-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BcXdbGdDota8TnQxpBTRAllPHRfR39KmdiPom0jZ/s4LTniFR5lDav+eJa6PQeLg v5iWpjKkIpm5KjxDPZPnzg== 0000907244-02-000211.txt : 20040412 0000907244-02-000211.hdr.sgml : 20040412 20020531151332 ACCESSION NUMBER: 0000907244-02-000211 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20020531 EFFECTIVENESS DATE: 20020531 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVERGREEN MONEY MARKET TRUST CENTRAL INDEX KEY: 0000820636 IRS NUMBER: 136892172 STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-42181 FILM NUMBER: 02667795 BUSINESS ADDRESS: STREET 1: 200 BERKLEY STREET CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6172103200 MAIL ADDRESS: STREET 1: 200 BERKELEY STREET CITY: BOSTON STATE: MA ZIP: 02116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVERGREEN MONEY MARKET TRUST CENTRAL INDEX KEY: 0000820636 IRS NUMBER: 136892172 STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05300 FILM NUMBER: 02667794 BUSINESS ADDRESS: STREET 1: 200 BERKLEY STREET CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6172103200 MAIL ADDRESS: STREET 1: 200 BERKELEY STREET CITY: BOSTON STATE: MA ZIP: 02116 485BPOS 1 emmtjune.txt EVERGREEN MONEY MARKET TRUST - N1A WRAPPER 1933 Act No. 333-42181 1940 Act No. 811-08555 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. [ ] Post-Effective Amendment No. 18 [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. 19 [X] EVERGREEN MONEY MARKET TRUST (Exact Name of Registrant as Specified in Charter) 200 Berkeley Street, Boston, Massachusetts 02116-5034 (Address of Principal Executive Offices) (617) 210-3200 (Registrant's Telephone Number) The Corporation Trust Company 1209 Orange Street Wilmington, Delaware 19801 (Name and Address of Agent for Service) It is proposed that this filing will become effective: [X] immediately upon filing pursuant to paragraph (b) [ ] on (date) pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(i) [ ] on (date) pursuant to paragraph (a)(i) [ ] 75 days after filing pursuant to paragraph (a)(ii) [ ] on (date) pursuant to paragraph (a)(ii) of Rule 485 If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment [ ] 60 days after filing pursuant to paragraph (a)(i) [ ] on (date) pursuant to paragraph (a)(i) EVERGREEN MONEY MARKET TRUST CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 18 TO REGISTRATION STATEMENT This Post-Effective Amendment No. 18 to Registrant's Registration Statement No. 333-42181/811-08555 consists of the following pages, items of information and documents: The Facing Sheet PART A ------ Prospectus for Classes A, B, C and I shares of Evergreen California Municipal Money Market Fund, Evergreen Florida Municipal Money Market Fund, Evergreen Money Market Fund, Evergreen Municipal Money Market Fund, Evergreen New Jersey Municipal Money Market Fund, Evergreen New York Municipal Money Market Fund, Evergreen Pennsylvania Municipal Money Market Fund, Evergreen Treasury Money Market Fund and Evergreen U.S. Government Money Market Fund is contained herein. Prospectus for Classes S and S1 shares of Evergreen California Municipal Money Market Fund, Evergreen Florida Municipal Money Market Fund, Evergreen Money Market Fund, Evergreen Municipal Money Market Fund, Evergreen New Jersey Municipal Money Market Fund, Evergreen New York Municipal Money Market Fund, Evergreen Pennsylvania Municipal Money Market Fund, Evergreen Treasury Money Market Fund and Evergreen U.S. Government Money Market Fund is contained herein. Prospectus for Class A shares of Evergreen California Municipal Money Market Fund, Evergreen Money Market Fund, Evergreen Municipal Money Market Fund, Evergreen New York Municipal Money Market Fund and Evergreen U.S. Government Money Market Fund is contained herein. Prospectus for Class S shares of Evergreen California Municipal Money Market Fund, Evergreen Florida Municipal Money Market Fund, Evergreen Money Market Fund, Evergreen Municipal Money Market Fund, Evergreen New Jersey Municipal Money Market Fund, Evergreen New York Municipal Money Market Fund, Evergreen Pennsylvania Municipal Money Market Fund, Evergreen Treasury Money Market Fund and Evergreen US Government Money Market Fund is contained herein. PART B ------ Statement of Additional Information for Evergreen California Municipal Money Market Fund, Evergreen Florida Municipal Money Market Fund, Evergreen Money Market Fund, Evergreen Municipal Money Market Fund, Evergreen New Jersey Municipal Money Market Fund, Evergreen New York Municipal Money Market Fund, Evergreen Pennsylvania Municipal Money Market Fund, Evergreen Treasury Money Market Fund and Evergreen US Government Money Market Fund is contained herein. PART C ------ Exhibits Indemnification Business and Other Connections of Investment Advisor Principal Underwriter Location of Accounts and Records Undertakings Signatures EVERGREEN MONEY MARKET TRUST PART A PROSPECTUSES ALL FOUR MONEY MARKET FUNDS' PROSPECTUSES ARE ATTACHED TO THE EDGAR FILING SUBTEMPLATE. THE FOLLOWING IS A LIST OF THE NAMES OF THE ATTACHMENTS AS THEY APPEAR ON THE SUBTEMPLATE: emmtabci.htm (Classes A, B, C and I) emmta.htm (Class A) emmts.htm (Class S) emmtss1.htm (Classes S and S1) EVERGREEN MONEY MARKET TRUST PART B STATEMENT OF ADDITIONAL INFORMATION (SAI) EVERGREEN MONEY MARKET TRUST 200 Berkeley Street Boston, Massachusetts 02116 (800) 343-2898 STATEMENT OF ADDITIONAL INFORMATION June 1, 2002 Evergreen California Municipal Money Market Fund ("California Municipal Money Market Fund") Evergreen Florida Municipal Money Market Fund ("Florida Municipal Money Market Fund") Evergreen Money Market Fund ("Money Market Fund") Evergreen Municipal Money Market Fund ("Municipal Money Market Fund") Evergreen New Jersey Municipal Money Market Fund ("New Jersey Municipal Money Market Fund") Evergreen New York Municipal Money Market Fund ("New York Municipal Money Market Fund") Evergreen Pennsylvania Municipal Money Market Fund ("Pennsylvania Municipal Money Market Fund") Evergreen Treasury Money Market Fund ("Treasury Money Market Fund") Evergreen U.S. Government Money Market Fund ("U.S. Government Money Market Fund") (Each a "Fund"; together, the "Funds") Each Fund is a series of an open-end management investment company known as Evergreen Money Market Trust (the "Trust") This Statement of Additional Information (SAI) pertains to all classes of shares of the Funds listed above. It is not a prospectus but should be read in conjunction with the prospectus(es) for the Fund in which you are making or contemplating an investment. The Funds are offered through four prospectuses: one prospectus dated June 1, 2002, as amended from time to time, offering Class A and Class I shares of each Fund and Class B and Class C shares of Money Market Fund and U.S. Government Money Market Fund; one prospectus offering Class S shares of each Fund; one prospectus offering Class A shares of California Municipal Money Market Fund, Money Market Fund, Municipal Money Market Fund, New York Municipal Money Market Fund and U.S. Government Money Market Fund; and one prospectus offering Class S1 shares of Money Market Fund, Municipal Money Market Fund and U.S. Government Money Market Fund and Class S shares of California Municipal Money Market Fund, Florida Municipal Money Market Fund, New Jersey Municipal Money Market Fund, New York Municipal Money Market Fund, Pennsylvania Municipal Money Market Fund and Treasury Money Market Fund. You may obtain a prospectus without charge by calling (800) 343-2898 or downloading it off our website at www.evergreeninvestments.com. The information in Part 1 of this SAI is specific information about the Funds described in the prospectuses. The information in Part 2 of this SAI contains more general information that may or may not apply to the Fund or class of shares in which you are interested. Certain information may be incorporated by reference to the Funds' Annual Report dated January 31, 2002. You may obtain a copy of the Annual Report without charge by calling (800) 343-2898 or downloading it off our website at www.evergreeninvestments.com. TABLE OF CONTENTS PART 1 TRUST HISTORY..............................................................1-1 INVESTMENT POLICIES........................................................1-1 OTHER SECURITIES AND PRACTICES.............................................1-3 PRINCIPAL HOLDERS OF FUND SHARES...........................................1-4 EXPENSES...................................................................1-9 PERFORMANCE...............................................................1-13 SERVICE PROVIDERS.........................................................1-15 FINANCIAL STATEMENTS......................................................1-17 