fund
purchases securities on a when-issued basis, it assumes the risks of ownership
at the time of purchase, not at the time of receipt. Failure of the issuer to
deliver a security purchased by a Fund on a when-issued basis may result in the
Fund incurring a loss or missing an opportunity to make an alternative
investment. Evergreen Institutional Tax Exempt Money Market Fund does not expect
that commitments to purchase when-issued securities will normally exceed 25% of
its total assets and Evergreen Institutional Treasury Money Market Fund does not
expect that such commitments will exceed 20% of its total assets. The Funds do
not intend to purchase when-issued securities for speculative purposes but only
in furtherance of their investment objective.
Illiquid Securities. The Funds may invest up to 10% of their net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements with maturities longer than seven days. In the
case of Evergreen Institutional Tax Exempt Money Market Fund and Evergreen
Institutional Money Market Fund, securities eligible for resale pursuant to Rule
144A under the Act, which have been determined to be liquid, will not be
considered by each Fund's investment adviser to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 10% limit. The
inability of a Fund to dispose of illiquid or not readily marketable investments
readily or at a reasonable price could impair the Fund's ability to raise cash
for redemptions or other purposes. The liquidity of securities purchased by a
Fund which are eligible for resale pursuant to Rule 144A will be monitored by
the Funds' investment adviser on an ongoing basis, subject to the oversight of
the Trustees. In the event that such a security is deemed to be no longer
liquid, a Fund's holdings will be reviewed to determine what action, if any, is
required to ensure that the retention of such security does not result in a Fund
having more than 10% of its net assets invested in illiquid or not readily
marketable securities.
Other Investment Policies. The Funds may borrow money for temporary or emergency
purposes in amounts not in excess of 10% of the value of a Fund's total assets
in the case of Evergreen Institutional Tax Exempt Money Market Fund and
Evergreen Institutional Money Market Fund and one-third of the value of
Evergreen Institutional Treasury Money Market Fund's total assets, including the
amount borrowed. As another means of borrowing, both Evergreen Institutional Tax
Exempt Money Market Fund and Evergreen Institutional Money Market Fund may agree
to sell portfolio securities to financial institutions such as banks and
broker-dealers and to repurchase them at a mutually agreed upon date and price
(a "reverse repurchase agreement") at the time of such borrowing in amounts up
to 5% of the value of their total assets. A Fund will not purchase any
securities whenever any borrowings (including reverse repurchase agreements) are
outstanding. If either Evergreen Institutional Tax Exempt Money Market Fund or
Evergreen Institutional Money Market Fund enter into a reverse repurchase
agreement, they will place in a segregated custodial account cash, United States
Government securities or liquid high grade debt obligations having a value equal
to the repurchase price (including accrued interest) and will subsequently
monitor the account to ensure that such equivalent value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a Fund may decline below the repurchase price of those securities.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established ("Trustees"). The Capital Management
Group of First Union National Bank of North Carolina ("CMG") serves as
investment adviser to Evergreen Institutional Treasury Money Market Fund,
Evergreen Institutional Money Market Fund and Evergreen Institutional Tax Exempt
Money Market Fund. First Union National Bank of North Carolina ("FUNB") is a
subsidiary of First Union Corporation ("First Union"), the sixth
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largest bank holding company in the United States. First Union is headquartered
in Charlotte, North Carolina, and had $137 billion in consolidated assets as of
March 31, 1997. First Union and its subsidiaries provide a broad range of
financial services to individuals and businesses throughout the United States.
CMG and the other investment advisory affiliates of FUNB manages or otherwise
oversees the investment of over $61.9 billion in assets belonging to a wide
range of clients, including all the series of Evergreen Investment Trust
(formerly known as First Union Funds), the two series of The Evergreen Lexicon
Fund (formerly The FFB Lexicon Fund) and the two series of Evergreen Tax-Free
Trust (formerly FFB Funds Trust). First Union Brokerage Services, Inc., a
wholly-owned subsidiary of FUNB, is a registered broker-dealer that is
principally engaged in providing retail brokerage services consistent with its
federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services. CMG is entitled to receive from each Fund an annual fee equal to .15
of 1% of average daily net assets.
Evergreen Keystone Investment Services, Inc. ("EKIS"), a wholly-owned
subsidiary of FUNB, serves as administrator to Evergreen Institutional Treasury
Money Market Fund, Evergreen Institutional Money Market Fund and Evergreen
Institutional Tax Exempt Money Market Fund and is entitled to receive a fee
based on the average daily net assets of each Fund at a rate based on the total
assets of the mutual funds for which any affiliate of FUNB serves as investment
adviser, calculated in accordance with the following schedule: .050% of the
first $7 billion; .035% on the next $3 billion; .030% on the next $5 billion;
.020% on the next $10 billion; .015% on the next $5 billion; and .010% on assets
in excess of $30 billion. BISYS Fund Services ("BISYS"), an affiliate of
Evergreen Keystone Distributor, Inc., distributor for the Evergreen Keystone
group of mutual funds, serves as sub-administrator to the Funds and is entitled
to receive a fee from EKIS calculated on the average daily net assets of the
Funds at a rate based on the total assets of the mutual funds for which any
affiliate of FUNB serves as investment adviser, calculated in accordance with
the following schedule: .0100% of the first $7 billion; .0075% on the next $3
billion; .0050% on the next $15 billion; and .0040% on assets in excess of $25
billion. The total assets of the mutual funds for which FUNB affiliates serve as
investment adviser were approximately $29 billion as of March 31, 1997.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
Investors may purchase Fund shares at net asset value by mail or wire as
described below. The Funds impose no sales charges on purchases of Institutional
shares. Institutional shares are the only class of shares offered by this
Prospectus and are only available to institutional investors who are clients of
the Funds investment adviser or its affiliates or who have a significant
business relationship with the Funds investment adviser or its affiliates. The
minimum initial investment is $1,000,000 which may be waived in certain
situations. There is no minimum for subsequent investments.
Purchases by Wire. Initial investments may be made by wire by (i) calling
Evergreen Keystone Service Company ("EKSC"), a wholly-owned subsidiary of FUNB,
the Fund's registrar, transfer and dividend disbursing agent at (800) 633-2700
for an account number and (ii) instructing your bank, which may charge a fee, to
wire federal funds to State Street Bank and Trust Company ("State Street"), as
follows: State Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Mutual
Fund Division. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Purchase Application must also be sent to EKSC indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Funds Value Their Shares. The net asset value of each Fund's shares for
purposes of both purchases and redemptions is determined twice daily, at 12 noon
(Eastern time) and promptly after the regular close of the New York Stock
Exchange (currently 4:00 p.m. Eastern time) each business day (i.e., any weekday
exclusive of days on which the New York Stock Exchange (the "Exchange") or State
Street is closed). The Exchange is closed on New Year's Day, Presidents Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share is calculated by taking the sum of
the values of a Fund's investments and any cash and other assets, subtracting
liabilities, and dividing by the total number of shares outstanding. All
expenses, including the fees payable to the Funds' investment adviser, are
accrued daily. The securities in a Fund's portfolio are valued on an amortized
cost basis. Under this method of valuation, a security is
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initially valued at its acquisition cost, and thereafter a constant
straight-line amortization of any discount or premium is assumed each day
regardless of the impact of fluctuating interest rates on the market value of
the security. The market value of the obligations in a Fund's portfolio can be
expected to vary inversely to changes in prevailing interest rates. As a result,
the market value of the obligations in a Fund's portfolio may vary from the
value determined using the amortized cost method. The market value of securities
which are not rated is normally valued on the basis of valuations provided by a
pricing service when such prices are believed to reflect the fair value of such
securities. Other assets and securities for which no quotations are readily
available are valued at fair value as determined in good faith by the Trustees.
Each Fund attempts to maintain its net asset value at $1.00 per share.
Under most conditions, management believes this will be possible, although there
can be no assurance that this will be achieved. Calculations are periodically
made to compare the value of a Fund's portfolio valued at amortized cost with
market values. If a deviation of 1/2 of 1% or more were to occur between the net
asset value calculated by reference to market values and a Fund's $1.00 per
share net asset value, or if there were other deviations which the Trustees of
the Trust under which each Fund operates believed would result in a material
dilution to shareholders or purchasers, the Trustees would promptly consider
what action, if any, should be initiated.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's remittance is not
promptly received, the investor will be responsible for any loss a Fund or the
Fund's investment adviser incurs. If such investor is an existing shareholder, a
Fund may redeem shares from the investor's account to reimburse a Fund or the
Fund's investment adviser for any loss. In addition, such investors may be
prohibited or restricted from making further purchases in any of the Evergreen
Keystone Funds. Shares of the Funds are sold at the net asset value per share
next determined after a shareholder's investment has been converted to federal
funds. Investments by federal funds wire will be effective upon receipt. Shares
purchased via telephone will receive the dividend declared on that day if the
telephone order is placed by 12 noon (Eastern time), and federal funds are
received the same day by 4:00 p.m. (Eastern time). Investors should telephone
the Fund at the number on the front page of this Prospectus for additional
information on same day purchases by telephone. Investment checks received at
State Street will be invested on the date of receipt. Shareholders will begin
earning dividends the following business day. A Fund cannot accept investments
specifying a certain price or date and reserves the right to reject any specific
purchase order, including orders in connection with exchanges from the other
Evergreen Keystone Funds. Although not currently anticipated, each Fund reserves
the right to suspend the offer of shares for a period of time.
HOW TO REDEEM SHARES
You may "redeem", i.e. sell, your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to ten days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or cancelled.
Redeeming Shares Directly By Mail Or Telephone. Send a signed letter of
instruction or stock power form to EKSC at P.O. Box 2121, Boston, Massachusetts
02106-2121. Stock power forms are available from your financial intermediary,
EKSC, and many commercial banks. Additional documentation is required for the
sale of shares by corporations, financial intermediaries, fiduciaries and
surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to EKSC.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling EKSC at (800) 633-2700 between the hours of 8:00 a.m. to 5:30 p.m.
(Eastern time) each business day (i.e., any weekday exclusive of days on which
the Exchange or EKSC's offices are closed). The Exchange is closed on New Year's
Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Redemption requests made after 4:00 p.m.
(Eastern time) will be processed using the net asset value determined on the
next business day. Such redemption requests must include the shareholder's
account name, as registered with a Fund, and the account number. During periods
of drastic economic or market changes, shareholders may experience difficulty in
effecting telephone redemptions. Shareholders who are unable to reach a Fund or
EKSC by telephone should follow the procedures outlined above for redemption by
mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Purchase Application and choose how
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the redemption proceeds are to be paid. Redemption proceeds will either (i) be
mailed by check to the shareholder at the address in which the account is
registered or (ii) be wired to an account with the same registration as the
shareholder's account in a Fund at a designated commercial bank. State Street
currently deducts a $5.00 wire charge from all redemption proceeds wired. This
charge is subject to change without notice. Redemption proceeds will be wired on
the same day if the request is made prior to 12 noon (Eastern time). Such
shares, however, will not earn dividends for that day. Redemption requests
received after 12 noon will earn dividends for that day, and the proceeds will
be wired on the following business day. A shareholder who decides later to use
this service, or to change instructions already given, should provide EKSC with
such shareholder's signature guaranteed by a bank or trust company (not a Notary
Public), a member firm of a domestic stock exchange or by other financial
institutions whose guarantees are acceptable to EKSC. Shareholders should allow
approximately ten days for such form to be processed. The Funds will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures include requiring some form of identification prior to
acting upon instructions and tape recording of telephone instructions. If a Fund
fails to follow such procedures, it may be liable for any losses due to
unauthorized or fraudulent instructions. The Funds will not be liable for
following telephone instructions reasonably believed to be genuine. The Funds
reserve the right to refuse a telephone redemption if it is believed advisable
to do so. Financial intermediaries may charge a fee for handling telephonic
requests. Procedures for redeeming Fund shares by telephone may be modified or
terminated without notice at any time.
Redemptions By Check. Upon request each Fund will provide holders of
Institutional shares, without charge, with checks drawn on the Fund that will
clear through State Street. Shareholders will be subject to State Street's rules
and regulations governing such checking accounts. Checks will be sent usually
within ten business days following the date the account is established. Checks
may be made payable to the order of any payee in an amount of $250 or more. The
payee of the check may cash or deposit it like a check drawn on a bank.
(Investors should be aware that, as in the case with regular bank checks,
certain banks may not provide cash at the time of deposit, but will wait until
they have received payment from State Street.) When such a check is presented to
State Street for payment, State Street, as the shareholder's agent, causes the
Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. Checks will be returned
by State Street if there are insufficient or uncollectable shares to meet the
withdrawal amount. The check writing procedure for withdrawal enables
shareholders to continue earning income on the shares to be redeemed up to but
not including the date the redemption check is presented to State Street for
payment. Shareholders wishing to use this method of redemption, should fill out
the appropriate part of the Purchase Application (including the Signature Card)
and mail the completed form to EKSC, P.O. Box 2121, Boston, Massachusetts
02106-2121. Shareholders requesting this service after an account has been
opened must contact EKSC since additional documentation will be required.
Currently, there is no charge either for checks or for the clearance of any
checks. This service may be terminated or altered at any time.
General. Under unusual circumstances, a Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by Federal securities law.
The Funds reserve the right to close an account that through redemption has
remained below $1,000 for thirty days. Shareholders will receive sixty days'
written notice to increase the account value before the account is closed. See
the Statement of Additional Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for Class Y
shares of certain other Evergreen Keystone Funds by telephone or mail as
described below. An exchange which represents an initial investment in another
Evergreen Keystone Fund must amount to at least $1,000. Once an exchange request
has been telephoned or mailed, it is irrevocable and may not be modified or
canceled. Exchanges will be made on the basis of the relative net asset values
of the shares exchanged next determined after an exchange request is received.
Exchanges are subject to the minimum investment and suitability requirements of
each fund. Each of the Evergreen Keystone Funds has different investment
objectives and policies. For complete information, a prospectus of the fund into
which an exchange will be made should be read prior to the exchange. An exchange
is treated for Federal income tax purposes as a redemption and purchase of
shares and may result in the realization of a capital gain or loss. This
exchange privilege may be materially modified or discontinued at any time by the
Fund upon sixty days' notice to shareholders and is only available in states in
which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares by telephone by calling
EKSC at (800) 633-2700. Exchange requests made after 4:00 p.m. (Eastern time)
will be processed using the net asset value determined on the next business day.
During periods of drastic economic or market changes, shareholders may
experience difficulty in effecting telephone exchanges. You should follow the
procedures outlined below for exchanges by mail if you are unable to reach EKSC
by telephone. If you wish to use the telephone exchange service you should
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indicate this on the Purchase Application. As noted above, each Fund will employ
reasonable procedures to confirm that instructions for the redemption or
exchange of shares communicated by telephone are genuine. A telephone exchange
may be refused by a Fund or EKSC if it is believed advisable to do so.
Procedures for exchanging Fund shares by telephone may be modified or terminated
at any time. Written requests for exchanges should follow the same procedures
outlined for written redemption requests in the section entitled "How to Redeem
Shares", however, no signature guarantee is required.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. CMG is
subject to and in compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG being prevented from continuing to
perform the services required under the investment advisory contract or from
acting as agent in connection with the purchase of shares of a Fund by its
customers. If CMG was prevented from continuing to provide the services called
for under the investment advisory agreement, it is expected that the Trustees
would identify, and call upon each Fund's shareholders to approve, a new
investment adviser. If this were to occur, it is not anticipated that the
shareholders of any Fund would suffer any adverse financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds declare substantially all of their net income as dividends on
each business day. Such dividends are paid monthly. Net income, for dividend
purposes, includes accrued interest and any market discount or premium that day,
less the estimated expenses of a Fund. Gains or losses realized upon the sale of
portfolio securities are not included in net income, but are reflected in the
net asset value of a Fund's shares. Distributions of any net realized capital
gains will be made annually or more frequently as required by the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The amount of
dividends may fluctuate from day to day, and the dividend may be omitted on a
day where Fund expenses exceed investment income. Dividends and distributions
generally are taxable in the year in which they are paid, except any dividends
paid in January that were declared in the previous calendar quarter may be
treated as paid in the immediately preceding December. Such dividends will be
automatically reinvested in full and fractional shares of a Fund on the last
business day of each month. However, shareholders who so inform the transfer
agent in writing may have their dividends paid out in cash monthly. Shareholders
who invest by check will be credited with a dividend on the business day
following initial investment. Shareholders will receive dividends on investments
made by federal funds bank wire the same day the wire is received provided that
wire purchases are received by State Street by 12 noon (Eastern time). Shares
purchased by qualified institutions via telephone as described in "How to
Purchase Shares" will receive the dividend declared on that day if the telephone
order is placed by 12 noon (Eastern time), and federal funds are received by
4:00 p.m. (Eastern time). All other wire purchases received after 12 noon
(Eastern time) will earn dividends beginning the following business day.
Dividends accruing on the day of redemption will be paid to redeeming
shareholders except for redemptions by check and where proceeds are wired the
same day. (See "How to Redeem Shares".)
Each Fund intends to qualify to be treated as a regulated investment
company under the Code. While so qualified, it is expected that each Fund will
not be required to pay any Federal income taxes on that portion of its
investment company taxable income and any net realized capital gains it
distributes to shareholders. The Code imposes a 4% nondeductible excise tax on
regulated investment companies, such as the Funds, to the extent they do not
meet certain distribution requirements by the end of each calendar year. Each
Fund anticipates meeting such distribution requirements. The excise tax
generally does not apply to the tax exempt income of a regulated investment
company (such as Evergreen Institutional Tax Exempt Money Market Fund) that pays
exempt interest dividends. Except as noted below with respect to Evergreen
Institutional Tax Exempt Money Market Fund, most shareholders of the Funds
normally will have to pay Federal income taxes and any state or local taxes on
the dividends and distributions they receive from a Fund.
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Evergreen Institutional Tax Exempt Money Market Fund will designate and
pay exempt-interest dividends derived from interest earned on qualifying tax
exempt obligations. Such exempt-interest dividends may be excluded by
shareholders of the Fund from their gross income for Federal income tax
purposes, however, (1) all or a portion of such exempt-interest dividends may be
a specific preference item for purposes of the Federal individual and corporate
alternative minimum taxes to the extent that they are derived from certain types
of private activity bonds issued after August 7, 1986, and (2) all
exempt-interest dividends will be a component of "adjusted current earnings" for
purposes of the Federal corporate alternative minimum tax.
Dividends paid from taxable income, if any, and distributions of any net
realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income, even though received in additional
Fund shares. Market discount recognized on taxable and tax-free bonds is taxable
as ordinary income, not as excludable income. Following the end of each calendar
year, every shareholder of the Funds will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year. Under current law, the highest Federal income tax rate
applicable to net long-term capital gains realized by individuals is 28%. The
rate applicable to corporations is 35%. Since the Funds gross income is
ordinarily expected to be interest income, it is not expected that the 70%
dividends-received deduction for corporations will be applicable. Specific
questions should be addressed to the investor's own tax adviser. Each Fund is
required by Federal law to withhold 31% of reportable payments (which may
include dividends, capital gain distributions and redemptions) paid to certain
shareholders. In order to avoid this backup withholding requirement, you must
certify on the Purchase Application, or on a separate form supplied by EKSC,
that the investor's social security or taxpayer identification number is correct
and that the investor is not currently subject to backup withholding or is
exempt from backup withholding.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, a Fund may consider sales of its shares as a factor in the selection
of dealers to enter into portfolio transactions with the Fund.
Organization. The Evergreen Institutional Money Market Fund and Evergreen
Institutional Treasury Money Market Fund are separate investment series of
Evergreen Money Market Trust, which is a Massachusetts business trust organized
in 1987. The Evergreen Institutional Tax Exempt Money Market Fund is a separate
investment series of The Evergreen Municipal Trust, which is a Massachusetts
business trust organized in 1988.
The Funds do not intend to hold annual shareholder meetings; shareholder
meetings will be held only when required by applicable law. Shareholders have
available certain procedures for the removal of Trustees.
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 acts as each Fund's custodian.
Registrar, Transfer and Dividend Disbursing Agent. Evergreen Keystone Service
Company, P.O. Box 2121, Boston, Massachusetts 02106-2121, serves as each Fund's
registrar, transfer and dividend-disbursing agent. EKSC is compensated for its
services as transfer agent by a fee based upon the number of shareholder
accounts maintained for the Fund.
Principal Underwriter. EKD, an affiliate of BISYS Fund Services, located at 125
West 55th Street, New York, New York 10019, is the principal underwriter of the
Funds. BISYS Fund Services also acts as sub-administrator to the Funds,
including providing personnel to serve as officers of the Funds.
Other Classes of Shares. The Funds offer two classes of shares, Institutional
Service and Institutional. Institutional shares are the only Class offered by
this Prospectus.
Performance Information. From time to time, a Fund may quote its yield in
advertisements or in reports to shareholders. Yield information may be useful in
reviewing the performance of a Fund and for providing a basis for comparison
with other investment alternatives. However, since net investment income of a
Fund changes in response to fluctuations in interest rates and Fund expenses,
any given yield quotation should not be considered representative of a Fund's
yields for any future period.
The method of calculating each Fund's yield is set forth in the Statement
of Additional Information. Before investing, the investor may want to determine
which investment -- tax-free or taxable -- will result in a higher after-tax
return. To do this, the yield on the tax-free investment should be divided by
the decimal determined by subtracting from 1 the highest Federal tax rate to
which the investor currently is subject. For example, if the tax-free yield is
6% and the investor's maximum tax bracket is 36%, the computation is:
15
<PAGE>
6% Tax-Free Yield /(1-.36 Tax Rate) = 6/.64 = 9.38% Taxable Yield. In this
example, the investor's after-tax return will be higher from the 6% tax-free
investment if available taxable yields are below 9.38%. Conversely, the taxable
investment will provide a higher return when taxable yields exceed 9.38%. This
is only an example and is not necessarily reflective of a Fund's yield. The tax
equivalent yield will be lower for investors in the lower income brackets.
Comparative performance information may also be used from time to time in
advertising or marketing the Funds' shares, including data from Lipper
Analytical Services, Inc., IBC/Donoghue's Money Fund Report, Bank Rate Monitor
and other industry publications.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the SEC under the Act. Copies of the Registration Statements may be
obtained at a reasonable charge from the SEC or may be examined, without charge,
at the offices of the SEC in Washington, D.C.
16
<PAGE>
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<PAGE>
(This Page Left Blank Intentionally)
<PAGE>
<PAGE>
Investment Adviser
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
Evergreen Institutional Money Market Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Custodian
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
Legal Counsel
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
Independent Accountants
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
Distributor
Evergreen Keystone Distributor, Inc., 125 W. 55th Street, New York, New York
10019
<PAGE>
PROSPECTUS May 20, 1997
EVERGREEN(SM) INSTITUTIONAL MONEY MARKET FUNDS (LOGO GOES HERE)
EVERGREEN INSTITUTIONAL MONEY MARKET FUND
EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND
INSTITUTIONAL SERVICE SHARES
The Evergreen Institutional Money Market Funds (the "Funds") are
designed to provide institutional investors with current income, stability
of principal and liquidity. This Prospectus provides information regarding
the Institutional Service shares offered by the Funds. Each Fund is, or is
a series of, an open-end, diversified, management investment company. This
Prospectus sets forth concise information about the Funds that a
prospective investor should know before investing. The address of the Funds
is 200 Berkeley Street, Boston, Massachusetts 02116.
A Statement of Additional Information for the Funds dated May 20,
1997 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Evergreen Keystone Funds at (800)
343-2898. The minimum investment in each Fund is $1,000,000. There can be
no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY, AND
INVOLVE INVESTMENT RISKS.
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1997, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 4
DESCRIPTION OF THE FUNDS 6
Investment Objectives And Policies 6
Investment Practices And Restrictions 9
MANAGEMENT OF THE FUNDS 10
Investment Adviser 10
Distribution Plans And Agreements 11
PURCHASE AND REDEMPTION OF SHARES 12
How To Buy Shares 12
How To Redeem Shares 13
Exchange Privilege 14
Effect Of Banking Laws 15
OTHER INFORMATION 15
Dividends, Distributions And Taxes 15
General Information 16
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The investment adviser to EVERGREEN INSTITUTIONAL MONEY MARKET FUND,
EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND and EVERGREEN INSTITUTIONAL
TREASURY MONEY MARKET FUND is the Capital Management Group of First Union
National Bank of North Carolina. First Union National Bank of North Carolina is
a wholly-owned subsidiary of First Union Corporation, the sixth largest bank
holding company in the United States.
EVERGREEN INSTITUTIONAL MONEY MARKET FUND seeks as high a level of
current income as is consistent with preserving capital and providing liquidity.
The Fund will invest only in high quality money market instruments.
EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND seeks as high a
level of current income exempt from Federal income tax as is consistent with
preserving capital and providing liquidity. The Fund invests substantially all
of its assets in short-term municipal securities, the interest from which is
exempt from Federal income tax.
EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND seeks to maintain
stability of principal while earning current income.
Each Fund seeks to maintain a stable net asset value of $1.00 per share
although no assurances can be given that such a stable net asset value will be
maintained.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Institutional Service shares of the Fund. For
further information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to the
Institutional Service shares of each Fund, together with examples of the
cumulative effect of such expenses on a hypothetical $1,000 investment for the
periods specified assuming (i) a 5% annual return and (ii) redemption at the end
of each period.
EVERGREEN INSTITUTIONAL MONEY MARKET FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Management Fee .15%
After 1 Year $ 5
12b-1 Fees .25%
After 3 Years $16
Other Expenses .10%
Total .50%
</TABLE>
EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Management Fee .15%
After 1 Year $ 5
12b-1 Fees .25%
After 3 Years $16
Other Expenses .10%
Total .50%
</TABLE>
EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Management Fee .15%
After 1 Year $ 5
12b-1 Fees .25%
After 3 Years $16
Other Expenses .10%
Total .50%
</TABLE>
From time to time, the Funds' investment adviser may, at its discretion,
waive its fee or reimburse a Fund for certain of its expenses in order to reduce
a Fund's expense ratio. The investment adviser will reimburse these Funds to the
extent that any Fund's aggregate annual operating expenses (including the
investment adviser's fee, but excluding taxes, interest, brokerage commissions,
Rule 12b-1 distribution fees and shareholder service fees and extraordinary
expenses) exceed .45 of 1.00% of the average net assets for any fiscal year. The
investment adviser may cease these voluntary waivers or reimbursements at any
time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in Institutional
Service shares of the Funds will bear directly or indirectly. THE EXAMPLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL
RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE
SHOWN. For a more complete description of the various costs and expenses borne
by the Funds see "Management of the Funds".
3
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the period ended February 28, 1997 of EVERGREEN
INSTITUTIONAL MONEY MARKET FUND, EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET
FUND and EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND has been audited by
Price Waterhouse LLP, each Fund's independent accountants. A report of Price
Waterhouse LLP is incorporated by reference in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN INSTITUTIONAL MONEY MARKET FUND
<TABLE>
<CAPTION>
PERIOD ENDED
FEBRUARY 28, 1997
INSTITUTIONAL INSTITUTIONAL
SERVICE SHARES * SHARES **
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period...................................................... $1.000 $1.000
Net investment income..................................................................... 0.014 0.015
Less distributions to shareholders from net investment income............................. (0.014) (0.015)
Net asset value, end of period............................................................ $1.000 $1.000
Total Return.............................................................................. 1.40% 1.57%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................................... $ 867,294 $ 575,331
Ratios to average net assets (annualized):
Expenses, net......................................................................... 0.32% 0.07%
Expenses before waivers and reimbursements............................................ 0.68% 0.43%
Net investment income................................................................. 5.24% 5.48%
</TABLE>
* Class commenced operations on November 26, 1996.
** Class commenced operations on November 19, 1996.
EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
<TABLE>
<CAPTION>
PERIOD ENDED
FEBRUARY 28, 1997
INSTITUTIONAL INSTITUTIONAL
SERVICE SHARES * SHARES **
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period...................................................... $1.000 $1.000
Net investment income..................................................................... 0.008 0.010
Less distributions to shareholders from net investment income............................. (0.008) (0.010)
Net asset value, end of period............................................................ $1.000 $1.000
Total Return.............................................................................. 0.85% 0.96%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................................... $14,295 $ 206,124
Ratios to average net assets (annualized):
Expenses, net......................................................................... 0.30% 0.05%
Expenses before waivers and reimbursements............................................ 0.70% 0.45%
Net investment income................................................................. 3.19% 3.50%
</TABLE>
* Class commenced operations on November 25, 1996.
** Class commenced operations on November 20, 1996.
4
<PAGE>
EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
PERIOD ENDED
FEBRUARY 28, 1997
INSTITUTIONAL INSTITUTIONAL
SERVICE SHARES * SHARES **
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period...................................................... $1.000 $1.000
Net investment income..................................................................... 0.013 0.015
Less distributions to shareholders from net investment income............................. (0.013) (0.015)
Net asset value, end of period............................................................ $1.000 $1.000
Total Return.............................................................................. 1.33% 1.49%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................................... $ 509,369 $ 367,771
Ratios to average net assets (annualized):
Expenses, net......................................................................... 0.31% 0.06%
Expenses before waivers and reimbursements............................................ 0.70% 0.45%
Net investment income................................................................. 4.98% 5.24%
</TABLE>
* Class commenced operations on November 27, 1996.
** Class commenced operations on November 20, 1996.
5
<PAGE>
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies, which are discussed in
"Investment Practices and Restrictions".
EVERGREEN INSTITUTIONAL MONEY MARKET FUND
The investment objective of EVERGREEN INSTITUTIONAL MONEY MARKET FUND is
to achieve as high a level of current income as is consistent with preserving
capital and providing liquidity. This objective is a fundamental policy and may
not be changed without shareholder approval. The Fund invests in high quality
money market instruments, which are determined to be of eligible quality under
Securities and Exchange Commission ("SEC") rules and to present minimal credit
risk. Under SEC rules, eligible securities include First Tier Securities (i.e.,
securities rated in the highest short-term rating category) and Second Tier
Securities (i.e., securities which are otherwise eligible but not in the First
Tier). The rules prohibit the Fund from holding more than 5% of its value in
Second Tier Securities. The Fund's permitted investments include:
1. Marketable obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities, including issues of the United
States Treasury, such as bills, certificates of indebtedness, notes and bonds,
and issues of agencies and instrumentalities established under the authority of
an act of Congress. Some of these securities are supported by the full faith and
credit of the United States Government, others are supported by the right of the
issuer to borrow from the Treasury, and still others are supported only by the
credit of the agency or instrumentality. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority.
Agencies or instrumentalities whose securities are supported only by the
credit of the agency or instrumentality, and not the credit of the United States
Government, include the Interamerican Development Bank and the International
Bank for Reconstruction and Development. These obligations are supported by
appropriated but unpaid commitments of its member countries. There are no
assurances that the commitments will be undertaken in the future.
2. Commercial paper, including variable amount master demand notes, that
is rated in one of the two highest short-term rating categories by any two of
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Services, Inc.
("Moody's") or any other nationally recognized statistical rating organization
("SRO") (or by a single rating agency if only one of these agencies has assigned
a rating). The Fund will not invest more than 10% of its total assets, at the
time of the investment in question, in variable amount master demand notes. For
a description of these ratings see the Statement of Additional Information.
3. Corporate debt securities and bank obligations that are rated in one
of the three highest short-term rating categories by any two of S&P, Moody's and
any other SRO (or by a single rating agency if only one of these agencies has
assigned a rating).
4. Unrated corporate debt securities, commercial paper and bank
obligations that are issued by an issuer that has outstanding a class of
short-term debt instruments (i.e., instruments having a maturity of 366 days or
less) that (A) is comparable in priority and security to the unrated securities
and (B) meets the rating requirements of paragraphs 2 or 3 above.
5. Unrated corporate debt securities, commercial paper and bank
obligations issued by domestic and foreign companies which have an outstanding
long-term debt issue rated in the top two rating categories by a SRO and
determined by the investment adviser to be of comparable quality.
6. Unrated corporate debt securities, commercial paper and bank
obligations otherwise determined by the investment adviser to be of comparable
quality.
7. Repurchase agreements with respect to the securities described in
paragraphs 1 through 6 above.
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
6
<PAGE>
branches of U.S. banks. These investments involve risks that are different from
investments in domestic securities. These risks may include future unfavorable
political and economic developments, possible withholding taxes, seizure of
foreign deposits, currency controls, interest limitations or other governmental
restrictions which might affect the payment of principal or interest on the
securities in the Fund's portfolio. Additionally, foreign banks are subject to
less extensive regulations and disclosure requirements than U.S. banks and,
accordingly, there may be less publicly available information about such banks
and greater risks associated with their obligations.
The Fund may invest in commercial paper and other short-term corporate
obligations which meet the rating criteria specified in paragraphs 3 and 4 above
which are issued in private placements pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Act"). Such securities are not
registered for purchase and sale by the public under the Act. The Fund has been
informed that the staff of the SEC does not consider such securities to be
readily marketable. The Fund will not invest more than 10% of its total assets
in securities which are not readily marketable (including private placement
securities) and in repurchase agreements maturing in more than seven days.
EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
The investment objective of EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY
MARKET FUND is to achieve as high a level of current income exempt from Federal
income tax, as is consistent with preserving capital and providing liquidity.
This objective is a fundamental policy and may not be changed without
shareholder approval. The Fund will seek to achieve its objective by investing
substantially all of its assets in a diversified portfolio of short-term (i.e.,
with remaining maturities not exceeding 397 days) debt obligations issued by
states, territories and possessions of the United States and by the District of
Columbia, and their political subdivisions and duly constituted authorities, the
interest from which is exempt from Federal income tax. Such securities are
generally known as Municipal Obligations. (See "Municipal Obligations" below.)
The Fund will invest in Municipal Obligations only if they are determined
to be of eligible quality under SEC rules and to present minimum credit risk.
Municipal Obligations in which the Fund may invest include: (i) municipal
securities that are rated in one of the top three short-term rating categories
by any two of S&P, Moody's or any other nationally recognized SRO (or by a
single rating agency if only one of these agencies has assigned a rating); (ii)
municipal securities that are issued by an issuer that has outstanding a class
of short-term debt instruments (i.e., having a maturity of 366 days or less)
that (A) is comparable in priority and security to such instruments and (B)
meets the rating requirements above; and (iii) bonds with a remaining maturity
of 397 days or less that are rated no lower than one of the top two long-term
rating categories by any SRO and determined by the investment adviser to be of
comparable quality. For a description of such ratings see the Statement of
Additional Information. The Fund may also purchase Municipal Obligations which
are unrated at the time of purchase up to a maximum of 20% of its total assets,
if such securities are determined by the Fund's investment adviser to be of
comparable quality. Certain Municipal Obligations (primarily variable rate
demand notes) may be entitled to the benefit of standby letters of credit or
similar commitments issued by banks or other financial institutions and, in such
instances, the investment adviser will take into account the obligation of the
bank in assessing the quality of such security. The ability of the Fund to meet
its investment objective is necessarily subject to the ability of municipal
issuers to meet their payment obligations.
Interest income on certain types of bonds issued after August 7, 1986 to
finance nongovernmental activities is an item of "tax-preference" subject to the
Federal alternative minimum tax for individuals and corporations. To the extent
the Fund invests in these "private activity" bonds (some of which were formerly
referred to as "industrial development" bonds), individual and corporate
shareholders, depending on their status, may be subject to the alternative
minimum tax on the part of the Fund's distributions derived from the bonds. As a
matter of fundamental policy, which may not be changed without shareholder
approval, the Fund will invest at least 80% of its net assets in Municipal
Obligations, the interest from which is not subject to the Federal alternative
minimum tax.
Municipal Obligations. As noted above, the Fund will invest substantially all of
its assets in Municipal Obligations. These include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds" are debt
obligations issued to obtain funds for various public purposes that are exempt
from Federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific
7
<PAGE>
source such as from the user of the facility being financed. The term "municipal
bonds" also includes "moral obligation" issues which are normally issued by
special purpose authorities.
Industrial development bonds ("IDBs") and private activity bonds ("PABs")
are in most cases revenue bonds and are not payable from the unrestricted
revenues of the issuer. The credit quality of IDBs and PABs is usually directly
related to the credit standing of the corporate user of the facilities being
financed. Participation interests are interests in municipal bonds, including
IDBs and PABs, and floating and variable rate obligations that are owned by
banks. These interests carry a demand feature permitting the holder to tender
them back to the bank, which demand feature is backed by an irrevocable letter
of credit or guarantee of the bank. A put bond is a municipal bond which gives
the holder the unconditional right to sell the bond back to the issuer at a
specified price and exercise date, which is typically well in advance of the
bond's maturity date. "Short-term municipal notes" and "tax exempt commercial
paper" include tax anticipation notes, bond anticipation notes, revenue
anticipation notes and other forms of short-term loans. Such notes are issued
with a short-term maturity in anticipation of the receipt of tax funds, the
proceeds of bond placements and other revenues.
Floating Rate and Variable Rate Obligations. Municipal Obligations also include
certain variable rate and floating rate municipal obligations with or without
demand features. These variable rate securities do not have fixed interest
rates; rather, those rates fluctuate based upon changes in specified market
rates, such as the prime rate, or are adjusted at predesignated periodic
intervals. Such securities must comply with conditions established by the SEC
under which they may be considered to have remaining maturities of 397 days or
less. Certain of these obligations may carry a demand feature that gives the
Fund the right to demand prepayment of the principal amount of the security
prior to its maturity date. The demand obligation may or may not be backed by
letters of credit or other guarantees of banks or other financial institutions.
Such guarantees may enhance the quality of the security. The Fund will limit the
value of its investments in any floating or variable rate securities which are
not readily marketable and in all other not readily marketable securities to 10%
or less of its net assets.
Stand-by Commitments. The Fund may also acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at the Fund's option, specified
Municipal Obligations at a specified price. The Fund expects that stand-by
commitments generally will be available without the payment of direct or
indirect consideration. However, if necessary and advisable, the Fund may pay
for stand-by commitments either separately in cash or by paying a higher price
for portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the Fund's portfolio will not exceed 10% of the value of the Fund's net assets
calculated immediately after each stand-by commitment is acquired. The Fund will
enter into stand-by commitments only with banks and broker-dealers that, in the
judgment of the Fund's investment adviser, present minimal credit risks.
Taxable Investments. The Fund may temporarily invest up to 20% of the Fund's
total assets in taxable securities under any one or more of the following
circumstances: (a) pending investment of proceeds of 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. In addition, the Fund may temporarily invest up to 100% of its
total assets in taxable securities for defensive purposes. The Fund may invest
for defensive purposes during periods when the Fund's assets available for
investment exceed the available Municipal Obligations that meet the Fund's
quality and other investment criteria. Taxable securities in which the Fund may
invest on a short-term basis include obligations of the United States
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 ratings assigned by an SRO; commercial paper rated in the highest grade
by Moody's or S&P; and certificates of deposit issued by United States branches
of United States banks with assets of $1 billion or more.
EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND
The investment objective of EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET
FUND, which is a matter of fundamental policy that may not be changed without
shareholder approval, is to maintain stability of principal while earning
current income. However, the Fund will only attempt to seek income to the extent
consistent with stability of principal and, therefore, investments will only be
made in short-term United States Treasury obligations with an average
dollar-weighted maturity of 90 days or less. As a matter of investment strategy,
the Fund's investment adviser intends to maintain a dollar-weighted average
maturity for the Fund of 60 days or less.
8
<PAGE>
EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND is suitable for
conservative investors seeking high current yields plus relative safety. The
Fund provides a reasonable means of maximizing opportunities and minimizing
risks resulting from changing interest rates.
The short-term United States Treasury obligations in which the Fund
invests are issued by the U.S. Government and are fully guaranteed as to
principal and interest by the United States. Such securities will have a
maturity date that is 397 days or less from the date of acquisition unless they
are purchased under an agreement that provides for repurchase of the securities
from the Fund within 397 days from the date of acquisition. The Fund may also
retain Fund assets in cash.
INVESTMENT PRACTICES AND RESTRICTIONS
General. The Funds invest only in securities that have remaining maturities of
397 days (thirteen months) or less at the date of purchase. For this purpose,
floating rate or variable rate obligations (described under EVERGREEN
INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND, above), which are payable on demand,
but which may otherwise have a stated maturity in excess of this period, will be
deemed to have remaining maturities of less than 397 days pursuant to conditions
established by the SEC. The Funds maintain a dollar-weighted average portfolio
maturity of ninety days or less. The Funds follow these policies to maintain a
stable net asset value of $1.00 per share, although there is no assurance they
can do so on a continuing basis. The market value of the obligations in a Fund's
portfolio can be expected to vary inversely to changes in prevailing interest
rates. If a portfolio security is no longer of eligible quality, a Fund shall
dispose of such security in an orderly fashion as soon as reasonably
practicable, unless the investment adviser determines, in light of market
conditions or other factors, that disposal of the instrument would not be in the
best interests of the Fund and its shareholders.
The ability of each Fund to meet its investment objective is necessarily
subject to the ability of the issuers of securities in which the Funds invest to
meet their payment obligations. In addition, the portfolio of each Fund will be
affected by general changes in interest rates which will result in increases or
decreases in the value of the obligations held by the Fund. Investors should
recognize that, in periods of declining interest rates, the yield of a Fund will
tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, the yield of a Fund will tend to be somewhat lower. Also,
when interest rates are falling, the inflow of net new money to a Fund from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of the Fund's portfolio, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
Repurchase Agreements. The Funds may enter into repurchase agreements. A
repurchase agreement is an arrangement pursuant to which a buyer purchases a
security and simultaneously agrees to resell it to the vendor at a price that
results in an agreed-upon market rate of return which is effective for the
period of time (which is normally one to seven days, but may be longer) the
buyer's money is invested in the security. The arrangement results in a fixed
rate of return that is not subject to market fluctuations during a Fund's
holding period. Repurchase agreements may be entered into with member banks of
the Federal Reserve System, including, the Fund's custodian or "primary dealers"
(as designated by the Federal Reserve Bank of New York) in United States
Government securities. Each Fund will require continued maintenance of
collateral with its custodian in an amount equal to, or in excess of, the
repurchase price (including accrued interest). In the event a vendor defaults on
its repurchase obligation, a Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, a Fund might be
delayed in selling the collateral. The Funds investment adviser will review and
continually monitor the creditworthiness of each institution with which the Fund
enters into a repurchase agreement to evaluate these risks. A Fund may not enter
into repurchase agreements if, as a result, more than 10% of a Fund's net assets
would be invested in repurchase agreements maturing in more than seven days and
in other securities that are not readily marketable.
Securities Lending. In order to generate income and to offset expenses, the
Funds may lend portfolio securities to brokers, dealers and other financial
organizations. The Funds investment adviser will monitor the creditworthiness of
such borrowers. Loans of securities may not exceed 30% of a Fund's total assets
and will be collateralized by cash, letters of credit or United States
Government securities that are maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities, including
accrued interest. While such securities are on loan, the borrower will pay a
Fund any income accruing thereon, and the Fund may invest the cash collateral in
portfolio securities, thereby increasing its return. A Fund will have the right
to call any such loan and obtain the securities loaned at any time on five days'
notice. Any gain or loss in the market price of the loaned
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securities which occurs during the term of the loan would affect a Fund and its
investors. A Fund may pay reasonable fees in connection with such loans.
When-Issued Securities. EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND and
EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND may purchase securities on a
"when-issued" basis (i.e., for delivery beyond the normal settlement date at a
stated price and yield). A Fund generally would not pay for such securities or
start earning interest on them until they are received. However, when a Fund
purchases securities on a when-issued basis, it assumes the risks of ownership
at the time of purchase, not at the time of receipt. Failure of the issuer to
deliver a security purchased by a Fund on a when-issued basis may result in the
Fund incurring a loss or missing an opportunity to make an alternative
investment. EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND does not expect
that commitments to purchase when-issued securities will normally exceed 25% of
its total assets and EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND does not
expect that such commitments will exceed 20% of its total assets. The Funds do
not intend to purchase when-issued securities for speculative purposes but only
in furtherance of their investment objective.
Illiquid Securities. The Funds may invest up to 10% of their net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements with maturities longer than seven days. In the
case of EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND and EVERGREEN
INSTITUTIONAL MONEY MARKET FUND, securities eligible for resale pursuant to Rule
144A under the Act, which have been determined to be liquid, will not be
considered by each Fund's investment adviser to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 10% limit. The
inability of a Fund to dispose of illiquid or not readily marketable investments
readily or at a reasonable price could impair the Fund's ability to raise cash
for redemptions or other purposes. The liquidity of securities purchased by a
Fund which are eligible for resale pursuant to Rule 144A will be monitored by
the Funds' investment adviser on an ongoing basis, subject to the oversight of
the Trustees. In the event that such a security is deemed to be no longer
liquid, a Fund's holdings will be reviewed to determine what action, if any, is
required to ensure that the retention of such security does not result in a Fund
having more than 10% of its net assets invested in illiquid or not readily
marketable securities.
Other Investment Policies. The Funds may borrow money for temporary or emergency
purposes in amounts not in excess of 10% of the value of a Fund's total assets
in the case of EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND and
EVERGREEN INSTITUTIONAL MONEY MARKET FUND and one-third of the value of
EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND'S total assets, including the
amount borrowed. As another means of borrowing, both EVERGREEN INSTITUTIONAL TAX
EXEMPT MONEY MARKET FUND and EVERGREEN INSTITUTIONAL MONEY MARKET FUND may agree
to sell portfolio securities to financial institutions such as banks and
broker-dealers and to repurchase them at a mutually agreed upon date and price
(a "reverse repurchase agreement") at the time of such borrowing in amounts up
to 5% of the value of their total assets. A Fund will not purchase any
securities whenever any borrowings (including reverse repurchase agreements) are
outstanding. If either EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND or
EVERGREEN INSTITUTIONAL MONEY MARKET FUND enter into a reverse repurchase
agreement, they will place in a segregated custodial account cash, United States
Government securities or liquid high grade debt obligations having a value equal
to the repurchase price (including accrued interest) and will subsequently
monitor the account to ensure that such equivalent value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a Fund may decline below the repurchase price of those securities.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established ("Trustees"). The Capital Management
Group of First Union National Bank of North Carolina ("CMG") serves as
investment adviser to EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND,
EVERGREEN INSTITUTIONAL MONEY MARKET FUND and EVERGREEN INSTITUTIONAL TAX EXEMPT
MONEY MARKET FUND. First Union National Bank of North Carolina ("FUNB") is a
subsidiary of First Union Corporation ("First Union"), the sixth largest bank
holding company in the United States. First Union is headquartered in Charlotte,
North Carolina, and had $137 billion in consolidated assets as of March 31,
1997. First Union and its subsidiaries provide a broad
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range of financial services to individuals and businesses throughout the United
States. CMG and the other investment advisory affiliates of FUNB manage or
otherwise oversee the investment of over $61.9 billion in assets belonging to a
wide range of clients, including all the series of Evergreen Investment Trust
(formerly known as First Union Funds), the two series of The Evergreen Lexicon
Fund (formerly The FFB Lexicon Fund) and the two series of Evergreen Tax-Free
Trust (formerly FFB Funds Trust). First Union Brokerage Services, Inc., a
wholly-owned subsidiary of FUNB, is a registered broker-dealer that is
principally engaged in providing retail brokerage services consistent with its
federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services. CMG is entitled to receive from each Fund an annual fee equal to .15
of 1% of average daily net assets.