ADDITIONAL INFORMATION CONCERNING CALIFORNIA..............................1-18 ADDITIONAL INFORMATION CONCERNING FLORIDA.................................1-28 ADDITIONAL INFORMATION CONCERNING NEW JERSEY..............................1-34 ADDITIONAL INFORMATION CONCERNING NEW YORK................................1-37 ADDITIONAL INFORMATION CONCERNING PENNSYLVANIA............................1-42 PART 2 ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES............. 2-1 PURCHASE AND REDEMPTION OF SHARES.........................................2-17 SALES CHARGE WAIVERS AND REDUCTIONS.......................................2-20 PRICING OF SHARES.........................................................2-22 PERFORMANCE CALCULATIONS..................................................2-23 PRINCIPAL UNDERWRITER.....................................................2-25 DISTRIBUTION EXPENSES UNDER RULE 12b-1....................................2-26 TAX INFORMATION...........................................................2-30 BROKERAGE.................................................................2-33 ORGANIZATION..............................................................2-34 INVESTMENT ADVISORY AGREEMENT.............................................2-35 MANAGEMENT OF THE TRUST...................................................2-36 CORPORATE AND MUNICIPAL BOND RATINGS......................................2-41 ADDITIONAL INFORMATION....................................................2-50 PART 1 TRUST HISTORY The Trust is an open-end management investment company, which was organized as a Delaware business trust on September 18, 1997. A copy of the Declaration of Trust is on file as an exhibit to the Trust's Registration Statement, of which this SAI is a part. INVESTMENT POLICIES FUNDAMENTAL INVESTMENT RESTRICTIONS Each Fund has adopted the fundamental investment restrictions set forth below which may not be changed without the vote of a majority of the Fund's outstanding shares, as defined in the Investment Company Act of 1940 (the "1940 Act"). Where necessary, an explanation beneath a fundamental policy describes the Fund's practices with respect to that policy, as allowed by current law. If the law governing a policy changes, the Funds' practices may change accordingly without a shareholder vote. Unless otherwise stated, all references to the assets of the Fund are in terms of current market value. 1. Diversification (Money Market Fund, Municipal Money Market Fund, Treasury Money Market Fund and U.S. Government Money Market Fund) Money Market Fund, Municipal Money Market Fund, Treasury Money Market Fund and U.S. Government Money Market Fund may not make any investment that is inconsistent with each Fund's classification as a diversified investment company under the 1940 Act. Further Explanation of Diversification Policy: To remain classified as a diversified investment company under the 1940 Act, each Fund must conform with the following: With respect to 75% of its total assets, a diversified investment company may not invest more than 5% of its total assets, determined at market or other fair value at the time of purchase, in the securities of any one issuer, or invest in more than 10% of the outstanding voting securities of any one issuer, determined at the time of purchase. These limitations do not apply to investments in securities issued or guaranteed by the United States ("U.S.") government or its agencies or instrumentalities. 1a. Non-Diversification (California Municipal Money Market Fund, Florida Municipal Money Market Fund, New Jersey Municipal Money Market Fund, New York Municipal Money Market Fund and Pennsylvania Municipal Money Market Fund) A non-diversified management investment company, in order to maintain its tax treatment as a registered investment company pursuant to the Internal Revenue Code of 1986, as amended, may have no more than 25% of its total assets invested in the securities (other than U.S. government securities or the shares of other regulated investment companies) of any one issuer and must invest 50% of its total assets under the 5% of its assets and 10% of outstanding voting securities test applicable to diversified funds. 2. Concentration Each Fund may not concentrate its investments in the securities of issuers primarily engaged in any particular industry (other than securities that are issued or guaranteed by the U.S. government or its agencies or instrumentalities or, in the case of Money Market Fund, domestic bank money instruments). 1-1 Further Explanation of Concentration Policy: Each Fund may not invest more than 25% of its total assets, taken at market value, in the securities of issuers primarily engaged in any particular industry (other than securities issued or guaranteed by the U.S. government or its agencies or instrumentalities). 3. Issuing Senior Securities Except as permitted under the 1940 Act, each Fund may not issue senior securities. 4. Borrowing Each Fund may not borrow money, except to the extent permitted by applicable law. Further Explanation of Borrowing Policy: Each Fund may borrow from banks and enter into reverse repurchase agreements in an amount up to 33 1/3% of its total assets, taken at market value. Each Fund may also borrow up to an additional 5% of its total assets from banks or others. A Fund may borrow only as a temporary measure for extraordinary or emergency purposes such as the redemption of Fund shares. A Fund may purchase additional securities so long as borrowings do not exceed 5% of its total assets. Each Fund may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities. Each Fund may purchase securities on margin and engage in short sales to the extent permitted by applicable law. 5. Underwriting Each Fund may not underwrite securities of other issuers, except insofar as a Fund may be deemed to be an underwriter in connection with the disposition of its portfolio securities. 6. Real Estate Each Fund may not purchase or sell real estate, except that, to the extent permitted by applicable law, a Fund may invest in (a) securities that are directly or indirectly secured by real estate, or (b) securities issued by issuers that invest in real estate. 7. Commodities Each Fund may not purchase or sell commodities or contracts on commodities except to the extent that a Fund may engage in financial futures contracts and related options and currency contracts and related options and may otherwise do so in accordance with applicable law, and without registering as a commodity pool operator under the Commodity Exchange Act. 8. Lending Each Fund may not make loans to other persons, except that a Fund may lend its portfolio securities and cash in accordance with applicable law and exemptive relief issued by the Securities and Exchange Commission (SEC). The acquisition of investment securities or other investment instruments shall not be deemed to be the making of a loan. Further Explanation of Lending Policy: To generate income and offset expenses, a Fund may lend portfolio securities to broker-dealers and other financial institutions in an amount up to 33 1/3% of its total assets, taken at market value. While securities are on loan, the borrower will pay the Fund any income accruing on the security. The Fund may invest any cash collateral it receives in additional portfolio securities, such as U.S. Treasury notes, certificates of deposit, other 1-2 high-grade, short-term obligations or interest bearing cash equivalents. Increases or decreases in the market value of a security lent will affect the Fund and its shareholders. When a Fund lends its securities, it will require the borrower to give the Fund collateral in cash or U.S. government securities. The Fund will require collateral in an amount equal to at least 100% of the current market value of the securities lent, including accrued interest. The Fund has the right to call a loan and obtain the securities lent any time on notice of not more than five business days. The Fund may pay fees in connection with such loans. Subject to receiving shareholder approval, the Funds in the Evergreen Select Equity Trust, Evergreen Select Fixed Income Trust, Evergreen Equity Trust and Evergreen Fixed Income Trust will be able to lend cash to other Evergreen Funds (except SNAP Fund), including the Funds of the Trust in accordance with Evergreen's Interfund Lending Policy and with the exemptive order issued by the Securities and Exchange Commission on November 20, 2001 (Rel. No. 812-11592). 