Evergreen Keystone Investment Services, Inc. ("EKIS"), a wholly-owned
subsidiary of FUNB, serves as administrator to EVERGREEN INSTITUTIONAL TREASURY
MONEY MARKET FUND, EVERGREEN INSTITUTIONAL MONEY MARKET FUND and EVERGREEN
INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND and is entitled to receive a fee
based on the average daily net assets of each Fund at a rate based on the total
assets of the mutual funds for which any affiliate of FUNB serves as investment
adviser, calculated in accordance with the following schedule: .050% of the
first $7 billion; .035% on the next $3 billion; .030% on the next $5 billion;
.020% on the next $10 billion; .015% on the next $5 billion; and .010% on assets
in excess of $30 billion. BISYS Fund Services ("BISYS"), an affiliate of
Evergreen Keystone Distributor, Inc., distributor for the Evergreen Keystone
group of mutual funds, serves as sub-administrator to the Funds and is entitled
to receive a fee from EKIS calculated on the average daily net assets of the
Funds at a rate based on the total assets of the mutual funds for which any
affiliate of FUNB serves as investment adviser, calculated in accordance with
the following schedule: .0100% of the first $7 billion; .0075% on the next $3
billion; .0050% on the next $15 billion; and .0040% on assets in excess of $25
billion. The total assets of the mutual funds for which FUNB affiliates serve as
investment adviser were approximately $29 billion as of March 31, 1997.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted for their
Institutional Service shares a "Rule 12b-1 plan" (each, a "Plan" or collectively
the "Plans"). Pursuant to each Plan, a Fund may incur distribution-related and
shareholder servicing-related expenses which may not exceed an annual rate of
.25 of 1% of the Fund's aggregate average daily net assets attributable to
Institutional Service shares. The Plans provide that a portion of the fee
payable thereunder may constitute a service fee to be used for providing ongoing
personal service and/or the maintenance of shareholder accounts. Service fee
payments to financial intermediaries for such purposes will not exceed .25 of 1%
on an annualized basis of the aggregate average daily net assets attributable to
the Institutional Service shares.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Keystone Distributor, Inc. ("EKD"). Pursuant to the Distribution
Agreements, each Fund will compensate EKD for its services at a rate which may
not exceed an annual rate of .20 of 1% of a Fund's aggregate average daily net
assets attributable to Institutional Service shares. The Distribution Agreements
provide that EKD will use the distribution fee received from a Fund for payments
(i) to compensate broker-dealers or other persons for distributing shares of the
Funds, (ii) to otherwise promote the sale of shares of the Fund, and (iii) to
compensate broker-dealers, depository institutions and other financial
intermediaries for providing administrative, accounting and other services with
respect to the Fund's shareholders.
The Funds may not pay any distribution or services fees during any fiscal
period in excess of the amounts set forth above. Since EKD's compensation under
the Distribution Agreements is not directly tied to the expenses incurred by
EKD, the amount of compensation received by it under the Distribution Agreements
during any year may be more or less than its actual expenses and may result in a
profit to EKD. Distribution expenses incurred by EKD in one fiscal year that
exceed the level of compensation paid to EKD for that year may be paid from
distribution fees received from a Fund in subsequent fiscal years.
The Plans are in compliance with rules of the National Association of
Securities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to .75
of 1% and .25 of 1%, respectively, of the average annual net assets attributable
to that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mutual
fund that also charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per annum.
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PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
Investors may purchase shares of the Funds through broker-dealers, banks
or other financial intermediaries, or directly through EKD. The minimum initial
investment is $1,000,000, which may be waived in certain situations. There is no
minimum for subsequent investments. In states where EKD is not registered as a
broker-dealer shares of the Funds will only be sold through BISYS, other
broker-dealers or other financial institutions that are registered. See the
Share Purchase Application and Statement of Additional Information for more
information. Only Institutional Service shares of the Fund are offered through
this Prospectus. (See "General Information" -- "Other Classes of Shares".)
Institutional Service shares of the Fund can be purchased at net asset value
without an initial sales charge. Certain broker-dealers or other financial
institutions may impose a fee in connection with purchases at net asset value.
Purchases by Wire. Initial investments may be made by wire by (i) calling
Evergreen Keystone Service Company ("EKSC"), a wholly-owned subsidiary of FUNB,
the Funds' registrar, transfer and dividend disbursing agent at (800) 633-2700
for an account number and (ii) instructing your bank, which may charge a fee, to
wire federal funds to State Street Bank and Trust Company ("State Street"), as
follows: State Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Mutual
Fund Division. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Purchase Application must also be sent to EKSC indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Funds Value Their Shares. The net asset value of each Fund's shares for
purposes of both purchases and redemptions is determined twice daily, at 12 noon
(Eastern time) and promptly after the regular close of the New York Stock
Exchange (currently 4:00 p.m. Eastern time) each business day (i.e., any weekday
exclusive of days on which the New York Stock Exchange (the "Exchange") or State
Street is closed). The Exchange is closed on New Year's Day, Presidents Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share is calculated by taking the sum of
the values of a Fund's investments and any cash and other assets, subtracting
liabilities, and dividing by the total number of shares outstanding. All
expenses, including the fees payable to the Funds' investment adviser, are
accrued daily. The securities in a Fund's portfolio are valued on an amortized
cost basis. Under this method of valuation, a security is initially valued at
its acquisition cost, and thereafter a constant straight-line amortization of
any discount or premium is assumed each day regardless of the impact of
fluctuating interest rates on the market value of the security. The market value
of the obligations in a Fund's portfolio can be expected to vary inversely to
changes in prevailing interest rates. As a result, the market value of the
obligations in a Fund's portfolio may vary from the value determined using the
amortized cost method. The market value of securities which are not rated is
normally valued on the basis of valuations provided by a pricing service when
such prices are believed to reflect the fair value of such securities. Other
assets and securities for which no quotations are readily available are valued
at fair value as determined in good faith by the Trustees.
Each Fund attempts to maintain its net asset value at $1.00 per share.
Under most conditions, management believes this will be possible, although there
can be no assurance that this will be achieved. Calculations are periodically
made to compare the value of a Fund's portfolio valued at amortized cost with
market values. If a deviation of 1/2 of 1% or more were to occur between the net
asset value calculated by reference to market values and a Fund's $1.00 per
share net asset value, or if there were other deviations which the Trustees of
the Trust under which each Fund operates believed would result in a material
dilution to shareholders or purchasers, the Trustees would promptly consider
what action, if any, should be initiated.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's remittance is not
promptly received, the investor will be responsible for any loss a Fund or the
Fund's investment adviser incurs. If such investor is an existing shareholder, a
Fund may redeem shares from the investor's account to reimburse a Fund or the
Fund's investment adviser for any loss. In addition, such investors may be
prohibited or restricted from making further purchases in any of the Evergreen
Keystone Funds. Shares of the Funds are sold at the net asset value per share
next determined after a shareholder's investment has been converted to federal
funds. Investments by federal funds wire will be effective upon receipt. Shares
purchased via telephone will receive the dividend declared on that day if the
telephone order is placed by 12 noon
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(Eastern time), and federal funds are received the same day by 4:00 p.m.
(Eastern time). Investors should telephone the Fund at the number on the front
page of this Prospectus for additional information on same day purchases by
telephone. Investment checks received at State Street will be invested on the
date of receipt. Shareholders will begin earning dividends the following
business day. A Fund cannot accept investments specifying a certain price or
date and reserves the right to reject any specific purchase order, including
orders in connection with exchanges from the other Evergreen Keystone Funds.
Although not currently anticipated, each Fund reserves the right to suspend the
offer of shares for a period of time.
General
In addition to the discount or commission paid to dealers, EKD will from
time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen Keystone Funds. Such incentives will take the form
of payment for attendance at seminars, lunches, dinners, sporting events or
theater performances, or payment for travel, lodging and entertainment incurred
in connection with travel by persons associated with a dealer and their
immediate family members to urban or resort locations within or outside the
United States. Such a dealer may elect to receive cash incentives of equivalent
amount in lieu of such payments. EKD may also limit the availability of such
incentives to certain specified dealers. EKD from time to time sponsors
promotions involving First Union Brokerage Services, Inc. ("FUBS"), an affiliate
of each Fund's investment adviser, and select broker-dealers, pursuant to which
incentives are paid, including gift certificates and payments in amounts up to
1% of the dollar amount of shares of a Fund sold. Awards may also be made based
on the opening of a minimum number of accounts. Such promotions are not being
made available to all dealers. Certain broker-dealers may also receive payments
from EKD or a Fund's investment adviser over and above the usual trail
commissions or shareholder servicing payments applicable to a given Class of
shares.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from an investor's financial intermediary before 4:00 p.m. (Eastern
time) for them to receive that day's net asset value. The financial intermediary
is responsible for furnishing all necessary documentation to the Fund and may
charge an investor for this service. Certain financial intermediaries may
require that they be given instructions earlier than 4:00 p.m.
HOW TO REDEEM SHARES
You may "redeem", i.e. sell, your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to ten days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or cancelled.
Redeeming Shares Directly By Mail Or Telephone. Send a signed letter of
instruction or stock power form to EKSC at P.O. Box 2121, Boston, Massachusetts
02106-2121. Stock power forms are available from your financial intermediary,
EKSC, and many commercial banks. Additional documentation is required for the
sale of shares by corporations, financial intermediaries, fiduciaries and
surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to EKSC.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling EKSC at (800) 633-2700 between the hours of 8:00 a.m. to 5:30 p.m.
(Eastern time) each business day (i.e., any weekday exclusive of days on which
the Exchange or State Street's offices are closed). The Exchange is closed on
New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Redemption requests made after
4:00 p.m. (Eastern time) will be processed using the net asset value determined
on the next business day. Such redemption requests must include the
shareholder's account name, as registered with a Fund, and the account number.
During periods of drastic economic or market changes, shareholders may
experience difficulty in effecting telephone redemptions. Shareholders who are
unable to reach a Fund or EKSC by telephone should follow the procedures
outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Purchase Application and choose how the redemption proceeds
are to be paid. Redemption proceeds will either (i) be mailed by check to the
shareholder at the address in which the account is registered or (ii) be wired
to an account with the same registration as the shareholder's account in a Fund
at a designated commercial bank. State Street currently deducts a $5.00 wire
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charge from all redemption proceeds wired. This charge is subject to change
without notice. Redemption proceeds will be wired on the same day if the request
is made prior to 12 noon (Eastern time). Such shares, however, will not earn
dividends for that day. Redemption requests received after 12 noon will earn
dividends for that day, and the proceeds will be wired on the following business
day. A shareholder who decides later to use this service, or to change
instructions already given, should provide EKSC with such shareholder's
signature guaranteed by a bank or trust company (not a Notary Public), a member
firm of a domestic stock exchange or by other financial institutions whose
guarantees are acceptable to EKSC. Shareholders should allow approximately ten
days for such form to be processed. The Funds will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine. These
procedures include requiring some form of identification prior to acting upon
instructions and tape recording of telephone instructions. If a Fund fails to
follow such procedures, it may be liable for any losses due to unauthorized or
fraudulent instructions. The Funds will not be liable for following telephone
instructions reasonably believed to be genuine. The Funds reserve the right to
refuse a telephone redemption if it is believed advisable to do so. Financial
intermediaries may charge a fee for handling telephonic requests. Procedures for
redeeming Fund shares by telephone may be modified or terminated without notice
at any time.
Redemptions By Check. Upon request each Fund will provide holders of
Institutional Service shares, without charge, with checks drawn on the Fund that
will clear through State Street. Shareholders will be subject to State Street's
rules and regulations governing such checking accounts. Checks will be sent
usually within ten business days following the date the account is established.
Checks may be made payable to the order of any payee in an amount of $250 or
more. The payee of the check may cash or deposit it like a check drawn on a
bank. (Investors should be aware that, as in the case with regular bank checks,
certain banks may not provide cash at the time of deposit, but will wait until
they have received payment from State Street.) When such a check is presented to
State Street for payment, State Street, as the shareholder's agent, causes the
Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. Checks will be returned
by State Street if there are insufficient or uncollectable shares to meet the
withdrawal amount. The check writing procedure for withdrawal enables
shareholders to continue earning income on the shares to be redeemed up to but
not including the date the redemption check is presented to State Street for
payment. Shareholders wishing to use this method of redemption, should fill out
the appropriate part of the Purchase Application (including the Signature Card)
and mail the completed form to EKSC, P.O. Box 2121, Boston, Massachusetts
02106-2121. Shareholders requesting this service after an account has been
opened must contact EKSC since additional documentation will be required.
Currently, there is no charge either for checks or for the clearance of any
checks. This service may be terminated or altered at any time.
General. Under unusual circumstances, a Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by Federal securities law.
The Funds reserve the right to close an account that through redemption has
remained below $1,000 for thirty days. Shareholders will receive sixty days'
written notice to increase the account value before the account is closed. See
the Statement of Additional Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for
Institutional Service shares of the other Evergreen Keystone Funds by telephone
or mail as described below. An exchange which represents an initial investment
in another Evergreen mutual fund must amount to at least $1,000. Once an
exchange request has been telephoned or mailed, it is irrevocable and may not be
modified or canceled. Exchanges will be made on the basis of the relative net
asset values of the shares exchanged next determined after an exchange request
is received. Exchanges are subject to the minimum investment and suitability
requirements of each fund. Each of the Evergreen Keystone Funds has different
investment objectives and policies. For complete information, a prospectus of
the fund into which an exchange will be made should be read prior to the
exchange. An exchange is treated for Federal income tax purposes as a redemption
and purchase of shares and may result in the realization of a capital gain or
loss. This exchange privilege may be materially modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from an investor's financial intermediary before 4:00 p.m. (Eastern
time) for them to receive that day's net asset value. The financial intermediary
is responsible for furnishing all necessary documentation to the Fund and may
charge an investor for this service.
Exchanges By Telephone And Mail. You may exchange shares by telephone by calling
EKSC at (800) 633-2700. Exchange requests made after 4:00 p.m. (Eastern time)
will be processed using the net asset value determined on the next business day.
During periods of drastic economic or market changes, shareholders may
experience difficulty in effecting telephone exchanges. You should follow the
procedures outlined below for exchanges by mail
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if you are unable to reach EKSC by telephone. If you wish to use the telephone
exchange service you should indicate this on the Purchase Application. As noted
above, each Fund will employ reasonable procedures to confirm that instructions
for the redemption or exchange of shares communicated by telephone are genuine.
A telephone exchange may be refused by a Fund or EKSC if it is believed
advisable to do so. Procedures for exchanging Fund shares by telephone may be
modified or terminated at any time. Written requests for exchanges should follow
the same procedures outlined for written redemption requests in the section
entitled "How to Redeem Shares", however, no signature guarantee is required.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. CMG is
subject to and in compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG being prevented from continuing to
perform the services required under the investment advisory contract or from
acting as agent in connection with the purchase of shares of a Fund by its
customers. If CMG was prevented from continuing to provide the services called
for under the investment advisory agreement, it is expected that the Trustees
would identify, and call upon each Fund's shareholders to approve, a new
investment adviser. If this were to occur, it is not anticipated that the
shareholders of any Fund would suffer any adverse financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds declare substantially all of their net income as dividends on
each business day. Such dividends are paid monthly. Net income, for dividend
purposes, includes accrued interest and any market discount or premium that day,
less the estimated expenses of a Fund. Gains or losses realized upon the sale of
portfolio securities are not included in net income, but are reflected in the
net asset value of a Fund's shares. Distributions of any net realized capital
gains will be made annually or more frequently as required by the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The amount of
dividends may fluctuate from day to day, and the dividend may be omitted on a
day where Fund expenses exceed investment income. Dividends and distributions
generally are taxable in the year in which they are paid, except any dividends
paid in January that were declared in the previous calendar quarter may be
treated as paid in the immediately preceding December. Such dividends will be
automatically reinvested in full and fractional shares of a Fund on the last
business day of each month. However, shareholders who so inform the transfer
agent in writing may have their dividends paid out in cash monthly. Shareholders
who invest by check will be credited with a dividend on the business day
following initial investment. Shareholders will receive dividends on investments
made by federal funds bank wire the same day the wire is received provided that
wire purchases are received by State Street by 12 noon (Eastern time). Shares
purchased by qualified institutions via telephone as described in "How to
Purchase Shares" will receive the dividend declared on that day if the telephone
order is placed by 12 noon (Eastern time), and federal funds are received by
4:00 p.m. (Eastern time). All other wire purchases received after 12 noon
(Eastern time) will earn dividends beginning the following business day.
Dividends accruing on the day of redemption will be paid to redeeming
shareholders except for redemptions by check and where proceeds are wired the
same day. (See "How to Redeem Shares".)
Each Fund intends to qualify to be treated as a regulated investment
company under the Code. While so qualified, it is expected that each Fund will
not be required to pay any Federal income taxes on that portion of its
investment company taxable income and any net realized capital gains it
distributes to shareholders. The Code imposes a 4% nondeductible excise tax on
regulated investment companies, such as the Funds, to the extent they do not
meet certain distribution requirements by the end of each calendar year. Each
Fund anticipates meeting such distribution requirements. The excise tax
generally does not apply to the tax exempt income of a regulated investment
company (such as EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND) that pays
exempt interest dividends. Except as noted below with respect to EVERGREEN
INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND, most shareholders of the Funds
normally will have to pay Federal income taxes and any state or local taxes on
the dividends and distributions they receive from a Fund.
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EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND will designate and
pay exempt-interest dividends derived from interest earned on qualifying tax
exempt obligations. Such exempt-interest dividends may be excluded by
shareholders of the Fund from their gross income for Federal income tax
purposes, however, (1) all or a portion of such exempt-interest dividends may be
a specific preference item for purposes of the Federal individual and corporate
alternative minimum taxes to the extent that they are derived from certain types
of private activity bonds issued after August 7, 1986, and (2) all
exempt-interest dividends will be a component of "adjusted current earnings" for
purposes of the Federal corporate alternative minimum tax.
Dividends paid from taxable income, if any, and distributions of any net
realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income, even though received in additional
Fund shares. Market discount recognized on taxable and tax-free bonds is taxable
as ordinary income, not as excludable income. Following the end of each calendar
year, every shareholder of the Funds will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year. Under current law, the highest Federal income tax rate
applicable to net long-term capital gains realized by individuals is 28%. The
rate applicable to corporations is 35%. Since the Funds gross income is
ordinarily expected to be interest income, it is not expected that the 70%
dividends-received deduction for corporations will be applicable. Specific
questions should be addressed to the investor's own tax adviser. Each Fund is
required by Federal law to withhold 31% of reportable payments (which may
include dividends, capital gain distributions and redemptions) paid to certain
shareholders. In order to avoid this backup withholding requirement, you must
certify on the Purchase Application, or on a separate form supplied by EKSC,
that the investor's social security or taxpayer identification number is correct
and that the investor is not currently subject to backup withholding or is
exempt from backup withholding.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, a Fund may consider sales of its shares as a factor in the selection
of dealers to enter into portfolio transactions with the Fund.
Organization. The EVERGREEN INSTITUTIONAL MONEY MARKET FUND and EVERGREEN
INSTITUTIONAL TREASURY MONEY MARKET FUND are separate investment series of
Evergreen Money Market Trust, which is a Massachusetts business trust organized
in 1987. The EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND is a separate
investment series of The Evergreen Municipal Trust, which is a Massachusetts
business trust organized in 1988.
The Funds do not intend to hold annual shareholder meetings; shareholder
meetings will be held only when required by applicable law. Shareholders have
available certain procedures for the removal of Trustees.
A shareholder in each Class of the Funds will be entitled to their share
of all dividends and distributions from the Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net value of the Class of shares
of the Fund represented by the redeemed shares. The Trust is empowered to
establish, without shareholder approval, additional series, which may have
different investment objectives, and additional Classes of shares for any
existing or future series. If an additional series were established in the Fund,
each share of the series or Class would normally be entitled to one vote for all
purposes. Generally, shares of each series and Class would vote together as a
single Class on matters, such as the election of Trustees, that affect each
series and Class in substantially the same manner. Institutional Service and
Institutional shares have identical voting, dividend, liquidation and other
rights, except that each Class bears, to the extent applicable, its own
distribution and transfer agency expenses as well as any other expenses
applicable only to a specific Class. Each Class of shares votes separately with
respect to Rule 12b-1 distribution plans and other matters for which separate
Class voting is appropriate under applicable law. Shares are entitled to
dividends as determined by the Trustees and, in liquidation of the Fund, are
entitled to receive the net assets of the Fund.
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 acts as each Fund's custodian.
Registrar, Transfer and Dividend Disbursing Agent. Evergreen Keystone Service
Company, P.O. Box 2121, Boston, Massachusetts 02106-2121 serves as each Fund's
registrar, transfer and dividend disbursing agent. EKSC is compensated for its
services as transfer agent by a fee based upon the number of shareholder
accounts maintained for the Fund.
Principal Underwriter. EKD, an affiliate of BISYS Fund Services, located at 125
West 55th Street, New York, New York 10019, is the principal underwriter of the
Funds. BISYS Fund Services also acts as sub-administrator to the Funds,
including providing personnel to serve as officers of the Funds.
16
<PAGE>
Other Classes of Shares. The Funds offer two classes of shares, Institutional
Service and Institutional. Institutional Service shares are the only Class
offered by this Prospectus.
Performance Information. From time to time, a Fund may quote its yield in
advertisements or in reports to shareholders. Yield information may be useful in
reviewing the performance of a Fund and for providing a basis for comparison
with other investment alternatives. However, since net investment income of a
Fund changes in response to fluctuations in interest rates and Fund expenses,
any given yield quotation should not be considered representative of a Fund's
yields for any future period.