9. Investments in Federally Tax-Exempt Securities Each Fund (other than Money Market Fund, Treasury Money Market Fund and U.S. Government Money Market Fund) will, during periods of normal market conditions, invest its assets in accordance with applicable guidelines issued by the SEC or its staff concerning investment in tax-exempt securities for funds with the words tax-exempt, tax free or municipal in their names. OTHER SECURITIES AND PRACTICES For information regarding securities the Funds may purchase and investment practices the Funds may use, see the following sections in Part 2 of this SAI under "Additional Information on Securities and Investment Practices." Information provided in the sections listed below expands upon and supplements information provided in the Funds' prospectuses. The list below applies to all Funds unless otherwise noted. Money Market Instruments U.S. Government Agency Securities When-Issued, Delayed-Delivery and Forward Commitment Transactions Repurchase Agreements Reverse Repurchase Agreements Securities Lending Options and Futures Strategies Foreign Securities (applicable to Money Market Fund only) Premium Securities Illiquid and Restricted Securities Investment in Other Investment Companies Municipal Securities (not applicable to Money Market Fund, Treasury Money Market Fund and U.S. Government Money Market Fund) U.S. Virgin Islands, Guam and Puerto Rico (not applicable to Money Market Fund, Treasury Money Market Fund and U.S. Government Money Market Fund) Tender Option Bonds (not applicable to Money Market Fund, Treasury Money Market Fund and U.S. Government Money Market Fund) Master Demand Notes Obligations of Foreign Branches of United States Banks (applicable to Money Market Fund only) Obligations of United States Branches of Foreign Banks (applicable to Money Market Fund only) Zero Coupon "Stripped" Bonds Variable and Floating Rate Instruments (not applicable to Treasury Money Market Fund) Stand-by Commitments 1-3 PRINCIPAL HOLDERS OF FUND SHARES As of April 30, 2002, the officers and Trustees of the Trust owned as a group less than 1% of the outstanding shares of any class of each Fund. Set forth below is information with respect to each person who, to each Fund's knowledge, owned beneficially or of record more than 5% of the outstanding shares of any class of each Fund as of April 30, 2002. California Municipal Money Market Fund Class A First Clearing Corporation Attn: Money Market Department 10700 N. Park Drive Glen Allen, VA 23060-9243 99.99% California Municipal Money Market Fund Class I Hanan Kupferman Hagit Kupferman JT TEN 22054 E. Birdseye Dr. Diamond Bar, CA 91765-3901 99.40% California Municipal Money Market Fund Class S First Clearing Corp. - FUSI CAP Sweep Accounts Attn: Rigs Compliance 401 S. Tryon St. NC1164 Charlotte, NC 28202-1934 100.00% Florida Municipal Money Market Fund Class A First Union Brokerage Services Money Market Omnibus Account CP13-NC1167 301 S. College St. Charlotte, NC 28202-6000 56.56% First Union National Bank Trust Accounts CMG-1151-2 401 S. Tryon St. 3rd Fl. Charlotte, NC 28202-1934 27.31% Florida Municipal Money Market Fund Class I Frank C. J. Fiala Virginia F. Crawford TTEES Frank C. J. Fiala Rev Trust U/A DTD 5/18/78 1500 SE 24th Road Apt. 123 Ocala, FL 34471-6088 60.18% Judith A. Lynch TTEE Judith A. Lynch Rev Living Trust U/A DTD 09/04/98 3688 Wexford Hollow Rd. W Jacksonville, FL 32224-9627 37.99% Florida Municipal Money Market Fund Class S First Clearing Corp. - FUSI CAP Sweep Accounts Attn: Rig Compliance 401 S. Tryon St. NC1164 Charlotte, NC 28202-1934 100.00% 1-4 Money Market Fund Class A First Union Brokerage Services Money Market Omnibus Account CP13-NC1167 301 S. College St. Charlotte, NC 28202-6000 82.13% Bisys Fund Services Inc. FBO First Union Sweep Customers Attn: Mike Bryan 3435 Stelzer Rd. Columbus, OH 43219-6004 12.08% Money Market Fund Class B None Money Market Fund Class C First Clearing Corp. Cust. Spring Creek LP Attn: Elliott Schildkrout 45 Monadnock Rd. Chestnut Hill, MA 02467-1121 7.30% Money Market Fund Class I First Union National Bank Trust Accounts 1525 West WT Harris Blvd. Charlotte, NC 28288-0001 84.07% Money Market Fund Class S First Clearing Corp. - FUSI CAP Sweep Accounts Attn: Rig Compliance 401 S. Tryon St. NC1164 Charlotte, NC 28202-1934 64.96% First Clearing Corp. - FUSI CAP Sweep Accounts Attn: Rig Compliance 401 S. Tryon St. NC1164 Charlotte, NC 28202-1934 35.04% Money Market Fund Class S1 First Clearing Corp.-FUSI Cap Sweep Accounts Attn: Rig Compliance 401 South Tryon St. NC1164 Charlotte, NC 28202-1934 100.00% Municipal Money Market Fund Class A First Union Brokerage Services Money Market Omnibus Account CP13-NC1167 301 S. College St. Charlotte, NC 28202-6000 91.91% Municipal Money Market Fund Class I First Union National Bank Trust Accounts 1525 West WT Harris Blvd. Charlotte, NC 28288-0001 47.60% 1-5 First Union Securities Inc. Attn: Money Funds 8739 Research Dr. Charlotte, NC 28262-8537 7.33% Pitcairn Trust Company One Pitcairn Place Jenkintown, PA 19046-3531 5.38% Municipal Money Market Fund Class S First Clearing Corp. - FUSI CAP Sweep Accounts Attn: Rig Compliance 401 S. Tryon St. NC1164 Charlotte, NC 28202-1934 100.00% Municipal Money Market Fund Class S1 First Clearing Corp. - FUSI CAP Sweep Accounts Attn: Rig Compliance 401 S. Tryon St. NC1164 Charlotte, NC 28202-1934 100.00% New Jersey Municipal Money Market Fund Class A First Union Brokerage Services Money Market Omnibus Account CP13-NC1167 301 S. College St. Charlotte, NC 28202-6000 51.99% First Union National Bank Trust Accounts 401 S. Tryon St. 3rd Fl. Charlotte, NC 28202-1934 18.11% First Clearing Corporation Irwin Friedman 29 Fawn Dr. Livingston, NJ 07039-1905 8.74% New Jersey Municipal Money Market Fund Class I First Union National Bk BK/EB/INT Cash Acct. Trust Accounts 1525 West WT Harris Blvd. Charlotte, NC 28288-0001 23.23% Code Environmental Services Inc. 400 Middlesex Ave. Carteret, NJ 07008-3449 19.67% First Clearing Corporation Dennis J. O'Leary Account 2 71 Colfax Road Skillman, NJ 08558-2310 19.36% Edmund Brenman POA Sally Brenman 65 Maebelle Dr. Clark, NJ 07066-2216 17.41% First Clearing Corporation Joseph T. D'Amario and Mary D'Amario JRWROS 200 East 25th Street Paterson, NJ 07514-2119 8.12% 1-6 Code Enviro-Sciences, LLC 400 Middlesex Ave. Carteret, NJ 07008-3449 6.77% New Jersey Municipal Money Market Fund Class S First Clearing Corp. - FUSI CAP Sweep Accounts Attn: Rig Compliance 401 S. Tryon St. NC1164 Charlotte, NC 28202-1934 100.00% New York Municipal Money Market Fund Class A First Union Brokerage Services Money Market Omnibus Account 301 South College Street Charlotte, NC 28202-6000 97.54% New York Municipal Money Market Fund Class I First Union National Bank Trust Accounts 401 S. Tryon St. 3rd Floor Charlotte, NC 28202-1934 74.79% Tamara Feurstein Seymour Feurstein TEN COM 45 Winding Wood Rd. Rye Brook, NY 10573 25.21% New York Municipal Money Market Fund Class S First Clearing Corp. - FUSI CAP Sweep Accounts Attn: Rig Compliance 401 S. Tryon St. NC1164 Charlotte, NC 28202-1934 100.00% Pennsylvania Municipal Money Market Fund Class A First Union Brokerage Services Money Market Omnibus Account CP13-NC1167 301 S. College St. Charlotte, NC 28202-6000 65.05% Pennsylvania Municipal Money Market Fund Class I First Union National Bank Trust Accounts 1525 West WT Harris Blvd. Charlotte, NC 28288-0001 74.68% Byrd & Co. c/o First Union National Bank 123 S. Broad St. - PA4903 Philadelphia, PA 19109-1029 5.40% Johnathan B. Detwiler P.O. Box 69 Phoenixville, PA 19460-0069 5.08% Pennsylvania Municipal Money Market Fund Class S First Clearing Corp. - FUSI CAP Sweep Accounts Attn: Rig Compliance 401 S. Tryon St. NC1164 Charlotte, NC 28202-1934 100.00% 1-7 Treasury Money Market Fund Class A First Union National Bank Trust Accounts 11th Floor CMG-1151 301 S. Tryon Street Charlotte, NC 28202 38.52% Bisys Fund Services Inc. FBO First Union Sweep Customers Attn: Mike Bryan 3435 Stelzer Road Columbus, OH 43219-6004 36.00% First Union Brokerage Services Money Market Omnibus Account CP13-NC1167 301 S. College St. Charlotte, NC 28202-6000 9.45% Treasury Money Market Fund Class I First Union National Bank Trust Accounts 301 S. Tryon St. 11th Fl. CMG-1151 Charlotte, NC 28202 83.86% Byrd & Co. c/o First Union National Bank Sweep Funds Processing PA 4903 123 S. Broad St. Philadelphia, PA 19109-1029 8.81% Treasury Money Market Fund Class S First Clearing Corp. - FUSI CAP Sweep Accounts Attn: Rig Compliance 401 S. Tryon St. NC1164 Charlotte, NC 28202-1934 100.00% U.S. Government Money Market Fund Class A First Clearing Corporation Attn: Money Market Department 10700 N. Park Drive Glen Allen, VA 23060-9243 99.76% U.S. Government Money Market Fund Class B First Clearing Corporation Jack Silverberg R/O IRA FCC @ Custodian 2 Independence Place, Apt. 1502 No city, state, zip available 61.70% Donaldson Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ 07303-2052 