The method of calculating each Fund's yield is set forth in the Statement
of Additional Information. Before investing, the investor may want to determine
which investment -- tax-free or taxable -- will result in a higher after-tax
return. To do this, the yield on the tax-free investment should be divided by
the decimal determined by subtracting from 1 the highest Federal tax rate to
which the investor currently is subject. For example, if the tax-free yield is
6% and the investor's maximum tax bracket is 36%, the computation is:
6% Tax-Free Yield /(1-.36 Tax Rate) = 6/.64 = 9.38% Taxable Yield. In this
example, the investor's after-tax return will be higher from the 6% tax-free
investment if available taxable yields are below 9.38%. Conversely, the taxable
investment will provide a higher return when taxable yields exceed 9.38%. This
is only an example and is not necessarily reflective of a Fund's yield. The tax
equivalent yield will be lower for investors in the lower income brackets.
Comparative performance information may also be used from time to time in
advertising or marketing the Funds' shares, including data from Lipper
Analytical Services, Inc., IBC/Donoghue's Money Fund Report, Bank Rate Monitor
and other industry publications.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the SEC under the Act. Copies of the Registration Statements may be
obtained at a reasonable charge from the SEC or may be examined, without charge,
at the offices of the SEC in Washington, D.C.
17
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INVESTMENT ADVISER
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
EVERGREEN INSTITUTIONAL MONEY MARKET FUND
EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET FUND
CUSTODIAN
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
DISTRIBUTOR
Evergreen Keystone Distributor, Inc., 125 West 55th Street, New York, New York
10019
49311
<PAGE>
EVERGREEN MUNICIPAL TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
October 31, 1996
As Amended May 20, 1997
THE EVERGREEN MONEY MARKET FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-343-2898
Evergreen Money Market Fund ("Money Market")
Evergreen Tax Exempt Money Market Fund ("Tax Exempt")
Evergreen Pennsylvania Tax-Free Money Market Fund (formerly FFB Pennsylvania
Tax-Free Money Market Fund)("Pennsylvania")
Evergreen Treasury Money Market Fund
(formerly First Union Treasury Money Market Portfolio)("Treasury")
Evergreen Institutional Money Market Fund ("Institutional Money Market")
Evergreen Institutional Tax Exempt Money Market Fund ("Institutional Tax
Exempt")
Evergreen Institutional Treasury Money Market Fund ("Institutional Treasury")
This Statement of Additional Information pertains to all classes of shares of
the Funds listed above. It is not a prospectus and should be read in conjunction
with the Prospectus dated May 16, 1997, as supplemented from time to time, for
the Fund in which you are making or contemplating an investment. The Evergreen
Money Market Funds are offered through six separate prospectuses: one offering
Class A, Class B and Class C shares of Money Market and Class A shares of Tax
Exempt and Treasury, one offering Class A shares of Pennsylvania, one offering
Class Y shares of Money Market, Tax Exempt and Treasury, one offering Class Y
shares of Pennsylvania, one offering Institutional Service shares of
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury
and one offering Institutional shares of Institutional Money Market,
Institutional Tax Exempt and Institutional Treasury. Copies of each Prospectus
may be obtained without charge by calling the number listed above.
TABLE OF CONTENTS
Investment Objectives and Policies................................ 2
Investment Restrictions........................................... 4
Certain Risk Considerations....................................... 8
Management........................................................ 8
Investment Advisers............................................... 12
Distribution Plans................................................ 16
Allocation of Brokerage........................................... 18
Additional Tax Information........................................ 19
Net Asset Value................................................... 21
Purchase of Shares................................................ 21
General Information About the Funds............................... 25
Performance Information........................................... 27
Financial Statements.............................................. 29
Appendix A - Description of Bond, Municipal Note and Commercial Paper Ratings
Appendix B - Special Considerations Relating to Investment In Pennsylvania
Municipal Issuers
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds -Investment Objectives and Policies" in each
Fund's Prospectus)
The investment objective of each Fund and a description of the securities in
which each Fund may invest is set forth under "Description of the Funds -
Investment Objectives and Policies" in the relevant Prospectus. The following
expands upon the discussion in the Prospectuses regarding certain investments of
the following Funds:
Tax Exempt, Pennsylvania and Institutional Tax Exempt
To attain its objectives, each Fund invests primarily in high quality Municipal
Obligations which have remaining maturities not exceeding thirteen months. Each
Fund maintains a dollar-weighted average portfolio maturity of 90 days or less.
For information concerning the investment quality of Municipal Obligations that
may be purchased by the Fund, see "Investment Objective and Policies" in the
Prospectus. The tax-exempt status of a Municipal Obligation is determined by the
issuer's bond counsel at the time of the issuance of the security.
For the purpose of certain requirements under the Investment Company Act of 1940
(the "1940 Act") and each Fund's various investment restrictions, identification
of the "issuer" of a municipal security depends on the terms and conditions of
the security. When the assets and revenues of a political subdivision are
separate from those of the government which created the subdivision and the
security is backed only by the assets and revenues of the subdivision, the
subdivision would be deemed to be the sole issuer. Similarly, in the case of an
industrial development bond, if that bond is backed only by the assets and
revenues of the non-governmental user, then the non-governmental user would be
deemed to be the sole issuer. If, however, in either case, the creating
government or some other entity guarantees the security, the guarantee would be
considered a separate security and would be treated as an issue of the
government or other agency.
Municipal bonds may be categorized as "general obligation" or "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
secured by the net revenue derived from a particular facility or group of
facilities or, in some cases, the proceeds of a special excise or other specific
revenue source, but not by the general taxing power. Industrial development
bonds are, in most cases, revenue bonds and do not generally carry the pledge of
the credit of the issuing municipality or public authority.
Municipal Notes. Municipal notes include, but are not limited to, tax
anticipation notes (TANs), bond anticipation notes (BANs), revenue anticipation
notes (RANs), construction loan notes and project notes. Notes sold as interim
financing in anticipation of collection of taxes, a bond sale or receipt of
other revenue are usually general obligations of the issuer. Project notes are
issued by local housing authorities to finance urban renewal and public housing
projects and are secured by the full faith and credit of the U.S. Government.
Municipal Commercial Paper. Municipal commercial paper is issued to finance
seasonal working capital needs or as short-term financing in anticipation of
longer-term debt. It is paid from the general revenues of the issuer or
refinanced with additional issuances of commercial paper or long-term debt.
Municipal Leases. Municipal leases, which may take the form of a lease or an
installment purchase or conditional sale contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications equipment
and other capital assets. Municipal leases frequently have special risks not
normally associated with general obligation or revenue bonds. Leases and
installment purchases or conditional sale contracts (which normally provide for
title to the leased asset to pass eventually to the government issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt-issuance limitations of many state constitutions and statutes
are deemed to be inapplicable because of the inclusion in many leases or
contracts of "non-appropriation" clauses that provide that the governmental
issuer has no obligation to make future payments under the lease or contract
unless money is appropriated for such purpose by the appropriate legislative
body on a yearly or other periodic basis. These types of municipal leases may be
considered illiquid and subject to the 10% limitation of investment in illiquid
securities set forth under "Investment Restrictions" contained herein. The Board
of Trustees of each Trust under which each Fund operates may adopt guidelines
and delegate to the Adviser (as defined below) the daily function of determining
and monitoring the liquidity of municipal leases. In making such determination,
the Board and the Adviser may consider such factors as the frequency of trades
for the obligations, the number of dealers willing to purchase or sell the
obligations and the number of other potential buyers and the nature of the
marketplace for the obligations, including the time needed to dispose of the
obligations and the method of soliciting offers. If the Board determines that
any municipal leases are illiquid, such leases will be subject to the 10%
limitation on investments in illiquid securities.
For purposes of diversification under the 1940 Act, the identification of the
issuer of Municipal Obligations depends on the terms and conditions of the
obligation. If the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from those of the government
creating the subdivision and the obligation is backed only by the assets and
revenues of the subdivision, such subdivision would be regarded as the sole
issuer. Similarly, in the case of an industrial development bond, if the bond is
backed only by the assets and revenues of the non-governmental user, the
non-governmental user would be deemed to be the sole issuer. If in either case
the creating government or another entity guarantees an obligation, the
guarantee would be considered a separate security and be treated as an issue of
such government or entity.
As described in each Fund's Prospectus, the Fund may, under limited
circumstances, elect to invest in certain taxable securities and repurchase
agreements with respect to those securities. A Fund will enter into repurchase
agreements only with broker-dealers, domestic banks or recognized financial
institutions which, in the opinion of the Fund's Adviser, present minimal credit
risks. In the event of default by the seller under a repurchase agreement, a
Fund may have problems in exercising its rights to the underlying securities and
may incur costs and experience time delays in connection with the disposition of
such securities. The Fund's Adviser will monitor the value of the underlying
security at the time the transaction is entered into and at all times during the
term of the repurchase agreement to ensure that the value of the security always
equals or exceeds the agreed upon repurchase price. Repurchase agreements may be
considered to be loans under the 1940 Act, collateralized by the underlying
securities.
Each Fund may engage in the following investment activities:
Securities With Put Rights (or "stand-by commitments"). When a Fund
purchases Municipal Obligations it may obtain the right to resell them,
or "put" them, to the seller (a broker-dealer or bank) at an agreed
upon price within a specific period prior to their maturity date. The
Fund does not limit the percentage of its assets that may be invested
in securities with put rights.
The amount payable to a Fund by the seller upon its exercise of a put
will normally be (i) the Fund's acquisition cost of the securities
(excluding any accrued interest which the Fund paid on their
acquisition), less any amortized market premium plus any amortized
market or original issue discount during the period the Fund owned the
securities, plus (ii) all interest accrued on the securities since the
last interest payment date during the period the securities were owned
by the Fund. Absent unusual circumstances, each Fund values the
underlying securities at their amortized cost. Accordingly, the amount
payable by a broker-dealer or bank during the time a put is exercisable
will be substantially the same as the value of the underlying
securities.
A Fund's right to exercise a put is unconditional and unqualified. A
put is not transferable by the Fund, although the Fund may sell the
underlying securities to a third party at any time. Each Fund expects
that puts will generally be available without any additional direct or
indirect cost. However, if necessary and advisable, the Fund may pay
for certain puts either separately in cash or by paying a higher price
for portfolio securities which are acquired subject to such a put (thus
reducing the yield to maturity otherwise available to the same
securities). Thus, the aggregate price paid for securities with put
rights may be higher than the price that would otherwise be paid.
The acquisition of a put will not affect the valuation of the
underlying security, which will continue to be valued in accordance
with the amortized cost method. The actual put will be valued at zero
in determining net asset value. Where a Fund pays directly or
indirectly for a put, its cost will be reflected as an unrealized loss
for the period during which the put is held by that Fund and will be
reflected in realized gain or loss when the put is exercised or
expires. If the value of the underlying security increases, the
potential for unrealized or realized gain is reduced by the cost of the
put.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
.........Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
Adviser without shareholder approval, subject to review and approval by the
Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.
1........Concentration of Assets in Any One Issuer
.........Tax Exempt, Pennsylvania, Money Market, Institutional Tax Exempt and
Institutional Money Market may not invest more than 5% of their total assets, at
the time of the investment in question, in the securities of any one issuer
other than the U.S. government and its agencies or instrumentalities, except
that up to 25% of the value of Tax Exempt's, Institutional Tax Exempt's and
Pennsylvania's total assets may be invested without regard to such 5%
limitation. For this purpose each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues industrial development bonds on behalf of a
private entity, will be regarded as a separate issuer for determining the
diversification of each Fund's portfolio.
2........Ten Percent Limitation on Securities of Any One Issuer
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market nor Institutional Tax Exempt may purchase more than 10% of any class of
securities of any one issuer other than the U.S. government and its agencies or
instrumentalities.
3........Investment for Purposes of Control or Management
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market* nor Institutional Tax Exempt* may invest in companies for the purpose of
exercising control or management.
4........Purchase of Securities on Margin
.........Neither Money Market, Pennsylvania, Tax Exempt, Treasury, Institutional
Money Market*, Institutional Tax Exempt* nor Institutional Treasury* may
purchase securities on margin, except that each Fund may obtain such short-term
credits as may be necessary for the clearance of transactions. A deposit or
payment by a Fund of initial or variation margin in connection with financial
futures contracts or related options transactions is not considered the purchase
of a security on margin.
5........Unseasoned Issuers
.........Money Market and Institutional Money Market* may not invest more than
5% of their total assets in securities of unseasoned issuers that have been in
continuous operation for less than three years, including operating periods of
their predecessors.
.........Tax Exempt and Institutional Tax Exempt* may not invest more than 5% of
their total assets in taxable securities of unseasoned issuers that have been in
continuous operation for less than three years, including operating periods of
their predecessors, except that (i) each Fund may invest in obligations issued
or guaranteed by the U.S. government and its agencies or instrumentalities, and
(ii) each Fund may invest in municipal securities.
6........Underwriting
.........Money Market, Pennsylvania, Tax Exempt, Institutional Money Market and
Institutional Tax Exempt may not engage in the business of underwriting the
securities of other issuers; provided that the purchase by Tax Exempt and
Institutional Tax Exempt of municipal securities or other permitted investments,
directly from the issuer thereof (or from an underwriter for an issuer) and the
later disposition of such securities in accordance with the Fund's investment
program shall not be deemed to be an underwriting.
7........Interests in Oil, Gas or Other Mineral Exploration or Development
Programs
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market* nor Institutional Tax Exempt* may purchase, sell or invest in interests
in oil, gas or other mineral exploration or development programs.
8........Concentration in Any One Industry
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market nor Institutional Tax Exempt may invest 25% or more of its total assets
in the securities of issuers conducting their principal business activities in
any one industry; provided, that this limitation shall not apply to obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, or with respect to Pennsylvania, Tax Exempt and Institutional
Tax Exempt, to municipal securities and certificates of deposit and bankers'
acceptances issued by domestic branches of U.S. banks.
9........Warrants
.........Tax Exempt and Institutional Tax Exempt* may not invest more than 5% of
their total net assets in warrants, and, of this amount, no more than 2% of the
Fund's total net assets may be invested in warrants that are listed on neither
the New York nor the American Stock Exchange.
10.......Ownership by Trustees/Officers
.........Neither Money Market, Tax Exempt, Treasury, Institutional Money
Market*, Institutional Tax Exempt* nor Institutional Treasury* may purchase or
retain the securities of any issuer if (i) one or more officers or Trustees of a
Fund or its investment adviser individually owns or would own, directly or
beneficially, more than 1/2 of 1% of the securities of such issuer, and (ii) in
the aggregate, such persons own or would own, directly or beneficially, more
than 5% of such securities.
11.......Short Sales
.........Neither Money Market, Tax Exempt, Treasury, Institutional Money
Market*, Institutional Tax Exempt* nor Institutional Treasury* may make short
sales of securities or maintain a short position; except that, in the case of
Treasury, Institutional Treasury, Institutional Tax Exempt and Institutional
Money Market, at all times when a short position is open it owns an equal amount
of such securities or of securities which, without payment of any further
consideration are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short.
12.......Lending of Funds and Securities
.........Tax Exempt and Institutional Tax Exempt may not lend their funds to
other persons; however, they may purchase issues of debt securities, enter into
repurchase agreements and acquire privately negotiated loans made to municipal
borrowers.
.........Money Market and Institutional Money Market may not lend their funds to
other persons, provided that they may purchase money market securities or enter
into repurchase agreements.
.........Treasury and Institutional Treasury will not lend any of their assets,
except that they may purchase or hold U.S. Treasury obligations, including
repurchase agreements.
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market nor Institutional Tax Exempt may lend its portfolio securities, unless
the borrower is a broker, dealer or financial institution that pledges and
maintains collateral with the Fund consisting of cash, letters of credit or
securities issued or guaranteed by the U.S. government having a value at all
times not less than 100% of the current market value of the loaned securities,
including accrued interest, provided that the aggregate amount of such loans
shall not exceed 30% of the Fund's total assets (5% in the case of
Pennsylvania).
13.......Commodities
......... Money Market, Tax Exempt, Treasury*, Institutional Treasury*,
Institutional Money Market* and Institutional Tax Exempt* may not purchase, sell
or invest in commodities, commodity contracts or financial futures contracts.
14.......Real Estate
.........The Funds may not purchase, sell or invest in real estate or interests
in real estate, except that Money Market and Institutional Money Market may
purchase, sell or invest in marketable securities of companies holding real
estate or interests in real estate, including real estate investment trusts, Tax
Exempt and Institutional Tax Exempt may purchase municipal securities and other
debt securities secured by real estate or interests therein and Pennsylvania may
purchase securities secured by real estate or interests therein, or securities
issued by companies which invest in real estate or interests therein.
15.......Borrowing, Senior Securities, Reverse Repurchase Agreements
......... Money Market, Tax Exempt, Institutional Money Market and Institutional
Tax Exempt may not borrow money, issue senior securities or enter into reverse
repurchase agreements, except for temporary or emergency purposes, and not for
leveraging, and then in amounts not in excess of 10% of the value of the Fund's
total assets at the time of such borrowing; or mortgage, pledge or hypothecate
any assets except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of the
Fund's total assets at the time of such borrowing, provided that the Fund will
not purchase any securities at times when any borrowings (including reverse
repurchase agreements) are outstanding. The Funds will not enter into reverse
repurchase agreements exceeding 5% of the value of their total assets.
.........Pennsylvania shall not borrow money, issue senior securities, or
pledge, mortgage or hypothecate its assets, except that the Fund may borrow from
banks if immediately after each borrowing there is asset coverage of at least
300%.
.........Treasury and Institutional Treasury will not issue senior securities
except that each Fund may borrow money directly, as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in excess of 5%
of the value of its total assets, or in an amount up to one- third of the value
of its total assets, including the amount borrowed, in order to meet redemption
requests without immediately selling portfolio instruments. Any such borrowings
need not be collateralized. Each Fund will not purchase any securities while
borrowings in excess of 5% of the total value of its total assets are
outstanding. Each Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes. Treasury and Institutional Treasury
will not mortgage, pledge or hypothecate any assets except to secure permitted
borrowings. In these cases, Treasury and Institutional Treasury may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the pledge.
16.......Options
.........Money Market, Tax Exempt, Institutional Money Market* and Institutional
Tax Exempt* may not write, purchase or sell put or call options, or combinations
thereof, except Money Market and Institutional Money Market may do so as
permitted under "Description of the Funds - Investment Objective and Policies"
in each Fund's Prospectus and Tax Exempt and Institutional Tax Exempt may
purchase securities with rights to put securities to the seller in accordance
with its investment program.
.........Pennsylvania shall not write, purchase or sell puts, calls, warrants or
options or any combination thereof, except that the Fund may purchase securities
with put or demand rights.
17.......Investment in Municipal Securities
.........Pennsylvania, Tax Exempt and Institutional Tax Exempt may not invest
more than 20% of its total assets in securities other than municipal securities
(as described under "Description of Funds - Investment Objectives and Policies"
in each Fund's Prospectus), unless extraordinary circumstances dictate a more
defensive posture.
18.......Investment in Money Market Securities
.........Money Market may not purchase any securities other than money market
instruments(as described under "Description of Funds - Investment Objectives and
Policies" in the Fund's Prospectus).
19.......Investing in Securities of Other Investment Companies
.........Treasury*, Money Market*, Pennsylvania*, Tax Exempt*, Institutional
Treasury*, Institutional Money Market* and Institutional Tax Exempt* will
purchase securities of investment companies only in open-market transactions
involving customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation or
acquisition of assets. It should be noted that investment companies incur
certain expenses such as management fees and therefore any investment by the
Funds in shares of another investment company would be subject to such duplicate
expenses.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
CERTAIN RISK CONSIDERATIONS
There can be no assurance that a Fund will achieve its investment objective and
an investment in the Fund involves certain risks which are described under
"Description of the Funds - Investment Objectives and Policies" in each Fund's
Prospectus.
MANAGEMENT
The age, address and principal occupation of the Trustees and executive officers
of Evergreen Investment Trust (formerly First Union Funds), The Evergreen
Municipal Trust, Evergreen Tax Free Trust (formerly FFB Funds Trust) and
Evergreen Money Market Trust (each a "Trust" and collectively the "Trusts"),
during the past five years are set forth below:
Laurence B. Ashkin (68), 180 East Pearson Street, Chicago, IL-Trustee. Real
estate developer and construction consultant since 1980; President of Centrum
Equities since 1987 and Centrum Properties, Inc. since 1980.
Foster Bam (70), Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.
James S. Howell (72), 4124 Crossgate Road, Charlotte, NC-Chairman of the
Evergreen Group of Mutual Funds and Trustee. Retired Vice President of Lance
Inc. (food manufacturing); Chairman of the Distribution Comm. Foundation for the
Carolinas from 1989 to 1993.
Gerald M. McDonnell (57), 821 Regency Drive, Charlotte, NC-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
Thomas L. McVerry (58), 4419 Parkview Drive, Charlotte, NC-Trustee. Director of
Carolina Cooperative Federal Credit Union since 1990 and Rexham Corporation from
1988 to 1990; Vice President of Rexham Industries, Inc. (diversified
manufacturer) from 1989 to 1990. Vice President-Finance and Resources, Rexham
Corporation from 1979 to 1990.
William Walt Pettit* (41), Holcomb and Pettit, P.A., 227 West Trade St.,
Charlotte, NC-Trustee. Partner in the law firm Holcomb and Pettit, P.A. since
1990.
Russell A. Salton, III, M.D. (49), 205 Regency Executive Park, Charlotte, NC-
Trustee. Medical Director, U.S. Healthcare of Charlotte, North Carolina since
1996; President, Primary Physician Care from 1990 to 1996.
Michael S. Scofield (53), 212 S. Tryon Street Suite 980, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since 1969.
Robert J. Jeffries (73), 2118 New Bedford Drive, Sun City Center, FL-Trustee
Emeritus. Corporate consultant since 1967.
John J. Pileggi (37), 230 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Consultant to BISYS Fund Services since 1996. Senior Managing
Director, Furman Selz LLC since 1992, Managing Director from 1984 to 1992.
George O. Martinez (37), 3435 Stelzer Road, Columbus, OH-Secretary. Senior Vice
President/Director of Administration and Regulatory Services, BISYS Fund
Services since April 1995. Vice President/Assistant General Counsel, Alliance
Capital Management from 1988 to 1995.
The officers listed above hold the same positions with thirteen investment
companies offering a total of forty-one investment funds within the Evergreen
mutual fund complex. Messrs. Howell, Salton and Scofield are Trustees of all
thirteen investment companies. Messrs. McDonnell, McVerry and Pettit are
Trustees of twelve of the investment companies (excluded is Evergreen Variable
Trust). Messrs. Ashkin, Bam and Jeffries are Trustees of eleven of the
investment companies (excluded are Evergreen Variable Trust and Evergreen
Investment Trust.) ----------
* Mr. Pettit may be deemed to be an "interested person" within the meaning of
the 1940 Act.
The officers of the Trusts are all officers and/or employees of or consultants
to BISYS Fund Services ("BISYS"). BISYS is an affiliate of Evergreen Keystone
Distributor, Inc.
("EKD"), the distributor of each Class of shares of each Fund.
The Funds do not pay any direct remuneration to any officer or Trustee who is an
"affiliated person" of either First Union National Bank of North Carolina or
Evergreen Asset Management Corp. or their affiliates. See "Investment Adviser."
Currently, none of the Trustees is an "affiliated person" as defined in the 1940
Act. Evergreen Investment Trust, Evergreen Money Market Trust and The Evergreen
Municipal Trust pay each Trustee who is not an "affiliated person" an annual
retainer and a fee per meeting attended, plus expenses. The Evergreen Tax Free
Trust pays each Trustee who is not an "affiliated person" a fee per meeting
attended, plus expenses, as follows:
Name of Fund Annual Retainer Meeting Fee
Evergreen Investment Trust - $15,000* $2,000*
Treasury
Evergreen Money Market Trust - $4,000**
Money Market $100
Institutional Money Market $100
Institutional Treasury $100
The Evergreen Municipal Trust - **
Tax Exempt $100
Institutional Tax Exempt $100
Evergreen Tax Free Trust - -0-
Pennsylvania $100
- ---------------------------
* The annual retainer and the per meeting fee paid by Evergreen Investment Trust
to each Trustee are allocated among its fourteen series.
** Allocated among the Evergreen Money Market Trust (which offers three
investment series) and The Evergreen Municipal Trust (which offers five
investment series).
In addition:
(1) Each non-affiliated Trustee is paid a fee of $500 for each special
telephonic meeting in which he participates, regardless of the number of Funds
for which the meeting is called.
(2) The Chairman of the Board of the Evergreen group of mutual funds is
paid an annual retainer of $5,000, and the Chairman of the Audit
Committee is paid an annual retainer of $2,000. These retainers are
allocated among all the funds in the Evergreen group of mutual funds,
based upon assets.
(3) Each member of the Audit Committee is paid an annual retainer of $500.
(4) Any individual who has been appointed as a Trustee Emeritus of one or
more funds in the Evergreen group of mutual funds is paid one-half of
the fees that are payable to regular Trustees.
Set forth below for each of the Trustees is the aggregate compensation paid
to such Trustees by each of Evergreen Investment Trust, The Evergreen Municipal
Trust, Evergreen Money Market Trust and by Evergreen Tax Free Trust for the
one-year period ended February 28, 1997.
Aggregate Compensation from Trust
Total
Compensation
Evergreen The From Trusts
Money Evergreen Evergreen Evergreen & Fund
Name of Market Municipal Investment Tax Free Complex Paid
Trustee Trust Trust Trust Trust to Trustees
Laurence Ashkin $4,853 $4,119 $ 0 $1,017 $33,621
Foster Bam 4,553 3,719 0 817 30,921
James S. Howell 4,690 4,196 27,817 1,009 66,000
Gerald M.
McDonnell 3,845 3,417 23,927 806 53,300
Thomas L.
McVerry 4,377 3,941 26,637 1,006 59,500
William Walt
Pettit 3,993 3,724 25,459 1,009 57,000
Russell A.
Salton, III, M.D. 3,993 3,724 25,458 1,009 61,000
Michael S.
Scofield 4,070 3,750 25,458 1,009 61,102
Robert Jeffries* 1,867 1,523 0 411 13,305
- --------------------
*Robert J. Jeffries has been serving as a Trustee Emeritus since January 1,
1996.
As of the date of this Statement of Additional Information, the officers
and Trustees of each of the Trusts as a group owned less than 1% of the
outstanding shares of any of the Funds.
Set forth below is information with respect to each person, who, to each
Fund's knowledge, owned beneficially or of record more than 5% of a class of
each Fund's total outstanding shares and their aggregate ownership of the Fund's
total outstanding shares as of April 30, 1998.
Name of % of
Name and Address* Fund/Class No. of Shares Class/Fund
- ------------------ ---------- ---------- ---
First Union National Bank of NC Money Market/A 7,812 26.49%/20.04%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union National Bank Money Market/A 136,412,042 6.36%/4.81%
Trust Accounts
Attn: Ginny Batten CMG 1151-2
401 Tryon Street 3rd Fl.
Charlotte, NC 28288
FUNB Money Market/A 110,393,159 5.15%/3.90%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
FUNB Money Market/A 243,603,023 11.37%/8.60%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
FUNB Money Market/A 264,978,416 12.36%/9.35%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union National Bank Money Market/Y 285,500,261 42.18%/10.08%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S Tryon Street
Charlotte, NC 28202-1911
Pitcairn Trust Co. Money Market/Y 65,103,166 9.62%/3.00%
One Pitcairn Place
Jenkintown, PA 19046
First Union National Bank Tax-Exempt/A 41,099,739 5.98%/3.59%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union National Bank Tax-Exempt/A 202,776,147 29.49%/17.73%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-1164
First Union National Bank Tax-Exempt/A 157,777,336 22.95%/13.80%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-1164
First Union National Bank Tax-Exempt/A 88,280,121 12.84%/7.72%
Trust Accounts
Attn: Ginny Batten CMG 1151-2
301 S. Tryon Street
Charlotte, NC 28202-1911
First Union National Bank Tax-Exempt/Y 109,670,322 24.05%/19.59%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-151
301 S. Tryon Street
Charlotte, NC 28288
First Union National Bank Treasury/A 257,130,556 11.44%/8.49%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union National Bank Treasury/A 450,657,782 20.05%/15.40%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union National Bank Treasury/A 144,294,896 6.42%/4.93%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union National Bank Treasury/A 188,910,576 8.41%/6.46%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union National Bank Treasury/A 519,991,159 23.14%/17.77%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28202-1910
First Union National Bank Treasury/Y 546,702,320 88.41%/18.69%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Johnathan B. Detwiller Pennsylvania/Y 2,932,014 8.83%/4.65%
P.O. Box 69
Phoenixville, PA 19460-0069
First Union National Bank Pennsylvania/Y 10,379,554 31.27%/16.46%
Trust Accounts
Attn: Ginny Batten CMG 11512
301 S. Tryon Street
Charlotte, NC 28202-0001
Agnes C. Kim Pennsylvania/Y 2,335,497 7.04%/3.70%
760 Conshohocken State Rd.
Gladuyne, PA 19035-1416
FUNB Pennsylvania/A 21,890,603 73.32%/34.72%
Attn: Cap Finance GL
230 S. Tryon St.
Charlotte, NC 28202-3215
Hans P. Utsch Pennsylvania/A 3,648,793 12.22%/5.79%
Susan Utsch JT WROS
819 Church Road
Wayne, PA 19087-4714
First Union National Bank Inst MMkt/I 454,069,389 91.95%/29.21%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
First Union National Bank Inst MMkt/IS 263,973,048 39.74%/22.79%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
Ivax Corporation Inst MMkt/IS 40,411,193 6.08%/3.49%
Attn: Jason White
4400 Biscayne Blvd. 7th Floor
Miami, FL 33137-3212
First Union National Bank Inst Tx-Ex MM/I 155,276,582 100.00%/91.72%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
First Union National Bank Inst Tx-Ex MM/IS 13,616,585 97.12%/8.04%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
First Union National Bank Inst Treas MM/I 527,222,486 99.33%/59.21%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
First Union National Bank Inst Treas MM/I 277,915,322 77.27%/31.21%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Floor
Charlotte, NC 28202-1911
First Union National Bank of North Carolina and its affiliates act in various
capacities for numerous accounts. As a result of its ownership on April 30,
1997, of 88.41% of Class Y shares and 46.32% Class A shares of Treasury Money
Market Fund, 31.27% and 73.32%, respectively, of Class Y and Class A shares of
Pennsylvania Money Market Fund, 42.18% of Class Y and 55.37% of Class A shares
of Money Market Fund and 58.42% of Tax Exempt Money Market Fund, First Union may
be deemed to "control" those Funds as that term is defined in the 1940 Act.
INVESTMENT ADVISERS
(See also "Management of the Funds" in each Fund's Prospectus)
The investment adviser of Money Market and Tax Exempt is Evergreen Asset
Management Corp., a New York corporation, with offices at 2500 Westchester
Avenue, Purchase, New York ("Evergreen Asset" or the "Adviser"). Evergreen Asset
is owned by First Union National Bank of North Carolina ("FUNB" or the
"Adviser") which, in turn, is a subsidiary of First Union Corporation ("First
Union"), a bank holding company headquartered in Charlotte, North Carolina. The
investment adviser of Treasury, Institutional Treasury, Institutional Money
Market, Institutional Tax Exempt and Pennsylvania is FUNB which provides
investment advisory services through its Capital Management Group ("CMG"). The
Directors of Evergreen Asset are Richard K. Wagoner and Barbara I. Colvin. The
executive officers of Evergreen Asset are Stephen A. Lieber, Chairman and
Co-Chief Executive Officer, Nola Maddox Falcone, President and Co-Chief
Executive Officer, and Theodore J. Israel, Jr., Executive Vice President.
The partnership interests in Lieber, a New York general partnership, were owned
by Lieber I Corp. and Lieber II Corp., which are both wholly-owned subsidiaries
of FUNB.
Prior to January 1, 1996, First Fidelity Bank, N.A. acted as investment adviser
to Pennsylvania.
Under its Investment Advisory Agreement with each Fund, each Adviser has agreed
to furnish reports, statistical and research services and recommendations with
respect to each Fund's portfolio of investments. In addition, each Adviser
provides office facilities to the Funds and performs a variety of administrative
services. Each Fund pays the cost of all of its other expenses and liabilities,
including expenses and liabilities incurred in connection with maintaining their
registration under the Securities Act of 1933, as amended, and the 1940 Act,
printing prospectuses (for existing shareholders) as they are updated, state
qualifications, mailings, brokerage, custodian and stock transfer charges,
printing, legal and auditing expenses, expenses of shareholder meetings and
reports to shareholders. Notwithstanding the foregoing, each Adviser will pay
the costs of printing and distributing prospectuses used for prospective
shareholders.
The method of computing the investment advisory fee for each Fund is described
in such Fund's Prospectus. The advisory fees paid by each Fund for the three
most recent fiscal periods reflected in its registration statement are set forth
below:
TAX EXEMPT Year Ended Year Ended Year Ended
8/31/96 8/31/95 8/31/94
Advisory Fee $5,540,924 $2,329,035 $2,126,246
Waiver (1,243,131) (558,942) (1,256,653)
----------- --------- -----------
Net Advisory Fee $4,297,793 $1,770,093 $ 869,593
=========== ========== ===========
MONEY MARKET Six Months Year Ended Year Ended Year Ended
Ended 2/28/97 8/31/96 8/31/95 8/31/94
Advisory Fee $6,061,353 $8,346,173 $1,831,518 $1,245,513
Waiver 1,255,415 (2,427,423) (732,723) (974,438)
----------- --------- -----------
Net Advisory Fee 4,805,938 $5,918,750 1,098,795 $ 271,075
========== ========== ===========
PENNSYLVANIA Six Months Year Ended Year Ended
Ended 8/31/96* 2/29/96 2/28/95
Advisory Fee $148,591 $312,440 $ 85,049
Waiver (59,186) (241,213) (85,049)
-------- --------- ---------
Net Advisory Fee $89,405 $ 71,227 0
======== ========= =========
TREASURY Year Ended Eight Months Year Ended
8/31/96 Ended 12/31/94
8/31/95**
Advisory Fee $8,857,503 $2,814,251 $2,549,955
Waiver (2,109,068) (1,258,611) (1,948,237)
---------- --------- ----------
Net Advisory Fee $6,748,435 $1,555,640 $ 601,718
========== ========== ==========
INSTITUTIONAL MONEY Period From 11/19/96
MARKET Through 2/28/97
Advisory Fee $337,302
Waiver (337,302)
---------
Net Advisory Fee 0
=========
INSTITUTIONAL TAX Period From 11/20/96
EXEMPT Through 2/28/97
Advisory Fee $ 77,430
Waiver (77,430)
---------
Net Advisory Fee 0
=========
INSTITUTIONAL TREASURY Period From 11/20/96
Through 2/28/97
Advisory Fee $199,136
Waiver (199,136)
---------
Net Advisory Fee 0
=========
--------------------
* The Fund changed its fiscal year from February 28 to August 31.
** The Fund changed its fiscal year from December 31 to August 31.
Expense Limitations
Evergreen Asset as Adviser to Money Market and Tax Exempt has, pursuant to each
Investment Advisory Agreement, agreed to reimburse each Fund to the extent that
any of these Funds' aggregate operating expenses (including the Adviser's fee,
but excluding interest, taxes, brokerage commissions, and extraordinary
expenses, and for such Funds Class A, Class B and Class C shares, as applicable,
Rule 12b-1 distribution fees and shareholder servicing fees payable) exceed
1.00% of their average net assets for any fiscal year. FUNB as Adviser to
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury
has voluntarily agreed to reimburse each Fund to the extent that any of these
Funds' aggregate operating expenses (including the Adviser's fee, but excluding
interest, taxes, brokerage commissions, and extraordinary expenses, and for such
Funds Institutional Service shares Rule 12b-1 distribution fees and shareholder
servicing fees payable) exceed 0.20 of 1.00 % of their average net assets for
any fiscal year for Institutional shares and .45 of 1.00% for Institutional
Service shares.
The Investment Advisory Agreements are terminable, without the payment of any
penalty, on sixty days' written notice, by a vote of the holders of a majority
of each Fund's outstanding shares, or by a vote of a majority of each Trust's
Trustees or by the respective Adviser. The Investment Advisory Agreements will
automatically terminate in the event of their assignment. Each Investment
Advisory Agreement provides in substance that the Adviser shall not be liable
for any action or failure to act in accordance with its duties thereunder in the
absence of willful misfeasance, bad faith or gross negligence on the part of the
Adviser or of reckless disregard of its obligations thereunder. The Investment
Advisory Agreements with respect to Money Market and Tax Exempt, dated June 30,
1994, were each last approved by the Trustees of each Trust on March 11, 1997,
and will continue from year to year provided that such continuance is approved
annually by a vote of a majority of the Trustees of each Trust including a
majority of those Trustees who are not parties thereto or "interested persons"
(as defined in the 1940 Act) of any such party, cast in person at a meeting duly
called for the purpose of voting on such approval or a majority of the
outstanding voting shares of each Fund. With respect to Treasury, the Investment
Advisory Agreement dated February 28, 1985 and amended from time to time
thereafter was last approved by the Trustees on March 11, 1997, and it will
continue from year to year with respect to each Fund provided that such
continuance is approved annually by a vote of a majority of the Trustees
including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities of the Fund. With respect to Pennsylvania, the
Investment Advisory Agreement dated January 1, 1996 was first approved by the
shareholders of the Fund on December 12, 1995 and will continue until January 1,
1998 and from year to year with respect to the Fund provided that such
continuance is approved annually by a vote of a majority of the Trustees
including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities of the Fund. With respect to Institutional Money
Market, Institutional Tax Exempt and Institutional Treasury, the Investment
Advisory Agreements dated September 30, 1996 were approved by each Fund's
initial shareholder on September 30, 1996, and will continue in effect until
September 30, 1998, and thereafter from year to year provided that their
continuance is approved annually by a vote of a majority of the Trustees of each
Trust including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities of each Fund.
Certain other clients of each Adviser may have investment objectives and
policies similar to those of the Funds. Each Adviser (including the sub-adviser)
may, from time to time, make recommendations which result in the purchase or
sale of a particular security by its other clients simultaneously with a Fund.
If transactions on behalf of more than one client during the same period
increase the demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity. It is the
policy of each Adviser to allocate advisory recommendations and the placing of
orders in a manner which is deemed equitable by the Adviser to the accounts
involved, including the Funds. When two or more of the clients of the Adviser
(including one or more of the Funds) are purchasing or selling the same security
on a given day from the same broker-dealer, such transactions may be averaged as
to price.
Although the investment objectives of the Funds are not the same, and their
investment decisions are made independently of each other, they rely upon the
same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions occur, the Adviser
attempts to allocate the securities, both as to price and quantity, in
accordance with a method deemed equitable to each Fund and consistent with their
different investment objectives. In some cases, simultaneous purchases or sales
could have a beneficial effect, in that the ability of one Fund to participate
in volume transactions may produce better executions for that Fund.
Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to permit
purchase and sales transactions to be effected between each Fund and the other
registered investment companies for which either Evergreen Asset or FUNB acts as
investment adviser or between the Fund and any advisory clients of Evergreen
Asset, FUNB or Lieber. Each Fund may from time to time engage in such
transactions but only in accordance with these procedures and if they are
equitable to each participant and consistent with each participant's investment
objectives.
Prior to July 1, 1995, Federated Administrative Services, a subsidiary of
Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. For the fiscal year ended August 31, 1996, the fiscal period ended August
31, 1995 and the fiscal year ended December 31, 1994, Treasury incurred
$1,255,724, $601,034 and $462,002, respectively, in administrative service
costs.
Prior to January 19, 1996, Furman Selz LLC acted as administrator for
Pennsylvania. For the fiscal period ended January 18, 1996 and the fiscal years
ended February 28, 1995 and 1994 Furman Selz LLC waived its entire
administrative fee.
Evergreen Keystone Investment Services, Inc. ("EKIS") serves as administrator to
the Funds and is entitled to receive a fee based on the average daily net assets
of each Fund at a rate based on the total assets of the mutual funds for which
any affiliate of FUNB serves as investment adviser, calculated daily and payable
monthly at the following annual rates: .050% on the first $7 billion; .035% on
the next $3 billion; .030% on the next $5 billion; .020% on the next $10
billion; .015% on the next $5 billion; and .010% on assets in excess of $30
billion. BISYS, an affiliate of EKD, distributor for the Evergreen Keystone
group of mutual funds, serves as sub-administrator to the Funds and is entitled
to receive a fee from EKIS calculated on the average daily net assets of the
Funds at a rate based on the total assets of the mutual funds for which any
affiliate of FUNB serves as investment adviser, calculated in accordance with
the following schedule: .0100% of the first $7 billion; .0075% on the next $3
billion; .0050% on the next $15 billion; .0040% on assets in excess of $25
billion. The total assets of the mutual funds for which FUNB affiliates serve as
investment adviser were approximately $29 billion as of March 31, 1997.
DISTRIBUTION PLANS
Reference is made to "Management of the Funds - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A shares of Money Market, Tax Exempt, Treasury,
Pennsylvania, Institutional Service shares of Institutional Treasury,
Institutional Money Market and Institutional Tax Exempt, and for Money Market,
its Class B shares and Class C shares and are charged as class expenses, as
accrued. The distribution fees attributable to the Class B shares and Class C
shares are designed to permit an investor to purchase such shares through
broker-dealers without the assessment of a front-end sales charge, while at the
same time permitting the Distributor to compensate broker-dealers in connection
with the sale of such shares. In this regard the purpose and function of the
combined contingent deferred sales charge and distribution services fee on the
Class B shares and the Class C shares, are the same as those of the front-end
sales charge and distribution fee with respect to the Class A shares in that in
each case the sales charge and/or distribution fee provide for the financing of
the distribution of the Fund's shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each Fund with
respect to each of its Class A, Institutional Service, Class B and Class C
shares, as applicable, (to the extent that each Fund offers such classes) (each
a "Plan" and collectively, the "Plans"), the Treasurer of each Fund reports the
amounts expended by the Fund under the Plan and the purposes for which such
expenditures were made to the Trustees of each Trust for their review on a
quarterly basis. Also, each Plan provides that the selection and nomination of
the Independent Trustees are committed to the discretion of such Independent
Trustees then in office.
Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the Securities and Exchange Commission
make payments for distribution services to the Distributor; the latter may in
turn pay part or all of such compensation to brokers or other persons for their
distribution assistance.
Each Plan continues in effect from year to year only if approved at least
annually by each Trust's Board of Trustees or by a vote of a majority of each
Fund's outstanding shares (as defined in the 1940 Act). In either case, by the
vote of a majority of each Trust's Independent Trustees who have no direct or
indirect financial interest in the operation of the Plan or any agreement
related. Each Distribution Agreement will continue in effect from year to year,
if the Board of Trustees approves such continuance annually in the same manner
as the Advisory Agreement.
On October 1, 1996 Institutional Money Market, Institutional Tax Exempt and
Institutional Treasury commenced the offering of each Fund's Institutional
Service shares. Each Plan with respect to such Funds became effective on August
1, 1996 and was initially approved by the sole shareholder of each Fund on
September 30, 1996 and by the unanimous vote of the Trustees of each Trust,
including the disinterested Trustees voting separately, at a meeting called for
that purpose and held on August 1, 1996. The Distribution Agreements between
each Fund and the Distributor, pursuant to which distribution fees are paid
under the Plans by each Fund with respect to its Institutional Service shares
were also approved at the August 1, 1996 meeting by the unanimous vote of the
disinterested Trustees voting separately. Each Plan and Distribution Agreement
will continue in effect for successive twelve-month periods provided, however,
that such continuance is specifically approved at least annually by the Trustees
of each Trust or by vote of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that Class and, in either case, by a
majority of the Trustees of the Trust who are not parties to the Distribution
Agreement or interested persons, as defined in the 1940 Act, of any such party
(other than as Trustees of the Trust) and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related
thereto.
The Plans permit the payment of fees to brokers and others for distribution and
shareholder-related administrative services and to broker-dealers, depository
institutions, financial intermediaries and administrators for administrative
services as to each Fund's Class A, Institutional Service, Class B and Class C
shares as applicable. The Plans are designed to (i) stimulate brokers to provide
distribution and administrative support services to the Funds and holders of
each Fund's Class A, Institutional Service, Class B and Class C shares as
applicable and (ii) stimulate administrators to render administrative support
services to the Funds and holders of such shares. The administrative services
are provided by a representative who has knowledge of the shareholder's
particular circumstances and goals, and include, but are not limited to
providing office space, equipment, telephone facilities, and various personnel
including clerical, supervisory, and computer, as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding each Fund's Class A,
Institutional Service, Class B and Class C shares as applicable; assisting
clients in changing dividend options, account designations, and addresses; and
providing such other services as the Fund reasonably requests for its Class A,
Institutional Service, Class B and Class C shares, as applicable.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of shares of a Fund, (i) no
distribution fees (other than current amounts accrued but not yet paid) would be
owed by the Fund to the Distributor with respect to that Class or Classes of
shares, and (ii) the Fund would not be obligated to pay the Distributor for any
amounts expended under the Distribution Agreement not previously recovered by
the Distributor from distribution services fees in respect of such Class or
Classes of shares through deferred sales charges. However, the Distributor will
ask the Trust's Independent Trustees to take whatever action they deem
appropriate under the circumstances with respect to payment of Advances.
Any change in the Distribution Plan that would materially increase the
distribution expenses of the Fund provided for in the Distribution Plan requires
shareholder approval. Otherwise, the Distribution Plan may be amended by votes
of each Trust's (1) Board of Trustees and (2) Independent Trustees cast in
person at a meeting called for the purpose of voting on such amendment.
Any Plan or Distribution Agreement may be terminated (a) by a Fund without
penalty at any time by a majority vote of the holders of the outstanding voting
securities of the Fund, voting separately by Class or by a majority vote of the
Independent Trustees, or (b) by the Distributor. To terminate any Distribution
Agreement, any party must give the other parties 60 days' written notice; to
terminate a Plan only, the Fund need give no notice to the Distributor. Any
Distribution Agreement will terminate automatically in the event of its
assignment.
Fees Paid Pursuant to Distribution Plans. Treasury, Money Market, Tax Exempt and
Pennsylvania incurred the following distribution service fees:
Treasury. For the fiscal year ended August 31, 1996, $6,381,827 on behalf of
Class A shares.
Money Market. For the six months ended February 28, 1997, $2,698,374 on behalf
of Class A shares and $39,539 on behalf of Class B shares.