16.00% Prudential Securities Inc. FBO Mr. William H. Goff IRA DTD 08/16/01 206 Ridgegate Dr. Garland, TX 75040-3556 8.62% 1-8 U.S. Government Money Market Fund Class C RBC Dain Rauscher FBO Rodney V. Salm Susan Walker Salm JT TEN/WROS 223 Pauahilani Pl. Kailua, HI 96734-3150 90.98% Prudential Securities Inc. FBO Emily TW Wong IRA Rollover DTD 07/30/99 1320 Alexander St. Apt. 1201 Hon, HI 96826-1222 5.78% U.S. Government Money Market Fund Class I Donaldson Lufkin Jenrette Securities Corp. Inc. P.O. Box 2052 Jersey City, NJ 07303-2052 63.65% Evergreen Investment Management Co. 200 Berkeley Street Boston, MA 02116-5022 36.35% U.S. Government Money Market Fund Class S Evergreen Investment Management Co. 200 Berkeley Street Boston, MA 02116-5022 100.00% U.S. Government Money Market Fund Class S1 First Clearing Corporation-FUSI Cap Sweep Accounts Attn: Rig Compliance 401 South Tryon St. NC1164 Charlotte, NC 28202-1934 100.00% EXPENSES Advisory Fees The advisor to the Funds is Evergreen Investment Management Company, LLC (EIMC), a wholly owned subsidiary of Wachovia Corporation (Wachovia), (formerly First Union Corporation), located at 201 South College Street, Charlotte, North Carolina 28288-0630. EIMC is located at 200 Berkeley Street, Boston, Massachusetts 02116-5034. For more information, see "Investment Advisory Agreement" in Part 2 of this SAI. EIMC is entitled to receive from California Municipal Money Market Fund, Florida Municipal Money Market Fund, New Jersey Municipal Money Market Fund, New York Municipal Money Market Fund, Treasury Money Market Fund and U.S. Government Money Market Fund an annual fee based on a percentage of each Fund's average daily net assets, as follows: California Municipal Money Market Fund 0.45% Florida Municipal Money Market Fund 0.41% New Jersey Municipal Money Market Fund 0.41% New York Municipal Money Market Fund 0.40% Treasury Money Market Fund 0.31% U.S. Government Money Market Fund 0.40% 1-9 EIMC is entitled to receive from Money Market Fund and Municipal Money Market Fund an annual fee based on each Fund's average daily net assets as follows: Average Daily Net Assets Fee First $1 billion 0.44% Over $1 billion 0.39% EIMC is entitled to receive from Pennsylvania Municipal Money Market Fund an annual fee based on the average daily net assets of the Fund, as follows: Average Daily Net Assets Fee First $500 million 0.36% Next $500 million 0.32% Next $500 million 0.28% Over $1.5 billion 0.24% Advisory Fees Paid Below are the advisory fees paid by each Fund for the last three fiscal years or periods. Prior to May 11, 2001, amounts paid by Money Market Fund and Treasury Money Market Fund were paid to each Fund's previous investment advisor. Fund/Fiscal Year or Period Advisory Fees Advisory Fees Paid Waived Fiscal Year or Period Ended January 31, 2002 California Municipal Money Market Fund (a) $269,279 $118,253 Florida Municipal Money Market Fund $826,952 $0 Money Market Fund $75,907,349 $0 Municipal Money Market Fund $7,082,513 $12,947 New Jersey Municipal Money Market Fund $696,618 $0 New York Municipal Money Market Fund (a) $167,456 $45,280 Pennsylvania Municipal Money Market Fund $922,639 $0 Treasury Money Market Fund $12,017,528 $0 U.S. Government Money Market Fund (b) $6,107,964 $0 Fiscal Year or Period Ended January 31, 2001 Florida Municipal Money Market Fund $636,680 $0 Money Market Fund $53,179,383 $0 Municipal Money Market Fund $5,271,524 $0 New Jersey Municipal Money Market Fund $515,904 $0 Pennsylvania Municipal Money Market Fund $735,875 $0 Treasury Money Market Fund $11,755,695 $0 Fiscal Year or Period Ended January 31, 2000 Florida Municipal Money Market Fund $415,461 $0 Money Market Fund $41,092,961 $0 Municipal Money Market Fund $6,608,878 $0 New Jersey Municipal Money Market Fund $485,050 $0 Pennsylvania Municipal Money Market Fund $617,609 $0 Treasury Money Market Fund $14,314,005 $0 (a) For the period September 24, 2001 (commencement of operations) through January 31, 2002. (b) For the Period June 26, 2001 (commencement of operations) through January 31, 2002. 1-10 Brokerage Commissions The Funds paid no brokerage commissions during the fiscal year or period ended January 31, 2002. Underwriting Commissions For each Fund there are no underwriting commissions for the last three fiscal years or periods. 12b-1 Fees Below are the 12b-1 fees paid by each Fund for the fiscal year ended January 31, 2002. For more information, see "Distribution Expenses Under Rule 12b-1" in Part 2 of this SAI. Class I shares do not pay 12b-1 fees.

1-11 Trustee Compensation Listed below is the Trustee compensation paid by the Trust individually for the fiscal year ended January 31, 2002 and by the Trust and the eight other trusts in the Evergreen Fund Complex for the twelve months ended December 31, 2001. The Trustees do not receive pension or retirement benefits from the Funds. For more information, see "Management of the Trust" in Part 2 of this SAI. Trustee Aggregate Compensation for Total Compensation from Trusts fiscal year from the Evergreen Fund ended 1/31/2002 Complex for the twelve months ended 12/31/2001* Laurence B. Ashkin** $11,784 $40,250 Charles A. Austin, III $26,904 $93,000 Arnold H. Dreyfuss** $12,592 $43,250 K. Dun Gifford $31,359 $109,000 James S. Howell*** $11,657 $40,000 Leroy Keith Jr. $26,705 $92,500 Gerald M. McDonnell $27,036 $93,500 Thomas L. McVerry $26,835 $93,000 Louis W. Moelchert, Jr.**** $23,906 $92,000 William Walt Pettit $27,036 $93,500 David M. Richardson $27,036 $93,500 Russell A. Salton, III $29,746 $103,000 Michael S. Scofield $34,529 $120,000 Richard J. Shima $27,036 $93,500 Richard K. Wagoner $26,913 $93,000 *Certain Trustees have elected to defer all or part of their total compensation for the twelve months ended December 31, 2001. The amounts listed below will be payable in later years to the respective Trustees: Austin $55,800 Howell $28,000 McVerry $93,000 Moelchert $92,000 Pettit $93,500 Scofield $39,375 ** As of January 1, 2001, Laurence B. Ashkin and Arnold H. Dreyfuss retired and became Trustees Emeriti. *** As of January 1, 2000, James S. Howell retired and became Trustee Emeritus. ****On January 2, 2002, Louis W. Moelchert, Jr. resigned. He received compensation through December 2001. 1-12 PERFORMANCE Total Return Below are the average annual total returns for each class of shares of the Funds (including any applicable sales charges) as of January 31, 2002. The returns for California Municipal Money Market Fund, New York Municipal Money Market Fund and U.S. Government Money Market Fund are cumulative. For more information, see `Total Return' under "Performance Calculations" in Part 2 of this SAI.

1-13

(a) Historical performance shown for Classes S and I prior to their inception is based on the performance of Class A, the original class offered. The historical returns for Classes S and I have not been adjusted to reflect the effect of each Class' 12b-1 fees. These fees are 0.30% for Class A are 0.60% for Class S. Class I does not pay 12b-1 fees. If these fees had been reflected, returns for Classes S and S1 would have been lower while returns for Class I would have been higher. (b) Historical performance shown for Classes A, B, C, S and S1 prior to their inception is based on the performance of Class I, the original class offered. These historical returns for Classes A, B, C, S and S1 have not been adjusted to reflect the effect of each Class' 12b-1 fees. These fees are 0.30% for Class A, 1.00% for Classes B and C, and 0.60% for Classes S and S1. Class I does not pay 12b-1 fees. If these fees had been reflected, returns for Classes A, B, C, S and S1 would have been lower. (c) Historical performance shown for Classes A, S and S1 prior to their inception is based on the performance of Class I, the original class offered. The historical returns for Classes A, S and S1 have not been adjusted to reflect the effect of each Class' 12b-1 fees. These fees are 0.30% for Class A and 0.60% for Classes S and S1. Class I does not pay 12b-1 fees. If these fees had been reflected, returns for Classes A, S and S1 would have been lower. (d) Historical performance shown for Class S prior to its inception is based on the performance of Class A, one of the original classes offered along with Class I. The historical returns for Class S have not been adjusted to reflect the effect of each Class' 12b-1 fees. These fees are 0.30% for Class A and 0.60% for Class S. Class I does not pay 12b-1 fees. If these fees had been reflected, returns for Class S would have been lower. Yields Below are the yields for each class of shares of the Funds for the seven-day period ended January 31, 2002. For more information, see `Yield' under "Performance Calculations" in Part 2 of this SAI.