Tax Exempt. For the fiscal year ended August 31, 1996, $1,898,665 on behalf of
Class A shares.
Pennsylvania. For the six months ended August 31, 1996 (commencement of
operations), $24,476 on behalf of Class A shares.
For the period from November 19, 1996 through February 28, 1997, Institutional
Money Market, Institutional Tax Exempt and Institutional Treasury paid EKD, the
Distributor, fees of $297,918, $11,834 and $165,813, respectively pursuant to
the Distribution Plans.
ALLOCATION OF BROKERAGE
Decisions regarding each Fund's portfolio are made by its Adviser, subject to
the supervision and control of the Trustees. Orders for the purchase and sale of
securities and other investments are placed by employees of the Adviser, all of
whom, in the case of Evergreen Asset, are associated with Lieber and Company. In
general, the same individuals perform the same functions for the other funds
managed by the Adviser. A Fund will not effect any brokerage transactions with
any broker or dealer affiliated directly or indirectly with the Adviser unless
such transactions are fair and reasonable, under the circumstances, to the
Fund's shareholders. Circumstances that may indicate that such transactions are
fair or reasonable include the frequency of such transactions, the selection
process and the commissions payable in connection with such transactions.
It is anticipated that most purchase and sale transactions involving fixed
income securities will be with the issuer or an underwriter or with major
dealers in such securities acting as principals. Such transactions are normally
on a net basis and generally do not involve payment of brokerage commissions.
However, the cost of securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriter. Purchases or sales from
dealers will normally reflect the spread between bid and ask prices.
In selecting firms to effect securities transactions, the primary consideration
of each Fund shall be prompt execution at the most favorable price. A Fund will
also consider such factors as the price of the securities and the size and
difficulty of execution of the order. If these objectives may be met with more
than one firm, the Fund will also consider the availability of statistical and
investment data and economic facts and opinions helpful to the Fund. To the
extent that receipt of these services for which the Adviser or its affiliates
might otherwise have paid, it would tend to reduce their expenses.
Under Section 11(a) of the Securities Exchange Act of 1934, as amended, and the
rules adopted thereunder by the Securities and Exchange Commission, Lieber may
be compensated for effecting transactions in portfolio securities for a Fund on
a national securities exchange provided the conditions of the rules are met.
Each Fund advised by Evergreen Asset has entered into an agreement with Lieber
authorizing Lieber to retain compensation for brokerage services. In accordance
with such agreement, it is contemplated that Lieber, a member of the New York
and American Stock Exchanges, will, to the extent practicable, provide brokerage
services to the Fund with respect to substantially all securities transactions
effected on the New York and American Stock Exchanges. In such transactions, a
Fund will seek the best execution at the most favorable price while paying a
commission rate no higher than that offered to other clients of Lieber or that
which can be reasonably expected to be offered by an unaffiliated broker-dealer
having comparable execution capability in a similar transaction. However, no
Fund will engage in transactions in which Lieber would be a principal. While no
Fund advised by Evergreen Asset contemplates any ongoing arrangements with other
brokerage firms, brokerage business may be given from time to time to other
firms. In addition, the Trustees have adopted procedures pursuant to Rule 17e-1
under the 1940 Act to ensure that all brokerage transactions with Lieber, as an
affiliated broker-dealer, are fair and reasonable.
Any profits from brokerage commissions accruing to Lieber as a result of
portfolio transactions for the Fund will accrue to FUNB and to its ultimate
parent, First Union. The Investment Advisory Agreements do not provide for a
reduction of the Adviser's fee with respect to any Fund by the amount of any
profits earned by Lieber from brokerage commissions generated by portfolio
transactions of the Fund.
ADDITIONAL TAX INFORMATION
(See also "Taxes" in the Prospectus)
Each Fund has qualified and intends to continue to qualify, for and elect the
tax treatment applicable to regulated investment companies ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
(Such qualification does not involve supervision of management or investment
practices or policies by the Internal Revenue Service.) In order to qualify as a
regulated investment company, a Fund must, among other things, (a) derive at
least 90% of its gross income from dividends, interest, payments with respect to
proceeds from securities loans, gains from the sale or other disposition of
securities or foreign currencies and other income (including gains from options,
futures or forward foreign contracts) derived with respect to its business of
investing in such securities; (b) derive less than 30% of its gross income from
the sale or other disposition of securities, options, futures or forward
contracts (other than those on foreign currencies), or foreign currencies (or
options, futures or forward contracts thereon) that are not directly related to
the RIC's principal business of investing in securities (or options and futures
with respect thereto) held for less than three months; and (c) diversify its
holdings so that, at the end of each quarter of its taxable year, (i) at least
50% of the market value of the Fund's total assets is represented by cash, U.S.
government securities and other securities limited in respect of any one issuer,
to an amount not greater than 5% of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its total assets is invested in the securities of any one issuer (other
than U.S. government securities and securities of other regulated investment
companies). By so qualifying, a Fund is not subject to Federal income tax if it
timely distributes its investment company taxable income and any net realized
capital gains. A 4% nondeductible excise tax will be imposed on a Fund to the
extent it does not meet certain distribution requirements by the end of each
calendar year. Each Fund anticipates meeting such distribution requirements.
Dividends paid by a Fund from investment company taxable income generally will
be taxed to the shareholders as ordinary income. Investment company taxable
income includes net investment income and net realized short-term gains (if
any). Any dividends received by a Fund from domestic corporations will
constitute a portion of the Fund's gross investment income.
Distributions of the excess of net long-term capital gain over net short-term
capital loss are taxable to shareholders (who are not exempt from tax) as
long-term capital gain, regardless of the length of time the shares of a Fund
have been held by such shareholders. Short-term capital gains distributions are
taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.
Distributions of investment company taxable income and any net short-term
capital gains will be taxable as ordinary income as described above to
shareholders (who are not exempt from tax), whether made in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for Federal income tax purposes in each share so received
equal to the net asset value of a share of a Fund on the reinvestment date.
Distributions by each Fund result in a reduction in the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then receive
what is in effect a return of capital upon the distribution which will
nevertheless be taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a taxable gain
or loss depending on its basis in the shares. Such gains or losses will be
treated as a capital gain or loss if the shares are capital assets in the
investor's hands and will be a long-term capital gain or loss if the shares have
been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported by each
shareholder on his or her Federal income tax return. Each shareholder should
consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers to a Fund
and to certify as to its correctness and certain other shareholders may be
subject to a 31% Federal income tax backup withholding requirement on dividends,
distributions of capital gains and redemption proceeds paid to them by the Fund.
If the withholding provisions are applicable, any such dividends or capital gain
distributions to these shareholders, whether taken in cash or reinvested in
additional shares, and any redemption proceeds will be reduced by the amounts
required to be withheld. Investors may wish to consult their own tax advisers
about the applicability of the backup withholding provisions.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to Federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations for Tax Exempt, Pennsylvania and Institutional Tax
Exempt
To the extent that a Fund distributes exempt interest dividends to a
shareholder, interest on indebtedness incurred or continued by such shareholder
to purchase or carry shares of the Fund is not deductible. Furthermore, entities
or persons who are "substantial users" (or related persons) of facilities
financed by "private activity" bonds (some of which were formerly referred to as
"industrial development" bonds) should consult their tax advisers before
purchasing shares of the Fund. "Substantial user" is defined generally as
including a "non-exempt person" who regularly uses in its trade or business a
part of a facility financed from the proceeds of industrial development bonds.
The percentage of the total dividends paid by a Fund with respect to any taxable
year that qualifies as exempt interest dividends will be the same for all
shareholders of the Fund receiving dividends with respect to such year. If a
shareholder receives an exempt interest dividend with respect to any share and
such share has been held for six months or less, any loss on the sale or
exchange of such share will be disallowed to the extent of the exempt interest
dividend amount.
NET ASSET VALUE
The following information supplements that set forth in each Fund's Prospectus
under the subheading "How to Buy Shares - How the Funds Value Their Shares" in
the Section entitled "Purchase and Redemption of Shares."
The public offering price of shares of a Fund is its net asset value. On each
Fund business day on which a purchase or redemption order is received by a Fund
and trading in the types of securities in which a Fund invests might materially
affect the value of Fund shares, the per share net asset value of each such Fund
is computed in accordance with the Declaration of Trust and By-Laws governing
each Fund twice daily, at 12 noon Eastern time and as of the next close of
regular trading on the New York Stock Exchange (the "Exchange") (currently 4:00
p.m. Eastern time) by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding. A Fund business
day is any weekday, exclusive of national holidays on which the Exchange is
closed and Good Friday. Each Fund's securities are valued at amortized cost.
Under this method of valuation, a security is initially valued at its
acquisition cost and, thereafter, a constant straight line amortization of any
discount or premium is assumed each day regardless of the impact of fluctuating
interest rates on the market value of the security. If accurate quotations are
not available, securities will be valued at fair value determined in good faith
by the Board of Trustees.
PURCHASE OF SHARES
The following information supplements that set forth in each Fund's Prospectus
under the heading "Purchase and Redemption of Shares - How To Buy Shares."
General
Shares of each Fund will be offered on a continuous basis at a price equal to
their net asset value without any front-end or contingent deferred sales charges
or with a contingent deferred sales charge (the "deferred sales charge
alternative") as described below. Class Y and Institutional shares which, as
described below, are not offered to the general public or which, in the case of
Institutional shares, are only available to investors having certain
relationships with the Adviser of its affiliates, are offered without any
front-end or contingent deferred sales charges. Shares of each Fund are offered
on a continuous basis through (i) investment dealers that are members of the
National Association of Securities Dealers, Inc. and have entered into selected
dealer agreements with the Distributor ("selected dealers"), (ii) depository
institutions and other financial intermediaries or their affiliates, that have
entered into selected agent agreements with the Distributor ("selected agents"),
or (iii) the Distributor. For Money Market, Tax Exempt, Pennsylvania and
Treasury, the minimum for initial investments is $1,000; there is no minimum for
subsequent investments. For Institutional Money Market, Institutional Tax Exempt
and Institutional Treasury, the minimum amount for initial investments is
$1,000,000; there is no minimum for subsequent investments. The subscriber may
use the Share Purchase Application available from the Distributor for his or her
initial investment. Sales personnel of selected dealers and agents distributing
a Fund's shares may receive differing compensation for selling Class A,
Institutional Service, Class B or Class C shares.
Investors may purchase shares of a Fund in the United States either through
selected dealers or agents or directly through the Distributor. A Fund reserves
the right to suspend the sale of its shares to the public in response to
conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be executed at the
public offering price equal to the net asset value next determined, as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day. In the case of orders for purchase of shares placed through selected
dealers or agents, the applicable public offering price will be the net asset
value as so determined, but only if the selected dealer or agent receives the
order prior to the close of regular trading on the Exchange and transmits it to
the Distributor prior to its close of business that same day (normally 5:00 p.m.
Eastern time). The selected dealer or agent is responsible for transmitting such
orders by 5:00 p.m. If the selected dealer or agent fails to do so, the
investor's right to that day's closing price must be settled between the
investor and the selected dealer or agent. If the selected dealer or agent
receives the order after the close of regular trading on the Exchange, the price
will be based on the net asset value determined as of the close of regular
trading on the Exchange on the next day it is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may place
orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Share Purchase Application. Payment for
shares purchased by telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("ACH"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York time on a Fund
business day, the order to purchase shares is automatically placed the same Fund
business day for non-money market funds, and two days following the day the
order is received for money market funds, and the applicable public offering
price will be the public offering price determined as of the close of business
on such business day. Full and fractional shares are credited to a subscriber's
account in the amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to a Fund, stock certificates are
not issued for any class of shares of any Fund, although such shares remain in
the shareholder's account on the records of a Fund. This facilitates later
redemption and relieves the shareholder of the responsibility for and
inconvenience of lost or stolen certificates.
Alternative Purchase Arrangements
The Funds issue the following classes of shares:
Pennsylvania, Money Market, Tax Exempt, and Treasury: Class A shares; Money
Market: Class B and Class C shares; Pennsylvania, Money Market, Tax Exempt and
Treasury: Class Y shares, which are offered only to (a) persons who at or prior
to December 30, 1994, owned shares in a mutual fund advised by Evergreen Asset,
(b) certain investment advisory clients of the Advisers and their affiliates,
and (c) institutional investors; Institutional Money Market, Institutional Tax
Exempt and Institutional Treasury: Institutional Service shares; and
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury:
Institutional shares.
The classes of shares each represent an interest in the same portfolio of
investments of the Fund, have the same rights and are identical in all respects,
except that (1) only Class A, Class B, Class C and Institutional Service shares
are subject to a Rule 12b-1 distribution fee, (II) Class B and Class C shares
bear the expense of the deferred sales charge, (III) Class B and Class C shares
bear the expense of a higher Rule 12b-1 distribution services fee than Class A
shares and higher transfer agency costs, (IV) with the exception of Class Y
shares, each Class of each Fund has exclusive voting rights with respect to
provisions of the Rule 12b-1 Plan pursuant to which its distribution services
fee is paid which relates to a specific Class and other matters for which
separate Class voting is appropriate under applicable law, provided that, if the
Fund submits to a simultaneous vote of Class A, Class B and Class C shareholders
an amendment to the Rule 12b-1 Plan that would materially increase the amount to
be paid thereunder with respect to the Class A shares, the Class A shareholders,
the Class B shareholders and the Class C shareholders will vote separately by
Class, and (VI) only the Class B shares are subject to a conversion feature.
Each Class has different exchange privileges and certain different shareholder
service options available.
The alternative purchase arrangements permit an investor to choose the method of
purchasing shares that is most beneficial. The decision as to which Class of
shares of Money Market is more beneficial depends primarily on whether or not
the investor wishes to exchange all or part of any Class B or Class C shares
purchased for Class B or Class C shares of another Evergreen Keystone Fund at
some future date. If the investor does not contemplate such an exchange, it is
probably in such investor's best interest to purchase Class A shares. Class A
shares are subject to a lower distribution services fee and, accordingly, pay
correspondingly higher dividends per share than Class B or Class C shares.
The Trustees have determined that currently no conflict of interest exists
between or among the Class A, Class B, Class C and Class Y shares of Money
Market, Tax Exempt, Pennsylvania and Treasury, and the Institutional Service and
Institutional shares of Institutional Money Market, Institutional Tax Exempt and
Institutional Treasury. On an ongoing basis, the Trustees, pursuant to their
fiduciary duties under the 1940 Act and state laws, will seek to ensure that no
such conflict arises.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class B shares
at the public offering price equal to the net asset value per share of the Class
B shares on the date of purchase without the imposition of a sales charge at the
time of purchase. The Class B shares are sold without a front-end sales charge
so that the full amount of the investor's purchase payment is invested in the
Fund initially.
Proceeds from the contingent deferred sales charge are paid to the Distributor
and are used by the Distributor to defray the expenses of the Distributor
related to providing distribution-related services to the Fund in connection
with the sale of the Class B shares, such as the payment of compensation to
selected dealers and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services fee enables the
Fund to sell the Class B shares without a sales charge being deducted at the
time of purchase. The higher distribution services fee incurred by Class B
shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed within six
years after the month of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.
In determining the contingent deferred sales charge applicable to a redemption,
it will be assumed, that the redemption is first of any Class A shares in the
shareholder's Fund account, second of Class B shares held for over six years or
Class B shares acquired pursuant to reinvestment of dividends or distributions
and third of Class B shares held longest during the six-year period.
To illustrate, assume that an investor purchased 1,000 Class B shares at $1 per
share (at a cost of $1,000) and, during such time, the investor has acquired 100
additional Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 500 Class B shares, 100 Class B
shares will not be subject to charge because of dividend reinvestment.
Therefore, of the $500 of the shares redeemed $400 of the redemption proceeds
(400 shares x $1 original purchase price) will be charged at a rate of 4.0% (the
applicable rate in the second year after purchase for a contingent deferred
sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares (i)
following the death or disability, as defined in the Code, of a shareholder, or
(ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2. Conversion Feature. At the end
of the period ending seven years after the end of the calendar month in which
the shareholder's purchase order was accepted, Class B shares will automatically
convert to Class A shares and will no longer be subject to a higher distribution
services fee imposed on Class B shares. Such conversion will be on the basis of
the relative net asset values of the two classes, without the imposition of any
sales load, fee or other charge. The purpose of the conversion feature is to
reduce the distribution services fee paid by holders of Class B shares that have
been outstanding long enough for the Distributor to have been compensated for
the expenses associated with the sale of such shares.
For purposes of conversion to Class A, Class B shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares in
a shareholder's account will be considered to be held in a separate sub-account.
Each time any Class B shares in the shareholder's account (other than those in
the sub-account) convert to Class A, an equal pro-rata portion of the Class B
shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution services fee and transfer agency costs with respect to
Class B shares does not result in the dividends or distributions payable with
respect to other Classes of a Fund's shares being deemed "preferential
dividends" under the Code, and (ii) the conversion of Class B shares to Class A
shares does not constitute a taxable event under Federal income tax law. The
conversion of Class B shares to Class A shares may be suspended if such an
opinion is no longer available at the time such conversion is to occur. In that
event, no further conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee for an indefinite
period which may extend beyond the period ending seven years after the end of
the calendar month in which the shareholder's purchase order was accepted.
Level-Load Alternative--Class C Shares
Investors choosing the level load sales charge alternative purchase Class C
shares at the public offering price equal to the net asset value per share of
the Class C shares on the date of purchase without the imposition of a front-end
sales charge. However, you will pay a 1.0% contingent deferred sales charge if
you redeem shares during the first year after the month of purchase. No charge
is imposed in connection with redemptions made more than one year from the month
of purchase. Class C shares are sold without a front-end sales charge so that
the Fund will receive the full amount of the investor's purchase payment and
after the first year without a contingent deferred sales charge so that the
investor will receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. Class C shares do not convert to any other Class
shares of the Fund. Class C shares incur higher distribution services fees than
Class A shares, and will thus have a higher expense ratio and pay
correspondingly lower dividends than Class A shares.
GENERAL INFORMATION ABOUT THE FUNDS
(See also "Other Information - General Information" in each Fund's Prospectus)
Capitalization and Organization
Evergreen Money Market Fund, Evergreen Institutional Money Market Fund and
Evergreen Institutional Treasury Money Market Fund are each separate series of
Evergreen Money Market Trust, a Massachusetts business trust. Evergreen Tax
Exempt Money Market Fund and Evergreen Institutional Tax Exempt Money Market
Fund are each separate series of The Evergreen Municipal Trust, a Massachusetts
business trust. The Evergreen Treasury Money Market Fund (which prior to July 7,
1995 was known as the First Union Treasury Money Market Portfolio) is a separate
series of Evergreen Investment Trust, a Massachusetts business trust. On July 7,
1995, First Union Funds changed its name to Evergreen Investment Trust. The
Evergreen Pennsylvania Tax Free Money Market Fund is a separate series of
Evergreen Tax Free Trust. Evergreen Tax Free Trust (formerly known as FFB Funds
Trust) is a Massachusetts business trust which was organized on December 4,
1985. Each Trust is governed by a board of trustees. Unless otherwise stated,
references to the "Board of Trustees" or "Trustees" in this Statement of
Additional Information refer to the Trustees of all the Trusts.
Each Fund, other than Pennsylvania, Institutional Money Market, Institutional
Tax Exempt and Institutional Treasury may issue an unlimited number of shares of
beneficial interest with a $0.0001 par value. Pennsylvania, may issue an
unlimited number of shares of beneficial interest with a $.001 par value. All
shares of these Funds have equal rights and privileges. Each share is entitled
to one vote, to participate equally in dividends and distributions declared by
the Funds and on liquidation to their proportionate share of the assets
remaining after satisfaction of outstanding liabilities. Shares of these Funds
are fully paid, nonassessable and fully transferable when issued and have no
pre-emptive, conversion or exchange rights. Fractional shares have
proportionally the same rights, including voting rights, as are provided for a
full share.
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury
may issue an unlimited number of shares of beneficial interest with $0.001 par
value. Each of these Funds has two classes of shares, Institutional Service
Shares and Institutional Shares with identical voting, dividend, liquidation and
other rights, except that the Institutional Service Shares bear distribution
expenses and have exclusive voting rights with respect to their Distribution
Plans.
Under each Trust's Declaration of Trust, each Trustee will continue in office
until the termination of the Fund or his or her earlier death, incapacity,
resignation or removal. Shareholders can remove a Trustee upon a vote of
two-thirds of the outstanding shares of beneficial interest of the Trust.
Vacancies will be filled by a majority of the remaining Trustees, subject to the
1940 Act. As a result, normally no annual or regular meetings of shareholders
will be held, unless otherwise required by the Declaration of Trust of each
Trust or the 1940 Act.
Shares have noncumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of Trustees can elect 100% of the
Trustees if they choose to do so and in such event the holders of the remaining
shares so voting will not be able to elect any Trustees.
The Trustees of each Trust are authorized to reclassify and issue any unissued
shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
more Funds. Any issuance of shares of another series or class would be governed
by the 1940 Act and the law of the Commonwealth of Massachusetts. If shares of
another series of a Trust were issued in connection with the creation of
additional investment portfolios, each share of the newly created portfolio
would normally be entitled to one vote for all purposes. Generally, shares of
all portfolios would vote as a single series on matters, such as the election of
Trustees, that affected all portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.
In addition any Fund may, in the future, create additional classes of shares
which represent an interest in the same investment portfolio. Except for the
different distribution related and other specific costs borne by such additional
classes, they will have the same voting and other rights described for the
existing classes of each Fund.
Procedures for calling a shareholders meeting for the removal of the Trustees of
each Trust, similar to those set forth in Section 16(c) of the 1940 Act, will be
available to shareholders of each Fund. The rights of the holders of shares of a
series of a Fund may not be modified except by the vote of a majority of the
outstanding shares of such series.
Distributor
Evergreen Keystone Distributor, Inc. (the "Distributor"), 125 W. 55th Street,
New York, New York 10019, serves as each Fund's principal underwriter, and as
such may solicit orders from the public to purchase shares of any Fund. The
Distributor is not obligated to sell any specific amount of shares and will
purchase shares for resale only against orders for shares. Under the agreement
between each Fund and the Distributor, each Fund has agreed to indemnify the
Distributor, in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder, against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
Counsel
Sullivan & Worcester LLP, Washington, D.C., serves as counsel to the Funds.
Independent Accountants
Price Waterhouse LLP has been selected to be the independent accountants of
Money Market, Tax Exempt, Institutional Money Market, Institutional Treasury and
Institutional Tax Exempt.
KPMG Peat Marwick LLP has been selected to be the independent auditors of
Treasury and Pennsylvania.
PERFORMANCE INFORMATION
YIELD CALCULATIONS
Each Fund may quote a "Current Yield" or "Effective Yield" from time to time.
The Current Yield is an annualized yield based on the actual total return for a
seven-day period. The Effective Yield is an annualized yield based on a
compounding of the Current Yield. These yields are each computed by first
determining the "Net Change in Account Value" for a hypothetical account having
a share balance of one share at the beginning of a seven-day period ("Beginning
Account Value"), excluding capital changes. The Net Change in Account Value will
generally equal the total dividends declared with respect to the account.
The yields are then computed as follows:
Current Yield = Beginning Account Value x 365/7
Effective Yield = (1 + Total Dividend for 7 days) 365/7-1
Tax Equivalent Yield = Effective Yield
----------------------
1 - Fed Tax rate + [state Tax Rate -
(state Tax Rate x Fed Tax Rate]
Yield fluctuations may reflect changes in a Fund's net investment income, and
portfolio changes resulting from net purchases or net redemptions of the Fund's
shares may affect the yield. Accordingly, a Fund's yield may vary from day to
day, and the yield stated for a particular past period is not necessarily
representative of its future yield. Since the Funds use the amortized cost
method of net asset value computation, it does not anticipate any change in
yield resulting from any unrealized gains or losses or unrealized appreciation
or depreciation not reflected in the yield computation, or change in net asset
value during the period used for computing yield. If any of these conditions
should occur, yield quotations would be suspended. A Fund's yield is not
guaranteed, and the principal is not insured.
Yield information is useful in reviewing a Fund's performance, but because
yields fluctuate, such information cannot necessarily be used to compare an
investment in a Fund's shares with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed or guaranteed fixed yield
for a stated period of time. Shareholders should remember that yield is a
function of the kind and quality of the instruments in the Funds' investment
portfolios, portfolio maturity, operating expenses and market conditions.
It should be recognized that in periods of declining interest rates the yields
will tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates the yields will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new money to a Fund from the
continuous sale of its shares will likely be invested in instruments producing
lower yields than the balance of the Fund's investments, thereby reducing the
current yield of the Fund. In periods of rising interest rates, the opposite can
be expected to occur.
The current yield and effective yield of each Fund (and for Tax Exempt and
Pennsylvania, the tax equivalent yield) for the seven-day period ended February
28, 1997 for each Class of shares offered by the Funds is set forth in the table
below. The table assumes a Federal tax rate of 36% for Tax Exempt, and a
combined Federal and state tax rate for Pennsylvania of 37.8%.
Current Effective Tax Equivalent
Yield Yield Yield
Money Market
Class A 4.86% 4.98% N/A
Class B 4.16% 4.25% N/A
Class C N/A N/A N/A
Class Y 5.16% 5.28% N/A
Tax Exempt
Class A 2.97% 3.01% 4.70%
Class Y 3.27% 3.32% 5.19%
Treasury
Class A 4.61% 4.72% N/A
Class Y 4.91% 5.04% N/A
Pennsylvania
Class A 2.89% 2.93% 4.71%
Class Y 3.03% 3.08% 4.95%
Institutional Tax Exempt
Institutional 3.24% 3.34% 5.22%
Institutional Service 2.99% 3.08% 4.81%
Institutional Money Market
Institutional 5.36% 5.57% N/A
Institutional Service 5.10% 5.30% N/A
Institutional Treasury
Institutional 5.35% 5.38% N/A
Institutional Service 5.10% 5.12% N/A
GENERAL
From time to time, a Fund may quote its performance in advertising and other
types of literature as compared to the performance of the Bank Rate Monitor
National Index which publishes weekly average rates of 50 leading bank and
thrift institution money market deposit accounts. A Fund's performance may also
be compared to those of other mutual funds having similar objectives. This
comparative performance would be expressed as a ranking prepared by Lipper
Analytical Services, Inc., Donoghue's Money Fund Report or similar independent
services monitoring mutual fund performance. A Fund's performance will be
calculated by assuming, to the extent applicable, reinvestment of all capital
gains distributions and income dividends paid. Any such comparisons may be
useful to investors who wish to compare a Fund's past performance with that of
its competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker or to each
Adviser at the address or telephone number shown on the front cover of this
Statement of Additional Information. This Statement of Additional Information
does not contain all the information set forth in the Registration Statement
filed by the Trusts with the Securities and Exchange Commission under the
Securities Act of 1933. Copies of the Registration Statement may be obtained at
a reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
FINANCIAL STATEMENTS
The financial statements of Money Market, Tax Exempt, Treasury, Pennsylvania,
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury
appearing in their most current fiscal year Annual Report to shareholders and
the report thereon of the independent auditors appearing therein, namely Price
Waterhouse LLP (in the case of Money Market, Tax Exempt, Institutional Money
Market, Institutional Tax Exempt and Institutional Treasury) or KPMG Peat
Marwick LLP (in the case of Pennsylvania and Treasury) are incorporated by
reference in this Statement of Additional Information.
You may obtain a copy of each Fund's Annual Report without charge by writing to
EKSC, P.O. Box 2121, Boston, Massachusetts 02106-2121, or by calling EKSC toll
free at 1-800-343-2898.
APPENDIX "A"
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Group. A Standard & Poor's corporate or municipal bond
rating is a current assessment of the credit worthiness of an obligor with
respect to a specific obligation. This assessment of credit worthiness may take
into consideration obligers such as guarantors, insurers or lessees. The debt
rating is not a recommendation to purchase, sell or hold a security, inasmuch as
it does not comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished to Standard & Poor's by
the issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform any audit in connection with the
ratings and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended or withdrawn as a result of changes in,
unavailability of such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in the event
of bankruptcy, reorganization or their arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
any principal.
AA - Debt rated AA also qualifies as high quality debt obligations. Capacity to
pay interest and repay principal is very strong and in the majority of instances
they differ from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than is higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB - rating.
B - Debt rated B has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC - Debt rated CCC has a currently indefinable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC - The rating CC is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.
C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1 - The rating C1 is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in payment default. It is used when interest payments or
principal payments are not made on a due date even if the applicable grace
period has not expired, unless Standard & Poor's believes that such payments
will be made during such grace periods; it will also be used upon a filing of a
bankruptcy petition if debt service payments are jeopardized. Plus (+) or Minus
(-) - To provide more detailed indications of credit quality, the ratings from
AA to CCC may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
NR - indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy. Debt
obligations of issuers outside the United States and its territories are rated
on the same basis as domestic corporate and municipal issues. The ratings
measure the credit worthiness of the obligor but do not take into account
currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings) are
generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states may impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies,
insurance companies and fiduciaries generally.
Moody's Investors Service, Inc. A brief description of the applicable Moody's
Investors Service, Inc. rating symbols and their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Some bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. NOTE: Bonds within the above
categories which possess the strongest investment attributes are designated by
the symbol "1" following the rating.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Duff & Phelps, Inc.: AAA-- highest credit quality, with negligible risk factors;
AA -- high credit quality, with strong protection factors and modest risk, which
may vary very slightly from time to time because of economic conditions;
A--average credit quality with adequate protection factors, but with greater and
more variable risk factors in periods of economic stress. The indicators "+" and
"-" to the AA and A categories indicate the relative position of a credit within
those rating categories.
Fitch Investors Service L.P.: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with very strong ability to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulnerable to adverse changes in economic
conditions and circumstances. The indicators "+" and "-" to the AA, A and BBB
categories indicate the relative position of credit within those
rating categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
o Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
o Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.) Note rating symbols
are as follows:
o SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
o SP-2 Satisfactory capacity to pay principal and interest.
o SP-3 Speculative capacity to pay principal and interest.
Moody's Short-Term Loan Ratings - Moody's ratings for state and municipal
short-term obligations will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of major
importance in bond risk are of lesser importance over the short run. Rating
symbols and their meanings follow:
o MIG 1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
o MIG 2 - This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
o MIG 3 - This designation denotes favorable quality. All security elements are
accounted for but this is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
o MIG 4 - This designation denotes adequate quality. Protecton commonly regarded
as required of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk. COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries the
smallest degree of investment risk. The modifiers 1, 2, and 3 are used to denote
relative strength within this highest classification.
Standard & Poor's Ratings Group: "A" is the highest commercial paper rating
category utilized by Standard & Poor's Ratings Group which uses the numbers 1+,
1, 2 and 3 to denote relative strength within its "A" classification.
Duff & Phelps, Inc.: Duff 1 is the highest commercial paper rating category
utilized by Duff & Phelps which uses + or - to denote relative strength within
this classification. Duff 2 represents good certainty of timely payment, with
minimal risk factors. Duff 3 represents satisfactory protection factors, with
risk factors larger and subject to more variation.
Fitch Investors Service L.P.: F-1+ -- denotes exceptionally strong credit
quality given to issues regarded as having strongest degree of assurance for
timely payment; F-1 -- very strong, with only slightly less degree of assurance
for timely payment than F-1+; F-2 -- good credit quality, carrying a
satisfactory degree of assurance for timely payment.
APPENDIX B
Special Considerations Relating to Investment In Pennsylvania Municipal Issuers
General
The Commonwealth of Pennsylvania, the fifth most populous state,
historically has been identified as a heavy industry state, although that
reputation has changed with the decline of the coal, steel and railroad
industries and the resulting diversification of the Commonwealth's industrial
composition. The major new sources of growth are in the service sector,
including trade, medical and health services, educational and financial
institutions. Manufacturing has fallen behind in both the service sector and the
trade sector as a source of employment in Pennsylvania. The Commonwealth is the
headquarters for 58 major corporations. Pennsylvania's average annual
unemployment rate for the years 1990 has generally not been more than one
percent greater or lesser than the nation's annual average unemployment rate.
The seasonally adjusted unemployment rate for Pennsylvania for March, 1997 was
5.1% and for the United States for March, 1997 was 5.2%. The population of
Pennsylvania, 12,056 million people in 1996 according to the U.S. Bureau of the
Census, represents an increase from the 1987 estimate of 11,811 million. Per
capita income in Pennsylvania for 1995 of $23,558 was higher than the per capita
income of the United States of $23,208. . The Commonwealth's General Fund, which
receives all tax receipts and most other revenues and through which debt service
on all general obligations of the Commonwealth are made, closed fiscal years
ended June 30, 1994, June 30, 1995 and June 30, 1996 with positive fund balances
of $892,940, $688,304 and $635,182, respectively.
Debt
The Commonwealth may incur debt to rehabilitate areas affected by
disaster, debt approved by the electorate, debt for certain capital projects
(for projects such as highways, public improvements, transportation assistance,
flood control, redevelopment assistance, site development and industrial
development) and tax anticipation debt payable in the fiscal year of issuance.
The Commonwealth had outstanding general obligation debt of $5,054 million at
June 30, 1996. The Commonwealth is not permitted to fund deficits between fiscal
years with any form of debt. All year-end deficit balances must be funded within
the succeeding fiscal year's budget. At March 11, 1996, all outstanding general
obligation bonds of the Commonwealth were rated AA- by Standard & Poor's
Corporation and A-1 by Moody's Investors Service, Inc. (see Appendix A). There
can be no assurance that these ratings will remain in effect in the future. Over
the five-year period ending June 30, 2001, the Commonwealth has projected that
it will issue notes and bonds totaling $2,325 million and retire bonded debt in
the principal amount of $2,239 million.
Certain agencies created by the Commonwealth have statutory authorization to
incur debt for which Commonwealth appropriations to pay debt service thereon are
not required. As of December 31, 1996, total combined debt outstanding for these
agencies was $8,356 million. The debt of these agencies is supported by assets
of, or revenues derived from, the various projects financed and is not an
obligation of the Commonwealth. Some of these agencies, however, are indirectly
dependent on Commonwealth appropriations. The only obligations of agencies in
the Commonwealth that bear a moral obligation of the Commonwealth are those
issued by the Pennsylvania Housing Finance Agency ("PHFA"), a state-created
agency which provides housing for lower and moderate income families, and The
Hospitals and Higher Education Facilities Authority of Philadelphia (the
"Hospital Authority"), an agency created by the City of Philadelphia to acquire
and prepare various sites for use as intermediate care facilities for the
mentally retarded.
Local Government Debt
Numerous local government units in Pennsylvania issue general
obligation (i.e., backed by taxing power) debt, including counties, cities,
boroughs, townships and school districts. School district obligations are
supported indirectly by the Commonwealth. The issuance of non-electoral general
obligation debt is limited by constitutional and statutory provisions. Electoral
debt, i.e., that approved by the voters, is unlimited. In addition, local
government units and municipal and other authorities may issue revenue
obligations that are supported by the revenues generated from particular
projects or enterprises. Examples include municipal authorities (frequently
operating water and sewer systems), municipal authorities formed to issue
obligations benefitting hospitals and educational institutions, and industrial
development authorities, whose obligations benefit industrial or commercial
occupants. In some cases, sewer or water revenue obligations are guaranteed by
taxing bodies and have the credit characteristics of general obligations debt.
Litigation
Pennsylvania is currently involved in certain litigation where adverse
decisions could have an adverse impact on its ability to pay debt service. For
example, in Baby Neal v. Commonwealth, the American Civil Liberties Union filed
a lawsuit against the Commonwealth seeking an order that would require the
Commonwealth to provide additional funding for child welfare services. County of
Allegheny v. Commonwealth of Pennsylvania involves litigation regarding the
state constitutionality of the statutory scheme for county funding of the
judicial system. In Pennsylvania Association of Rural and Small Schools v.
Casey, the constitutionality of Pennsylvania's system for funding local school
districts has been challenged. No estimates for the amount of these claims are
available.
Other Factors
The performance of the obligations held by the Fund issued by the
Commonwealth, its agencies, subdivisions and instrumentalities are in part tied
to state-wide, regional and local conditions within the Commonwealth and to the
creditworthiness of certain nonCommonwealth related obligers, depending upon the
Pennsylvania Fund's portfolio mix at any given time. Adverse changes to the
state-wide, regional or local economies or changes in government may adversely
affect the creditworthiness of the Commonwealth, its agencies and
municipalities, and certain other non-government related obligers of
Pennsylvania tax-free obligations (e.g., a university, a hospital or a corporate
obligor). The City of Philadelphia, for example, experienced severe financial
problems which impaired its ability to borrow money and adversely affected the
ratings of its obligations and their marketability. Conversely, some obligations
held by the Fund will be almost exclusively dependent on the creditworthiness of
one underlying obligor, such as a project occupant or provider of credit or
liquidity support.
<PAGE>
EVERGREEN MUNICIPAL TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
The Audited Financial Statements listed below are incorporated by reference
to the Registrant's Annual Report dated February 28, 1997.
EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND (For Institutional Service
Shares and Institutional Shares)
Statement of Investments February 28, 1997
Statement of Assets and Liabilities February 28, 1997
Statement of Operations For the period November 19,
1996 through February 28,
1997
Statement of Changes in Net Assets For the period November 19,
1996 through February 28,
1997
Financial Highlights:
Institutional Service Shares For the period November 25,
1996 to February 28, 1997
Institutional Shares For the period November 20,
1996 to February 28, 1997
Report of Independent Accountants April 22, 1997
b. Exhibits
Number Description
1(A) Amended and Restated Declaration of Trust(2)
1(B) Form of Instrument providing for the Establishment
and Designation of Classes(2)
1(C) Form Amendment to Declaration of Trust
and Certification of Designation(2)
2 By-Laws(2)
3 None
4 Instruments Defining Rights of Shareholders(2)
5(A) Investment Advisory Agreement(2)
5(B) Investment Subadvisory Agreement(2)
6 Distribution Agreement between the Evergreen Municipal
Trust and Evergreen Keystone Distributor, Inc.(1)
7 None
8 Custodian Agreement(2)
9 None
10 Opinion and Consent of Counsel as to the legality of
securities being registered was filed with the Registrant's
Rule 24f-2 Notice on April 28, 1997 and is incorporated by
reference herein.
11 Consent of Independent Accountants(1)
12 Not Applicable
13 Not Applicable
14 Not Applicable
15 Rule 12b-1 Distribution Plans(2)
16 Schedules for computation of current, effective and tax
equivalent yield(1)
17 Financial Data Schedules(1)
19 Powers of Attorney(2)
- --------------------------
(1) Filed herewith.
(2) Incorporated by reference to Registrant's previous filings on Form
N-1A.
Item 25. Persons Controlled by or Under Common Control with Registrant
Not Applicable
Item 26. Number of Holders of Securities
Number of Record
Holders
Title of Class as of May 14, 1997
-------------- ------------------
Evergreen Florida High Income Municipal Fund
Class A Shares 1,753
Class B Shares 872
Class Y Shares 33
Evergreen Short-Intermediate Municipal Fund
Class A Shares 94
Class B Shares 182
Class Y Shares 736
Evergreen Short-Intermediate Municipal Fund - CA
Class A Shares 1
Class B Shares 1
Class Y Shares 576
Evergreen Tax Exempt Money Market Fund
Class A Shares 1,587
Class Y Shares 7,013
Evergreen Institutional Tax Exempt Money Market Fund
Institutional Shares 2
Institutional Service Shares 9
Item 27. Indemnification
Provisions for the indemnification of Registrant's Trustees and
officers are contained in Article XI of the Registrant's By-Laws.
Provisions for the indemnification of Evergreen Keystone Distributor,
Inc., Registrant's principal underwriter, are contained in Item 4 of the
Distribution Agreement, a copy of which is filed herewith and incorporated by
reference herein.
Item 28. Business or Other Connections of Investment Adviser
(a) For a description of the other business of the investment adviser, see
the section entitled "Management of the Funds-Investment Adviser" in Part A.
Evergreen Asset Management Corp., the Registrant's investment adviser, and
Lieber and Company, the Registrant's sub-adviser also act as such to the
Evergreen Trust, The Evergreen Total Return Fund, The Evergreen Limited Market
Fund, Inc., Evergreen Growth and Income Fund, The Evergreen Money Market Trust,
The Evergreen American Retirement Trust, The Evergreen Municipal Trust,
Evergreen Equity Trust, Evergreen Foundation Trust and Evergreen Variable Trust
all, registered investment companies. Stephen A. Lieber, Theodore J. Israel,
Jr., Nola Maddox Falcone and officers of the Adviser and Lieber and Company,
were, prior to June 30, 1994 officers and/or directors or trustees of the
Registrant and the other funds for which the Adviser acts as investment adviser.
Evergreen Asset Management Corp. and Lieber and Company are wholly- owned
subsidiaries of First Union National Bank Of North Carolina.
The Directors and principal executive officers of First Union National Bank
of North Carolina, parent of the Registrants's investment adviser and
sub-adviser, are set forth in the following tables:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
BOARD OF DIRECTORS
George E. Battle, Jr. John R. Belk
President of the Board of Senior Vice President
Bishops of the AME Zion Church Belk Stores Services, Inc.
South Atlantic Region 2801 W. Tyvola Road
Two First Union Center-Ste 2040 Charlotte, NC 29217-4500
Charlotte, NC 28202
Daniel T. Blue, Jr. Ben Mayo Boddie
Partner Chairman & CEO
Thigpen, Blue, Stephens & Fellers Boddie-Noell Enterprises, Inc.
205 Fayetteville Street Mall P.O. Box 1908
Releigh, NC 27602 Rocky Mount, NC 27802
Raymond A. Bryan, Jr. John F.A.V. Cecil
Chairman & CEO President
T.A. Loving Company Biltmore Dairy Farms, Inc.
P.O. Drawer 919 P.O. Box 5355
Goldsboro, NC 27530 Asheville, NC 28813
John W. Copeland John Crosland, Jr.
President Chairman of the Board
Ruddick Corporation The Crosland Group, Inc.
2000 Two First Union Center 135 Scaleybark Road
Charlotte, NC 28282 Charlotte, NC 28209
J. William Disher Malcolm E. Everett, III
Chairman & President President & CEO
Lance Incorporated First Union National Bank
P.O. Box 32368 of North Carolina
Charlotte, NC 28232 310 S. Tryon Street
Charlotte, NC 28288-0006
James F. Goodmon Shelton Gorelick
President & Chief President
Executive Officer SGIC, Inc.
Capitol Broadcasting P.O. Box 35229
Company, Inc. Charlotte, NC 28235-5129
P.O. Box 12000
Raleigh, NC 27605
Charles L. Grace James E. S. Hynes
President Chairman
Cummins Atlantic, Inc. Hynes Sales Company, Inc.
P.O. Box 240729 P.O. Box 220948
Charlotte, NC 28224-0729 Charlotte, NC 28222
Mackey J. McDonald Earl N. Phillips, Jr.
President & CEO President
V.F. Corporation First Factors Corporation
P.O. Box 1022 P.O. Box 2730
Wyomissing, PA 19610 High Point, NC 27261
J. Gregory Poole, Jr. John P. Rostan, III
Chairman & President General Partner
Gregory Poole Equipment Company Heritage Investments, LLP
P.O. Box 469 P.O. Box 970
Raleigh, NC 27602 Valdese, NC 28690
Nelson Schwab, III George Shinn
Managing Director Owner and Chairman
Carosel Capatal Company Shinn Enterprises, Inc.
4201 Congress St., Suite 440 One Hive Drive
Charlotte, NC 28217 Charlotte, NC 28217
Harley F. Shuford, Jr. Stanley E. Wright
President and CEO Retired President and Chief
Shuford Industries Executive Officer
P.O. Box 608 219 Fayetteville Street Mall
Hickory, NC 28603 Raleigh Federal Savings Bank
Raleigh, NC 27601
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
EXECUTIVE OFFICERS
Edward E. Crutchfield, Jr., Chairman & CEO, First Union Corporation
John R. Georgius, Vice Chairman, First Union Corporation
B.J. Walker, Vice Chairman, First Union Corporation
Malcolm E. Everett, III, President, FUNB of NC
Austin A. Adams, EVP, First Union Corporation
Marion A. Cowell, Jr., EVP, First Union Corporation
Robert T. Atwood, EVP & CFO, First Union Corporation
Leigh Bullen, Controller, FUNB of NC
H. Burt Melton, EVP, First Union Corporation
Don R. Johnson, EVP, First Union Corporation
Malcolm T. Murray, EVP, First Union Corporation
Alvin T. Sale, EVP, First Union Corporation
Richard K. Wagoner, EVP, FUNB of NC
James H. Hatch, SVP & Corporate Controller, First Union Corporation
Richard C. Highfield, SVP, First Union Corporation
Ben C. Maffitt, SVP, FUNB of NC
Donald A. McMullen, EVP, FUNB of NC
Kenneth R. Scancliff, SVP, First Union Corporation
Fred Winkler, EVP, FUNB of NC
Peter J. Schild, SVP, First Union Corporation
Betty Trautwein, SVP, FUNB of NC
Alice Lehman, SVP, First Union Corporation
Nina Archer, SVP, FUNB of NC
All of the Executive Officers are located at the following
address: First Union National Bank of North Carolina, One First
Union Center, Charlotte, NC 28288.