(a) Assumes the following combined federal and state tax rates: 38.6% SERVICE PROVIDERS Administrator Evergreen Investment Services, Inc. (EIS), 200 Berkeley Street, Boston, Massachusetts 02116, a subsidiary of Wachovia Corporation (Wachovia), serves as administrator to the Funds, subject to the supervision and control of the Trust's Board of Trustees. EIS provides the Funds with facilities, equipment and personnel and is entitled to receive from each Fund annual fees at the following rate: Average Daily Net Assets Administrative Service Fee Rates of the Evergreen Money Market Funds First $60 billion 0.060% Next $40 billion 0.055% Next $25 billion 0.050% On assets over $125 billion 0.040% 1-15 Below are the administrative fees paid by each Fund for the last three fiscal years or periods. Prior to December 31, 2001, the Funds paid EIS under a different fee schedule. Fund/Fiscal Year or Period Administrative Fees Paid Fiscal Year or Period Ended January 31, 2002 California Municipal Money Market Fund (a) $35,904 Florida Municipal Money Market Fund $121,017 Money Market Fund $11,601,131 Municipal Money Market Fund $1,012,694 New Jersey Municipal Money Market Fund $101,944 New York Municipal Money Market Fund (a) $25,118 Pennsylvania Municipal Money Market Fund $153,773 Treasury Money Market Fund $2,325,973 U.S. Government Money Market Fund (b) $916,195 Fiscal Year or Period Ended January 31, 2001 Florida Municipal Money Market Fund $93,173 Money Market Fund $8,104,520 Municipal Money Market Fund $734,081 New Jersey Municipal Money Market Fund $75,498 Pennsylvania Municipal Money Market Fund $122,646 Treasury Money Market Fund $2,275,296 Fiscal Year or Period Ended January 31, 2000 Florida Municipal Money Market Fund $23,237 Money Market Fund $516,868 Municipal Money Market Fund $61,148 New Jersey Municipal Money Market Fund $23,773 Pennsylvania Municipal Money Market Fund $34,677 Treasury Money Market Fund $879,347 (a) For the period September 24, 2001 (commencement of operations) through January 31, 2002. (b) For the period June 26, 2001 (commencement of operations) through January 31, 2002. Transfer Agent Evergreen Service Company, LLC (ESC), P.O. Box 8400, Boston, Massachusetts 02266-8400, a subsidiary of Wachovia, is the Funds' transfer agent. ESC issues and redeems shares, pays dividends and performs other duties in connection with the maintenance of shareholder accounts. Each Fund pays ESC annual fees as follows: Fund Type Annual Fee Annual Fee Per Open Account* Per Closed Account** Monthly Dividend Funds $26.75 $9.00 Quarterly Dividend Funds $25.75 $9.00 Semiannual Dividend Funds $24.75 $9.00 Annual Dividend Funds $24.75 $9.00 Money Market Funds $26.75 $9.00 *For shareholder accounts only. Each Fund pays ESC cost plus 15% for broker accounts. **Closed accounts are maintained on the system in order to facilitate historical and tax information. 1-16 Distributor Evergreen Distributor, Inc. (EDI), 90 Park Avenue, New York, New York 10016, markets the Funds through broker-dealers and other financial representatives. Independent Auditors KPMG LLP, 99 High Street, Boston, Massachusetts 02110, audits the financial statements of the Funds. Custodian State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, keeps custody of each Fund's securities and cash and performs other related duties. Legal Counsel Sullivan & Worcester LLP, 1666 K Street, Washington, D.C. 20006, provides legal advice to the Funds. FINANCIAL STATEMENTS The audited financial statements and the reports thereon are hereby incorporated by reference to the Funds' Annual Report, a copy of which may be obtained without charge from Evergreen Service Company, LLC, P.O. Box 8400, Boston, Massachusetts 02266-8400 or by calling (800) 343-2898, or by downloading it off our website at www.evergreeninvestments.com. 1-17 ADDITIONAL INFORMATION CONCERNING CALIFORNIA The information set forth below is derived from sources that are generally available to investors, including official statements for debt offerings of California and other issuers in the state. The information is intended to give recent historical description and is not intended to indicate future or continuing trends in the financial or other positions of California or local issuers in the state. It should be noted that the creditworthiness of obligations issued by local issuers in the state may be unrelated to the creditworthiness of obligations issued by the State of California, and there is no obligation on the part of the State to make payments on such local obligations in the event of a default. General During the early 1990's, California experienced significant financial difficulties, which reduced its credit standing, but the State's finances improved significantly starting in 1995. After several years of very strong growth, the State's financial condition started to worsen since the start of 2001, with the combination of a mild economic recession and a dramatic decline in revenue from capital gains and stock option activity resulting from the decline in stock market levels since mid-2000. The ratings of certain related debt of other issuers for which California has an outstanding lease purchase, guarantee or other contractual obligation (such as for state-insured hospital bonds) are generally linked directly to California's rating. Should the financial condition of California deteriorate further, its credit ratings could be reduced, and the market value and marketability of all outstanding notes and bonds issued by California, its public authorities or local governments could be adversely affected. Economic Factors California's economy is the largest among the 50 states and one of the largest in the world. The State's population of about 35 million represents about 12-1/2% of the total United States population and grew by 26% in the 1980s, more than double the national rate. Population growth slowed to less than 1% annually in 1994 and 1995, but rose to almost 2% in the final years of the 1990's. The bulk of population growth in the State is due to births and foreign immigration. Total personal income in the State, at an estimated $1,095 billion in 2000, accounts for almost 13% of all personal income in the nation. Total employment is over 16 million, the majority of which is in the service, trade and manufacturing sectors. Following a severe recession in the early 1990's, California began a period of strong growth in 1994 in virtually all sectors, particularly in high technology manufacturing and services, including computer software and other services, entertainment, tourism, and construction, and also with very strong growth in exports. The California economy outpaced the nation during this period. By the end of 2000, unemployment in the State had dropped in half from the recession to under 5%, its lowest level in three decades. The strongest growth in a decade occurred in 1999 and 2000, but in 2001 the State finally showed the impact of the nationwide economic slowdown, coupled with a cyclical downturn in the high technology sector (including Internet-related businesses) and entered a mild recession, with unemployment rising above 6%. International trade also slowed since the start of 2001 reflecting weakness in overseas economies (particularly in Asia). The terrorist attacks on September 11, 2001 resulted in a further, temporary economic decline in tourism-based areas, but this effect appears to have ended by the spring of 2002. Modest job growth appears to have begun by early 2002 and California's economy is expected to continue a mild recovery in 2002 and 2003. The recession, combined particularly with the decline in the stock markets since mid-2000, will result in much weaker State revenues than previously projected, as discussed further below under "Recent Financial Results." Widely publicized difficulties in California's energy supplies had been seen in early 2001 to pose some risks to the economy, but during the summer there were no electricity blackouts or shortages of natural gas. Although energy prices have risen from the levels of two years ago, they have now appeared to stabilize. Energy difficulties are mitigated by the fact that California's economy is very energy-efficient. U.S. Department of Energy statistics for 1999 1-18 revealed that California ranked 50th of the 50 states in energy expenditures as a percentage of state domestic product. Recent Developments Regarding Energy From mid-2000 through early 2001, the State faced occasional shortages of electricity and dramatic increases in the spot market price for electricity, as a result of many complex factors deriving generally from a deregulation plan implemented in 1997. The three major investor-owned utilities in the State ("IOUs") purchased electricity to meet their needs above their own generating capacity and contracted supplies at fluctuating short-term and spot market rates, which rose sharply, while the retail prices they could charge their residential and small business customers were capped at specified levels under the deregulation plan. By early January, 2001, the two largest IOUs had exhausted their cash reserves and could no longer purchase electricity in the spot market. The Governor declared a state of emergency under State law on January 17, 2001, and ordered the State's Department of Water Resources ("DWR") to begin purchasing electricity for resale to retail end use customers, to fill the gap in supplies resulting from the inability of the IOUs to continue to purchase power. The DWR also started to enter into long-term power supply contracts to reduce reliance on short-term and spot markets. DWR's purchases were initially funded primarily by unsecured, interest-bearing loans from the State's General Fund ("State Loans"). DWR is also receiving repayment from a portion of retail end use customers' payments, remitted through the IOUs, but these amounts will cover only a small portion of the power purchase costs. Effective June 26, 2001, the DWR entered into an Interim Loan Agreement with several banks totaling $4.1 billion ("Interim Loans"), which moneys are being used since that date to fund power purchases. The Interim Loans are repayable only from end use customer payments or other debt sales, and are not an obligation of the State General Fund. As of January 31, 2002, DWR had committed approximately $12.6 billion for power purchases, funded from $6.1 billion in net State Loans, $3.7 billion in customer payments and a net $2.7 billion from the Interim Loans ($1.4 billion of Interim Loan proceeds remain available to fund future power purchases). The State Loans, the Interim Loans and the balance of energy purchase costs, are intended to be funded from the issuance of an estimated $11 billion of DWR revenue bonds authorized by legislation. Issuance of the bonds depends on adoption and final legal review of several orders by the California Public Utilities Commission ("CPUC"). In February, 2002 the CPUC adopted an order implementing DWR's "revenue requirement" to be collected from customer rates; the procedure used by DWR to calculate its revenue requirement was, however, challenged in a court proceeding. The CPUC also approved a "rate agreement" with the DWR governing the imposition of consumer rates necessary to repay the bond issue and DWR's other power purchase costs. While the CPUC had raised customer rates significantly in 2001 (average of 40%), final calculation of the DWR's revenue requirement to repay bonds and meet its other obligations may require additional rate actions. CPUC also approved an order eliminating the right of retail customers to contract directly with generators for energy. A final schedule for issuance of the revenue bonds will depend on review of legal challenges to these CPUC orders and related matters. The DWR revenue bonds will be repaid from a dedicated revenue stream derived from customer payments; they will not be backed in any way by the faith and credit or taxing power of the State. Pending issuance of the DWR revenue bonds, DWR projects it will have enough funds available from existing resources and customer revenues to continue its power purchases and repay its obligations (including principal payments on the Interim Loans which began in April 2002). On April 6, 2001, the largest IOU, Pacific Gas & Electric Company, filed for voluntary protection under the federal Bankruptcy Code. Its bankruptcy proceeding remained far from resolution by May, 2002. The second-largest IOU, Southern California Edison Company ("SCE") also defaulted on various obligations in early 2001. In October, 2001, SCE announced the settlement of a lawsuit with the CPUC over the rates which SCE could charge its customers. CPUC implemented this settlement by allowing SCE to collect rates from its customers at current levels for up to three years to repay its prior debts. Based on this agreement, SCE used accumulated cash and proceeds of a new credit agreement to repay substantially all of its prior defaulted debts in March, 2002. 1-19 The State is intensifying programs for energy conservation, load management and improved energy efficiency in government, businesses and homes. Approval for construction of new power generating facilities, especially smaller and "peaking" power facilities, has been accelerated. A number of new power plants have been completed and new larger power plants are under construction and in permitting phase, and will come on line in 2002 and 2003. As noted, the State has entered into a number of longer term power supply contracts, thereby reducing the risks of reliance on the spot markets. The combination of these elements has substantially lowered wholesale electricity costs. Despite fears of significant disruptions during the summer of 2001, the combination of cooler weather, significant conservation efforts, absence of major unplanned power plant outages, and completion of several new power plants permitted the State to avoid any blackouts since early May, and spot market power costs have decreased significantly, lessening the cost of the DWR power purchase program. Natural gas prices have also decreased. A number of lawsuits are pending dealing with many aspects of the energy situation in California, including disputes over the rates which the CPUC may charge retail customers, financial responsibility for purchases of power by the IOUs, obligations and rights of independent power producers holding power sales contracts with the IOUs, and various antitrust, fraud and refund claims against energy suppliers. Constitutional Limitations on Taxes, Other Charges and Appropriations Limitation on Property Taxes. Certain California Municipal Obligations may be obligations of issuers which rely in whole or in part, directly or indirectly, on ad valorem property taxes as a source of revenue. The taxing powers of California local governments and districts are limited by Article XIIIA of the California Constitution, enacted by the voters in 1978 and commonly known as "Proposition 13." Briefly, Article XIIIA limits the rate of ad valorem property taxes to 1% of full cash value of real property and generally restricts the reassessment of property to 2% per year, except upon new construction or change of ownership (subject to a number of exemptions). Taxing entities may, however, raise ad valorem taxes above the 1% limit to pay debt service on voter-approved bonded indebtedness. Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the assessed value of property as of the owner's date of acquisition (or as of March 1, 1975, if acquired earlier), subject to certain adjustments. This system has resulted in widely varying amounts of tax on similarly situated properties. Several lawsuits were filed challenging the acquisition-based assessment system of Proposition 13, but it was upheld by the U.S. Supreme Court in 1992. Article XIIIA prohibits local governments from raising revenues through ad valorem taxes above the 1% limit; it also requires voters of any governmental unit to give two-thirds approval to levy any "special tax." Limitations on Other Taxes, Fees and Charges. On November 5, 1996, the voters of the State approved Proposition 218, called the "Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a number of provisions affecting the ability of local agencies to levy and collect both existing and future taxes, assessments, fees and charges. Article XIIIC requires that all new or increased local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes require a majority vote and taxes for specific purposes require a two-thirds vote. Article XIIID contains several new provisions making it generally more difficult for local agencies to levy and maintain "assessments" for municipal services and programs. Article XIIID also contains several new provisions affecting "fees" and "charges", defined for purposes of Article XIIID to mean "any levy other than an ad valorem tax, a special tax, or an assessment, imposed by a [local government] upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service." All new and existing property related fees and charges must conform to requirements prohibiting, among other things, fees and charges which generate 1-20 revenues exceeding the funds required to provide the property related service or are used for unrelated purposes. There are new notice, hearing and protest procedures for levying or increasing property related fees and charges, and, except for fees or charges for sewer, water and refuse collection services (or fees for electrical and gas service, which are not treated as "property related" for purposes of Article XIIID), no property related fee or charge may be imposed or increased without majority approval by the property owners subject to the fee or charge or, at the option of the local agency, two-thirds voter approval by the electorate residing in the affected area. In addition to the provisions described above, Article XIIIC removes limitations on the initiative power in matters of local taxes, assessments, fees and charges. Consequently, local voters could, by future initiative, repeal, reduce or prohibit the future imposition or increase of any local tax, assessment, fee or charge. It is unclear how this right of local initiative may be used in cases where taxes or charges have been or will be specifically pledged to secure debt issues. The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of matters, and it is not possible at this time to predict with certainly the outcome of such determinations. Appropriations Limits. The State and its local governments are subject to an annual "appropriations limit" imposed by Article XIIIB of the California Constitution, enacted by the voters in 1979 and significantly amended by Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB prohibits the State or any covered local government from spending "appropriations subject to limitation" in excess of the appropriations limit imposed. "Appropriations subject to limitation" are authorizations to spend "proceeds of taxes," which consist of tax revenues and certain other funds, including proceeds from regulatory licenses, user charges or other fees, to the extent that such proceeds exceed the cost of providing the product or service, but "proceeds of taxes" exclude most State subventions to local governments. No limit is imposed on appropriations of funds which are not "proceeds of taxes," such as reasonable user charges or fees, and certain other non-tax funds, including bond proceeds. Among the expenditures not included in the Article XIIIB appropriations limit are (1) the debt service cost of bonds issued or authorized prior to January 1, 1979, or subsequently authorized by the voters, (2) appropriations to comply with mandates of courts or the federal government, (3) appropriations for certain capital outlay projects, (4) appropriations by the State of post-1989 increases in gasoline taxes and vehicle weight fees, and (5) appropriations made in certain cases of emergency. The appropriations limit for each year is adjusted annually to reflect changes in cost of living and population, and any transfers of service responsibilities between government units. The definitions for such adjustments were liberalized in 1990 to follow more closely growth in the State's economy. "Excess" revenues are measured over a two-year cycle. Local governments must return any excess to taxpayers by rate reductions. The State must refund 50% of any excess, with the other 50% paid to schools and community colleges. With more liberal annual adjustment factors since 1988, and depressed revenues in the early 1990's because of the recession, few governments have been operating near their spending limits, but this condition may change over time. Local governments may by voter approval exceed their spending limits for up to four years. Because of extraordinary revenue receipts in fiscal year 