Item 29. Principal Underwriters
Evergreen Keystone Distributor, Inc. The Director and principal
executive officers are:
Director Michael C. Petrycki
Officers Robert A. Hering President
Michael C. Petrycki Vice President
Gordon Forrester Vice President
Lawrence Wagner VP, Chief Financial Officer
Steven D. Blecher VP, Treasurer, Secretary
Elizabeth Q. Solazzo Assistant Secretary
Thalia M. Cody Assistant Secretary
Evergreen Keystone Distributor, Inc. acts as Distributor for the
following registered investment companies or separate series thereof:
Evergreen Trust
Evergreen Fund
Evergreen Aggressive Growth Fund
Evergreen Equity Trust:
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Global Leaders Fund
The Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
The Evergreen Total Return Fund
The Evergreen American Retirement Trust:
The Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
The Evergreen Foundation Trust:
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
The Evergreen Municipal Trust:
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Florida High Income Municipal Bond Fund
Evergreen Tax Exempt Money Market Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Money Market Trust
Evergreen Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen Investment Trust
Evergreen Emerging Markets Growth Fund
Evergreen International Equity Fund
Evergreen Balanced Fund
Evergreen Value Fund
Evergreen Utility Fund
Evergreen Short-Intermediate Bond Fund(formerly Evergreen Fixed Income)
Evergreen U.S. Government Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen High Grade Tax Free Fund
Evergreen Treasury Money Market Fund
The Evergreen Lexicon Fund:
Evergreen Intermediate-Term Government Securities Fund
Evergreen Intermediate-Term Bond Fund
Evergreen Tax Free Trust:
Evergreen Pennsylvania Tax Free Money Market Fund
Evergreen New Jersey Tax Free Income Fund
Evergreen Variable Trust:
Evergreen VA Fund
Evergreen VA Growth and Income Fund
Evergreen VA Foundation Fund
Evergreen VA Global Leaders Fund
Keystone Quality Bond Fund (B-1)
Keystone Diversified Bond Fund (B-2)
Keystone High Income Bond Fund (B-4)
Keystone Balanced Fund (K-1)
Keystone Strategic Growth Fund (K-2)
Keystone Growth and Income Fund (S-1)
Keystone Mid-Cap Growth Fund (S-3)
Keystone Small Company Growth Fund (S-4)
Keystone Balanced Fund II
Keystone Capital Preservation and Income Fund
Keystone Fund for Total Return
Keystone Fund of the Americas
Keystone Global Opportunities Fund
Keystone Global Resources and Development Fund
Keystone Government Securities Fund
Keystone America Hartwell Emerging Growth Fund, Inc.
Keystone Institutional Adjustable Rate Fund
Keystone Institutional Trust
Keystone Institutional Small Capitalization Growth Fund
Keystone Intermediate Term Bond Fund
Keystone International Fund Inc.
Keystone Liquid Trust
Keystone Omega Fund
Keystone Precious Metals Holdings, Inc.
Keystone Small Company Growth Fund II
Keystone State Tax Free Fund
Keystone New York Tax Free Fund
Keystone Pennsylvania Tax Free Fund
Keystone Massachusetts Tax Free Fund
Keystone Florida Tax Free Fund
Keystone State Tax Free Fund - Series II
Keystone Missouri Tax Free Fund
Keystone California Tax Free Fund
Keystone Strategic Income Fund
Keystone Tax Free Fund
Keystone Tax Free Income Fund
Item 30. 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:
Evergreen Keystone Investment Services, Inc., 200 Berkeley Street, Boston,
MA 02116
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase,
New York 10577.
First Union National Bank of North Carolina, One First Union Center,
301 S. College Street, Charlotte, North Carolina 28288.
State Street Bank and Trust Company, 2 Heritage Drive, North Quincy,
Massachusetts 02171.
Item 31. Management Services
Not Applicable
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provision of Section
16(c) of the 1940 Act with respect to the removal of Trustees and the
calling of special shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for the effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) and the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on the 20th day of May, 1997.
EVERGREEN MUNICIPAL TRUST
By: /s/ John J. Pileggi
--------------------------
John J. Pileggi, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 23 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signatures Title
- ----------- -----
/s/John J. Pileggi
- ----------------------- President and
John J. Pileggi Treasurer
by James P. Wallin
Attorney - In - Fact
/s/Joan V. Fiore*
- ----------------------- Secretary
Joan V. Fiore
by James P. Wallin
Attorney - In - Fact
/s/ Foster Bam*
- ----------------------- Trustee
Foster Bam
by James P. Wallin
Attorney - In - Fact
/s/ Laurence B. Ashkin*
- ----------------------- Trustee
Laurence B. Ashkin
by James P. Wallin
Attorney - In - Fact
/s/James S. Howell*
- ----------------------- Trustee
James S. Howell
by James P. Wallin
Attorney - In - Fact
/s/Gerald M. McDonnell*
- ----------------------- Trustee
Gerald M. McDonnell
by James P. Wallin
Attorney - In - Fact
/s/Thomas L. McVerry*
- ----------------------- Trustee
Thomas L. McVerry
by James P. Wallin
Attorney - In - Fact
/s/William Walt Pettit*
- ----------------------- Trustee
William Walt Pettit
by James P. Wallin
Attorney - In - Fact
/s/Russell A. Salton, III, M.D*
- ------------------------------ Trustee
Russell A. Salton, III, M.D
by James P. Wallin
Attorney - In - Fact
/s/Michael S. Scofield*
- ----------------------- Trustee
Michael S. Scofield
by James P. Wallin
Attorney - In - Fact
*By: /s/ James P. Wallin
-----------------------
James P. Wallin**
Attorney-in-Fact
**James P. Wallin, by signing his name hereto, does hereby sign this document
on behalf of each of the above-named individuals pursuant to powers of attorney
duly executed by such persons filed as part of the Registration Statement to
Registrant's previous filings on Form N-1a.
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
6 Distribution Agreement
11 Consent of Independent
Accountants
16 Performance Data Schedules
17 Financial Data Schedules
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 1st day of January, 1997, by and between The
Evergreen Municipal Trust (the "Trust") and Evergreen Keystone Distributor, Inc.
("EKD").
WHEREAS, The Trust has adopted one or more Plans of Distribution with
respect to certain Classes of shares of its separate investment series (each a
"Plan", or collectively the "Plans") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act") which Plans authorize the Trust
on behalf of the Funds to enter into agreements regarding the distribution of
such Classes of shares (the "Shares") of the separate investment series of the
Trust (the "Funds") set forth on Exhibit A; and
WHEREAS, the Trust has agreed that Evergreen Keystone Distributor, Inc.
(the "Distributor"), a Delaware corporation, shall act as the distributor of the
Shares; and
WHEREAS, the Distributor agrees to act as distributor of the Shares for
the period of this Distribution Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the agreements hereinafter
contained, it is agreed as follows:
1. Services as Distributor-
1.1. The Distributor agrees to use appropriate efforts to promote each
Fund and to solicit orders for the purchase of Shares and will undertake such
advertising and promotion as it believes reasonable in connection with such
solicitation The services to be performed hereunder by the Distributor are
described in more detail in Section 7 hereof. . In the event that the Trust
establishes additional investment series with respect to which it desires to
retain Evergreen Funds Distributor, Inc. to act as distributor for one or more
Classes hereunder, it shall promptly notify the Distributor in writing. If the
Distributor is willing to render such services it shall notify the Trust in
writing whereupon such portfolio shall become a Fund and its designated Classes
of shares of beneficial interest shall become Shares hereunder.
1.2. All activities by the Distributor and its agents and employees as
the distributor of Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made or
adopted pursuant to the 1940 Act by the Securities and Exchange Commission (the
"Commission") or any securities association registered under the Securities
Exchange Act of 1934, as amended.
1.3 In selling the Shares, the Distributor shall use its best efforts
in all respects duly to conform with the requirements of all Federal and state
laws relating to the sale of such securities. Neither the Distributor, any
selected dealer or any other person is authorized by the Trust to give any
information or to make any representations, other than those contained in the
Trust's registration statement (the "Registration Statement") or related Fund
prospectus and statement of additional information ("Prospectus and Statement of
Additional Information") and any sales literature specifically approved by the
Trust.
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<PAGE>
1.4 The Distributor shall adopt and follow procedures, as approved by
the officers of the Trust, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
1.5. The Distributor will transmit any orders received by it for
purchase or redemption of Shares to the transfer agent and custodian for the
applicable Fund.
1.6 The Distributor shall provide persons acceptable to the Trust to
serve as officers of the Trust.
1.7. Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of Shares until such time as those officers deem it advisable to accept
such orders and to make such sales.
1.8. The Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others. The
Distributor shall offer and sell Shares only to such selected dealers as are
members, in good standing, of the NASD.
1.9 The Distributor agrees to adopt compliance standards, in a form
satisfactory to the Trust, governing the operation of the multiple class
distribution system under which Shares are offered.
2. Duties of the Trust.
2.1. The Trust agrees at its own expense to execute any and all
documents and to furnish, at its own expense, any and all information and
otherwise to take all actions that may be reasonably necessary in connection
with the qualification of Shares for sale in such states as the Trust and the
Distributor may designate.
2.2. The Trust shall furnish from time to time, for use in connection
with the sale of Shares such information with respect to the Funds and the
Shares as the Distributor may reasonably request; and the Trust warrants that
any such information shall be true and correct. Upon request, the Trust shall
also provide or cause to be provided to the Distributor: (a) unaudited
semi-annual statements of each Fund's books and accounts, (b) quarterly earnings
statements of each Fund, (c) a monthly itemized list of the securities in each
Fund, (d) monthly balance sheets as soon as practicable after the end of each
month, and (e) from time to time such additional. information regarding each
Fund's financial condition as the Distributor may reasonably request.
2
<PAGE>
3. Representations of the Trust.
3.1. The Trust represents to the Distributor that it is registered
under the 1940 Act and that the Shares of each of the Funds have been registered
under the Securities Act of 1933, as amended (the "Securities Act"). The Trust
will file such amendments to its Registration Statement as may be required and
will use its best efforts to ensure that such Registration Statement remains
accurate.
4. Indemnification.
4.1. The Trust shall indemnify and hold harmless the Distributor, its
officers and Directors and each person, if any, who controls the Distributor
within the meaning of Section 15 of the Securities Act against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith), which the
Distributor or such controlling person may incur under the Securities Act or
under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in the
Registration Statement, as from time to time amended or supplemented, any
prospectus or annual or interim report to shareholders of the Trust, or arising
out of or based upon any omission, or alleged omission, to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, unless such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Trust in connection therewith by
or on behalf of the Distributor; provided, however, that in no case (i) is the
indemnity of the Trust in favor of the Distributor and any such controlling
persons to be deemed to protect such Distributor or any such controlling persons
thereof against any liability to the Trust or its security holders to which the
Distributor, its officers and Directors or any such controlling persons would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of their duties or by reason of the reckless
disregard of their obligations and duties under this Agreement; or (ii) is the
Trust to be liable under its indemnity agreement contained in this paragraph
with respect to any claim made against the Distributor or any such controlling
persons, unless the Distributor or such controlling persons, as the case maybe,
shall have notified the Trust in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon the Distributor or such controlling persons
(or after the Distributor or such controlling persons shall have received notice
of such service on any designated agent), but failure to notify the Trust of any
such claim shall not relieve it from any liability which it may have to the
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Trust will be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling
3
<PAGE>
person or persons, defendant or-defendants in the suit, for the reasonable fees
and expenses of any counsel retained by them. The Trust shall promptly notify
the Distributor of the commencement of any litigation or proceeding against it
or any of its officers or directors in connection with the issuance or sale of
any of the shares.
4.2. The Distributor shall indemnify and hold harmless the Trust and
each of its directors and officers and each person, if any, who controls the
Trust against any loss, liability, claim, damage or expense described in the
foregoing indemnity contained in paragraph 4.1, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Trust in writing by or on behalf of the Distributor
for use in connection with the Registration Statement, as from time to time
amended, or the annual or interim reports to shareholders. In case any action
shall be brought against the Trust or any persons so indemnified, in respect of
which indemnity may be sought against the Distributor, the Distributor shall
have the rights and duties given to the Trust, and the Trust and each person so
indemnified shall have the rights and duties given to the Distributor by the
provisions of paragraph 4.1.
5. Offering of Shares.
5.1. None of the Shares shall be offered by either the Distributor or
the Trust under any of the provisions of this Agreement, and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Trust, if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current prospectus and statement of
additional information as required by Section 10(b) (2) of the Securities Act,
as amended, is not on file with the Commission; provided, however, that nothing
contained in this paragraph 5.1 shall in any way restrict or have any
application to or bearing upon the Trust's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the prospectus of each Fund
or the Trust's prospectus or Declaration of Trust.
6. Amendments to Registration Statement and Other Material Events.
6.1. The Trust agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor: (a) of any
request or action taken by the Commission which is material to the Distributor's
obligations hereunder or (b) any material fact of which the Trust becomes aware
which affects the Distributor's obligations hereunder.
For purposes of this section, informal requests by or acts of the Staff
of the Commission shall not be deemed actions of or requests by the Commission.
7. Compensation of Distributor.
7.1. (a) As promptly as possible after the first Business Day (as
defined in the Prospectus) of each month this Agreement is in effect, the Trust
shall compensate the Distributor for its
4
<PAGE>
distribution services rendered during the previous month (but not prior to the
Commencement Date); by making payment to the Distributor in the amounts set
forth on Exhibit A annexed hereto with respect to each Class of Shares of each
Fund to which this Agreement is applicable. The compensation by the Trust of the
Distributor is authorized pursuant to the Plan or Plans adopted by the Trust
pursuant to Rule 12b-l under the 1940 Act.
(b) Under this Agreement, the Distributor shall: (i) make
payments to securities dealers and others engaged in the sale of Shares; (ii)
make payments of principal and interest in connection with the financing of
commission payments made by the Distributor in connection with the sale of
Shares (iii) incur the expense of obtaining such support services, telephone
facilities and shareholder services as may reasonably be required in connection
with its duties hereunder; (iv) formulate and implement marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (v)
prepare, print and distribute sales literature; (vi) prepare, print and
distribute Prospectuses of the Funds and reports for recipients other than
existing shareholders of the Funds; and (vii) provide to the Trust such
information, analyses and opinions with respect to marketing and promotional
activities as the Trust may, from time to time, reasonably request.
(c) The Distributor shall prepare and deliver reports to the
Treasurer of the Trust on a regular, at least monthly, basis, showing the
distribution expenditures incurred by the Distributor in connection with its
services rendered pursuant to this Agreement and the Plan and the purposes
therefor, as well as any supplemental reports as the Trustees, from time to
time, may reasonably request.
(d) The Distributor may retain as a sales charge the difference
between the current offering price of Shares, as set forth in the current
prospectus for each Fund, and net asset value, less any reallowance that is
payable in accordance with the sales charge schedule in effect at any given time
with respect to the Shares.
(e) The Distributor may retain any contingent deferred sales
charge ("CDSCs") payable with respect to the redemption of any Shares, provided
however, that any CDSCs received by the Distributor shall first be applied by
the Distributor or its assignee to any outstanding amounts payable or which may
in the future be payable by the Distributor or its assignee under financing
arrangements entered into in connection with the payment of commissions on the
sale of Shares.
(f) The Distributor may sell, assign, pledge or hypothecate its
rights to receive compensation hereunder. The Trust acknowledges that, in
connection with the financing of commission payments made by the Distributor in
connection with the sale of Shares, the Distributor may sell and assign, and/or
has sold and assigned, to Mutual Fund Funding 1994-1 the Distributor's interest
in certain items of compensation payable to the Distributor hereunder, and that
Mutual Fund Funding 1994-1 in turn may pledge or assign, and/or has assigned,
such interest to First Union Corporation as lender to secure such financing. It
is understood that an assignee may not further sell, assign, pledge, or
hypothecate its right to receive such reimbursement unless such sale,
assignment, pledge or hypothecation has been approved by the
5
<PAGE>
vote of the Board of the Trust, including a majority of the Disinterested
Trustees, cast in person at a meeting called for the purpose of voting on such
approval.
(g) In addition to the foregoing, and in respect of its services
hereunder and for similar services rendered to other investment companies for
which Evergreen Asset Management Corp. (the "Investment Adviser") serves as
investment adviser, the Investment Adviser may pay to the Distributor an
additional fee to be paid in such amount and manner as the Investment Adviser
and Distributor may agree from time to time.
8. Confidentiality, Non-Exclusive Agency.
8.1. The Distributor agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Trust all records and
other information relative to the Funds and its prior, present or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and to obtain approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
8.2. Nothing contained in this Agreement shall prevent the Distributor,
or any affiliated person of the Distributor, from performing services similar to
those to be performed hereunder for any other person, firm, or corporation or
for its or their own accounts or for the accounts of others.
9. Term.
9.1. This Agreement shall continue until June 30, 1998 and thereafter
for successive annual periods, provided such continuance is specifically
approved at least annually by (i) a vote of the majority of the Trustees of the
Trust and (ii) a vote of the majority of those Trustees of the Trust who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan, in this Agreement or any agreement
related to the Plan (the "Independent Trustees") by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable at any time, with respect to the Trust, without penalty, (a) on not
less than 60 days' written notice by vote of a majority of the Independent
Trustees, or by vote of the holders of a majority of the outstanding voting
securities of the Trust, or (b) upon not less than 60 days' written notice by
the Distributor. This Agreement may remain in effect with respect to a Fund even
if it has been terminated in accordance with this paragraph with respect to one
or more other Funds of the Trust. This Agreement will also terminate
automatically in the event of its assignment. (As used in this Agreement, the
terms "majority of the outstanding voting securities", "interested persons", and
"assignment" shall have the same meaning as such terms have in the 1940 Act.)
6
<PAGE>
10. Miscellaneous.
10.1. This Agreement shall be governed by the laws of the State of New
York.
10.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their constructions or effect.
10.3 The obligations of the Trust hereunder are not personally binding
upon, nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust and only the Trust's
property shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below.
EVERGREEN KEYSTONE DISTRIBUTOR, INC. THE EVERGREEN MUNICIPAL TRUST
By: By:
Title: , Vice President Title: John J. Pileggi, President
7
<PAGE>
EXHIBIT A
To Distribution Agreement between Evergreen Keystone Distributor, Inc.
and EVERGREEN MUNICIPAL TRUST
FUNDS AND CLASSES COVERED BY THIS AGREEMENT:
Evergreen Florida High Income Municipal Bonds Fund
CLASS A SHARES
CLASS B SHARES
CLASS Y SHARES
Evergreen Short-Intermediate Municipal Fund
CLASS A SHARES
CLASS B SHARES
CLASS Y SHARES
Evergreen Short Intermediate Municipal Fund-California
CLASS A SHARES
CLASS B SHARES
CLASS Y SHARES
Evergreen Tax Exempt Money Market Fund
CLASS A SHARES
CLASS Y SHARES
Evergreen Institutional Tax Exempt Money Market Fund
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
Distribution Fees
1. During the term of this Agreement, the Trust will pay to the Distributor a
quarterly fee with respect to each of the Funds and Classes of Shares thereof
listed above. This fee will be computed at the annual rate of:.10 of 1% of the
average net asset value on an annual basis of Class A Shares of the Evergreen
Short-Intermediate Municipal Fund and the Evergreen Short Intermediate Municipal
Fund-California; .30 of 1% of the average net asset value on an annual basis of
Class A Shares of the Evergreen Tax Exempt Money Market Fund; .25 of 1% of the
average net asset value on an annual basis of Institutional Service Shares of
Evergreen Institutional Tax Exempt Money Market Fund, and .75 of 1% of the
average net asset value on an annual basis of Class B Shares of Evergreen
Short-Intermediate Municipal Fund and the Evergreen Short Intermediate Municipal
Fund-California.
2. For the quarterly period in which the Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the quarter.
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit A to the
Distribution Agreement between the parties dated December 30, 1994, as amended
the 1st day of October, 1996, to be executed by their officers designated below
as of the 1st day of October, 1996.
EVERGREEN KEYSTONE DISTRIBUTOR, INC. THE EVERGREEN MUNICIPAL TRUST
By: By:
Title: , Vice President Title: John J. Pileggi, President
8
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. 23 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated April 28, 1997, relating to the financial
statements and financial highlights appearing in the February 28, 1997 Annual
Report to Shareholders of Evergreen Institutional Tax Exempt Money Market Fund,
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 and under the headings "Independent Accountants" and "Financial
Statements" in the Statement of Additional Information.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
May 14, 1997
EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
CLASS I SHARES
Trailing 30 Days
DATE DIVIDEND DIVIDEND
30-Jan-97 0.000095910
31-Jan-97 0.000096748
01-Feb-97 0.000096748
02-Feb-97 0.000096748
03-Feb-97 0.000095570
04-Feb-97 0.000094121
05-Feb-97 0.000091767
06-Feb-97 9.0725E-05
07-Feb-97 9.2928E-05
08-Feb-97 9.2928E-05
09-Feb-97 9.2928E-05
10-Feb-97 9.3389E-05
11-Feb-97 9.1827E-05
12-Feb-97 9.225E-05
13-Feb-97 9.1386E-05
14-Feb-97 9.1217E-05
15-Feb-97 9.1218E-05
16-Feb-97 9.1218E-05
17-Feb-97 9.1218E-05
18-Feb-97 9.054E-05
19-Feb-97 8.9871E-05
20-Feb-97 9.0478E-05
21-Feb-97 9.0478E-05
22-Feb-97 9.0479E-05
23-Feb-97 9.0479E-05
24-Feb-97 9.088E-05
25-Feb-97 8.9753E-05
26-Feb-97 8.967E-05
27-Feb-97 9.1039E-05
28-Feb-97 0.000088711 0.002763222 3.36%
EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
CLASS IS SHARES
Trailing 30 Days
DATE DIVIDEND DIVIDEND
30-Jan-97 0.000089033
31-Jan-97 0.000089868
01-Feb-97 0.000089869
02-Feb-97 0.000089869
03-Feb-97 0.000088694
04-Feb-97 0.000087242
05-Feb-97 0.000084891
06-Feb-97 0.000083847
07-Feb-97 0.000086043
08-Feb-97 0.000086043
09-Feb-97 0.000086043
10-Feb-97 0.000086502
11-Feb-97 0.000084941
12-Feb-97 0.000085363
13-Feb-97 0.000084498
14-Feb-97 0.000084362
15-Feb-97 0.000084362
16-Feb-97 0.000084362
17-Feb-97 0.000084362
18-Feb-97 0.000083686
19-Feb-97 0.000083018
20-Feb-97 0.000083584
21-Feb-97 0.000083550
22-Feb-97 0.000083551
23-Feb-97 0.000083551
24-Feb-97 0.000083965
25-Feb-97 0.000082843
26-Feb-97 0.000082738
27-Feb-97 0.000084186
28-Feb-97 0.000081859 0.002556725 3.11%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> THE EVERGREEN INSTITUTIONAL MONEY MARKET FUNDS
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<NAME> EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
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<NET-CHANGE-IN-ASSETS> 220418904
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 77430
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 245724
<AVERAGE-NET-ASSETS> 17174341<F1>
<PER-SHARE-NAV-BEGIN> 1.000<F1>
<PER-SHARE-NII> 0.008<F1>
<PER-SHARE-GAIN-APPREC> 0.000<F1>
<PER-SHARE-DIVIDEND> 0.008<F1>
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<RETURNS-OF-CAPITAL> 0.000<F1>
<PER-SHARE-NAV-END> 1.000<F1>
<EXPENSE-RATIO> 0.32<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Institutional Service Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 6
<CIK> 0001111111
<NAME> THE EVERGREEN INSTITUTIONAL MONEY MARKET FUNDS
<SERIES>
<NUMBER> 022
<NAME> EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
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<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> NOV-20-1996<F1>
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<NET-INVESTMENT-INCOME> 1737234
<REALIZED-GAINS-CURRENT> (11420)
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<NET-CHANGE-FROM-OPS> 1725814
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1587125<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
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<NUMBER-OF-SHARES-SOLD> 356334234<F1>
<NUMBER-OF-SHARES-REDEEMED> 150200643<F1>
<SHARES-REINVESTED> 0<F1>
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<AVERAGE-NET-ASSETS> 168989259<F1>
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<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
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