1999-2000, State appropriations were estimated to be about $975 million above the limit. However, since the State was $2.1 billion below its limit in fiscal year 2000-01, resulting in no excess over the two-year period, no refunds were made. 1999-2000 was the only fiscal year since the late 1980's when State appropriations were above the limit. The State Department of Finance estimates the State will be about $14.5 billion below its appropriation limit in fiscal year 2001-02 and $6.3 billion under the limit in 2002-03. Because of the complex nature of Articles XIIIA, XIIIB, XIIIC and XIIID of the California Constitution, the ambiguities and possible inconsistencies in their terms, and the impossibility of predicting future appropriations or changes in population and cost of living, and the probability of continuing legal challenges, it is not currently possible to determine fully the impact of 1-21 these Articles on California municipal obligations or on the ability of the State or local governments to pay debt service on such California municipal obligations. It is not possible, at the present time, to predict the outcome of any pending litigation with respect to the ultimate scope, impact or constitutionality of these Articles or the impact of any such determinations upon State agencies or local governments, or upon their ability to pay debt service on their obligations. Further initiatives or legislative changes in laws or the California Constitution may also affect the ability of the State or local issuers to repay their obligations. Obligations of the State of California Under the California Constitution, debt service on outstanding general obligation bonds is the second charge to the General Fund after support of the public school system and public institutions of higher education. As of January 1, 2002, the State had outstanding approximately $23.9 billion of long-term general obligation bonds, plus $724 million of general obligation commercial paper and $6.2 billion of lease-purchase debt supported by the State General Fund. The State also had about $13.2 billion of authorized and unissued long-term general obligation bonds and lease-purchase debt. The State sold $1.8 billion of general obligation bonds to repay outstanding commercial paper notes in February and April, 2002, and sold $187,705,000 of new lease purchase bonds in February, 2002. In FY 2000-01, debt service on general obligation bonds and lease purchase debt was approximately 3.8% of General Fund revenues. State voters approved $2.8 billion of new general bond authorizations on the ballot in March, 2002. At least $15 billion in new bond authorizations will be on the ballot in November, 2002. Recent Financial Results The principal sources of General Fund tax revenues in 2000-01 were the California personal income tax (59 percent of total tax revenues), the sales tax (28 percent), corporation taxes (9 percent), and the gross premium tax on insurance (2 percent). Preliminary estimates for 2000-01 indicate that almost 25% of total General Fund tax revenue was derived from capital gains realizations and stock option income. While these sources have been extraordinarily strong in the past few years, they are particularly volatile. In preparing the 2001-02 budget, the State took account of the recent drop in stock market levels and reduced its estimated receipts from these revenues as compared to the prior year. However, with continued weak stock market levels into early 2002 it is now clear that revenue from capital gains and stock options will fall below projections. Indeed, the Administration now projects that this source of revenue will drop from 25% of all General Fund revenues in 2000-01 to 11% in 2001-02 and 9% in 2002-03; this represents the bulk of the total General Fund revenue shortfall in these two fiscal years. The State maintains a Special Fund for Economic Uncertainties (the "SFEU"), derived from General Fund revenues, as a reserve to meet cash needs of the General Fund, but which is required to be replenished as soon as sufficient revenues are available. Year-end balances in the SFEU are included for financial reporting purposes in the General Fund balance. Throughout the 1980's, State spending increased rapidly as the State population and economy also grew rapidly, including increased spending for many assistance programs to local governments, which were constrained by Proposition 13 and other laws. The largest State program is assistance to local public school districts. In 1988, an initiative (Proposition 98) was enacted which (subject to suspension by a two-thirds vote of the Legislature and the Governor) guarantees local school districts and community college districts a minimum share of State General Fund revenues (currently about 35 percent). Recent Budgets. The State suffered a severe economic recession from 1990-94 during which the State experienced substantial revenue shortfalls and accumulated a budget deficit of about $2.8 billion. With the economic recovery which began in 1994, the State's financial condition improved markedly in the years from fiscal year 1995-96 onward, with a combination of better than expected revenues, slowdown in growth of social welfare programs, and continued spending restraint based on the actions taken in earlier years. The economy grew strongly during the second half of the 1990's, and as a result, the General Fund took in substantially greater tax revenues (around 1-22 $2.2 billion in 1995-96, $1.6 billion in 1996-97, $2.4 billion in 1997-98, $1.7 billion in 1998-99, $8.2 billion in 1999-2000 and $4.1 billion in 2000-01) than were initially planned when the budgets were enacted. These additional funds were largely directed to school spending as mandated by Proposition 98, and to make up shortfalls from reduced federal health and welfare aid in 1995-96 and 1996-97. In 1998-99 through 2000-01, new spending programs were also enacted, particularly for education, new capital outlay projects were funded from current receipts, and significant tax reductions were enacted. The accumulated budget deficit from the recession years was finally eliminated. The Department of Finance estimates that the State's budget reserve (the SFEU) totaled $8.7 billion at June 30, 2000 and $6.3 billion at June 30, 2001. However, the SFEU balance at June 30, 2001 includes as an asset the $6.1 billion loan to the DWR for power purchases (see "Recent Developments Regarding Energy" above), and the General Fund's available cash at that date was considerably less. The growth in General Fund revenues since the end of the recession resulted in significant increases in State funding for local school districts under Proposition 98. From the recession level of about $4,200 per pupil, annual State funding has increased to over $6,700 per pupil in FY 2000-01. A significant amount of the new moneys have been directed to specific educational reforms, including reduction of class sizes in many grade levels. The improved budget condition also allowed annual increases in support for higher education in the State, permitting increased enrollment and reduction of student fees. Part of the 1997-98 Budget Act was completion of State welfare reform legislation to implement the new federal law passed in 1996. The new State program, called "CalWORKs," became effective January 1, 1998, and emphasizes programs to bring aid recipients into the workforce. As required by federal law, new time limits are placed on receipt of welfare aid. Generally, health and welfare costs have been contained even during the recent period of economic recovery, with the first real increases (after inflation) in welfare support levels occurring in 1999-2000 and additional increases in 2000-01. One of the most important elements of recent Budget Acts was agreement on substantial tax cuts. The largest of these was a phased-in cut in the Vehicle License Fee (an annual tax on the value of cars registered in the State, the "VLF"). Starting on January 1, 1999, the VLF was reduced by 25 percent, which was increased to a 35% reduction effective January 1, 2000 and a 67.5% reduction effective January 1, 2001. Under pre-existing law, VLF funds are automatically transferred to cities and counties, so the new legislation provided for the General Fund to make up the reductions. The full 67.5% percent VLF cut will be offset by about $2.6 billion in General Fund money in FY 2000-01, and $3.6 billion for fiscal year 2001-02. (The Administration is proposing a one-year reversal of the VLF cut above 25% in calendar 2003 to save about $2.4 billion.) Other tax cuts included an increase in the dependent credit exemption for personal income tax filers, restoration of a renter's tax credit for taxpayers, and a variety of business tax relief measures. Finally, because the SFEU balance was more than 4% of General Fund revenues for two consecutive years, the State reduced its sales tax by 0.25% for one year, starting January 1, 2001 (pursuant to an existing statutory formula). This will result in about $1.15 billion in lower revenues during calendar year 2001. The 0.25% rate was restored as of January 1, 2002. Fiscal Year 2001-02 Budget. The 2001-02 Budget Act (the "2001 Budget Act") was signed on July 26, 2001. The 2001 Budget Act included $78.8 billion in General Fund expenditures, a reduction of $1.3 billion from the previous year. General Fund revenues in fiscal year 2001-02 were projected to drop to $75.1 billion, a decline of almost 4 percent from the prior year, reflecting the economic slowdown and the sharp drop in capital gains and stock option revenue. The excess of expenditures over revenues is to be funded by using a part of the budget reserve from the prior year, and assumes that the General Fund will be repaid in full for advances made to purchase energy (see "Recent Developments Regarding Energy" above). The Governor vetoed about $500 million of General Fund expenditures from the 2001 Budget Act as adopted by the Legislature, to leave an estimated budget reserve in the SFEU at June 30, 2002 of $2.6 billion. The 2001 Budget Act also included expenditures of $21.3 billion from Special Funds and $3.2 billion from bond funds. 1-23 When the Governor released his proposed budget for 2002-03 in January 2002 (the "2002-03 Governor's Budget"), the Administration estimated that the major tax revenues (personal income, corporate and sales) would be more than $5 billion lower in 2001-02 than projected when the 2001 Budget Act was signed. The Administration projected the need to close a $12.5 billion budget gap for the two fiscal years 2001-02 and 2002-03. As a first part of his plan to close this gap, the Governor froze about $2.3 billion of spending for 2001-02 in November 2001; the Legislature ratified these actions in late January 2002. The State sold a record $5.7 billion in revenue anticipation notes ("RANs") for the 2001-02 fiscal year, to offset cash flow shortfalls during the fiscal year, as part of the State's normal, annual cash management program. The State's cash position has been adversely affected by the $6.1 billion advances made by the General Fund to pay for electricity purchases in the first half of 2001. In late April, 2002, the State Controller indicated that cash flow projections for the balance of the fiscal year, in light of weak revenues, indicated the need for the State to borrow additional moneys in the short-term note markets in order to pay the RANs when they mature on June 28, 2002, as well as other State obligations in June, July and August 2002, given the fact that the DWR revenue bonds will not be sold in time to replenish the General Fund by the end of June. The Controller proposed the issuance of up to $7.5 billion of "revenue anticipation warrants" in June, 2002. The need for any additional cash flow borrowing will likely depend on how quickly the DWR revenue bonds are sold (see "Recent Developments Regarding Energy" above). One of the major disputes which delayed passage of the 2001 Budget Act past the July 1 start of the fiscal year related to tax provisions. Under existing law, since the budget reserve was expected to fall below 4% in 2001-02, the 0.25% reduction in the State sales tax which went into effect on January 1, 2001 was scheduled to be reversed on January 1, 2002, providing over $500 million of revenues for the 2001-02 fiscal year. A compromise was reached which allows the 0.25% sales tax reinstatement to occur in 2002, but reduces the "trigger" for sales tax reductions in future years to a 3% budget reserve test from the present 4%. Certain other tax relief measures for senior citizens and rural and agricultural areas were included in the Budget Act, totaling about $122 million. The 2001 Budget Act provides full funding for K-14 education, and certain additional funding for low-performing schools, childcare and other programs. Funding for higher education was increased, but less than in previous years. No fee increases for higher education will be imposed. Health care, social services and prisons are funded for all expected caseload and inflation increases. Assistance to local governments was reduced from the previous year. The 2001 Budget Act was able to sustain the reduced revenues without major program reductions because a large part of the 2000-01 Budget Act was for one-time spending, which did not have to be continued. The Budget Act has much less one-time spending for capital outlay. The 2001 Budget Act also extends for two years the six-year transportation funding program implemented in 2000-01, and uses a total of $2.3 billion of those funds for General Fund purposes in 2001-02 and 2002-03, to be repaid in 2006-08. The shortfall in funding will be made up by temporary loans from other transportation accounts, so that it is not expected any projects will be delayed. Part of a compromise to permit this deferral was agreement to place a constitutional amendment on the next statewide ballot to permanently dedicate all sales taxes on gasoline and related fuels to transportation programs. In anticipation of reduced revenues in the 2001-02 fiscal year, the Governor in October, 2001 announced a hiring freeze for State agencies, and requested State agencies to find up to 10% in cost reductions in the current year. He also asked State agencies to prepare budget proposals for the 2002-03 fiscal year with up to a 15% cut from current levels. However, this cut would not apply to public safety or K-12 education programs. Proposed 2002-03 Budget When the 2002-03 Governor's Budget was released in January, 2002, it projected a $12.5 billion gap for the period through June 30, 2003. The 1-24 Administration's May Revision of the Governor's Budget, issued May 14, 2002 (the "May Revision"), reported that as a result of continuing economic weakness, particularly in the stock markets, revenues in the second part of the 2001-02 fiscal year fell substantially below projections. Personal income tax receipts are projected at $4.5 billion, or 11%, below the Governor's Budget estimate; total receipts will be down about $3.3 billion, or 4.3%. Personal income tax receipts for 2002-03 were projected to be $5.5 billion, or 13%, below the Governor's Budget estimate. Sales and corporations taxes are projected to be a little higher than earlier estimates, reflecting improved economic conditions and corporate profits. The May Revision concluded that, with the combination of lower revenues and certain increased expenditure requirements, the budget gap had risen to about $23.6 billion. The Administration proposed, in the May Revision, to close this gap with the following major actions: 1. Expenditure reductions of about $7.6 billion. About $2.3 billion of these reductions, for the 2001-02 fiscal year, have already been approved by the Legislature. The largest part of the reductions fall on health, welfare and other social services programs, but virtually all programs other than education and public safety would be affected to some extent. 2. Funding shifts from the General Fund to other sources, including bond funds and special funds, and deferral of expenditures to future years, totaling $3.6 billion. 3. Anticipated increases in federal funding for health and human services programs, security/bioterrorism and other areas totaling $1.1 billion. 4. Interfund loans, accelerations and transfers totaling $3.0 billion. 5. Various revenue increases totaling $3.9 billion, including deferral of net operating loss carryforwards for corporations, an increase in the cigarette tax, federal tax conformity legislation, and temporary suspension of the vehicle license fee reduction. 6. Sale of bonds secured by future payments from the tobacco litigation settlement, to generate $4.5 billion in current receipts. All of these proposals are subject to negotiations with the Legislature and, in some cases, action by other bodies, such as the federal government. There is no assurance which of these actions will be finally implemented, or the total budget savings will result. The 2002-03 Governor's Budget, as updated by the May Revision, proposed an austere spending plan for the next fiscal year, based on successful implementation of the various actions to close the budget gap. Spending for K-12 schools would be increased by a small amount, with full cost of living increases included, so that at least the minimum Proposition 98 guaranty would be funded. Most other areas of government would receive some program or funding reductions, although caseload increases, where appropriate, will be funded. The Governor proposed some reductions in existing grants to local governments, and counties, in particular, would have to make up reductions in health and social services programs. The Governor did not propose and large-scale funding shifts adverse to local government, as occurred in the early 1990's. Final action on the 2002-03 Budget Act will occur in the summer following final negotiations between the Governor and the Legislature. Although the State's strong economy has produced record revenues to the State government in recent years, the State's budget faces several years of significant constraints due to weaker economic conditions, and it continues to be marked by mandated spending on education, a large prison population, and social needs of a growing population with many immigrants. These factors which limit State spending growth also put pressure on local governments. There can be no assurances that, if economic conditions weaken, or other factors intercede, the State will not experience budget gaps in the future. Bond Rating The ratings on California's long-term general obligation bonds were reduced in the early 1990's from "AAA" levels which had existed prior to the recession. After 1996, through the end of 2000, the three major rating agencies raised their ratings of California's general obligation bonds as high as "AA" from Standard & Poor's, "Aa2" from Moody's and "AA" from Fitch. As of May 1, 2002, Standard & Poor's had reduced California's senior ratings to "A+" and Moody's had reduced its ratings to "A1" and both agencies maintained the State's 1-25 credit ratings on watch with negative implications. As of that date, Fitch had placed California's ratings on watch with negative implications. There can be no assurance that current ratings will be maintained in the future. It should be noted that the creditworthiness of obligations issued by local California issuers may be unrelated to creditworthiness of obligations issued by the State of California, and that there is no obligation on the part of the State to make payment on such local obligations in the event of default. Legal Proceedings The State is involved in certain legal proceedings (described in the State's recent financial statements) that, if decided against the State, may require the State to make significant future expenditures or may substantially impair revenues. If the State eventually loses any of these cases, the final remedies may not have to be implemented in one year. Obligations of Other Issuers Other Issuers of California Municipal Obligations. There are a number of State agencies, instrumentalities and political subdivisions of the State that issue Municipal Obligations, some of which may be conduit revenue obligations payable from payments from private borrowers. These entities are subject to various economic risks and uncertainties, and the credit quality of the securities issued by them may vary considerably from the credit quality of obligations backed by the full faith and credit of the State. State Assistance. Property tax revenues received by local governments declined more than 50% following passage of Proposition 13. Subsequently, the California Legislature enacted measures to provide for the redistribution of the State's General Fund surplus to local agencies, the reallocation of certain State revenues to local agencies and the assumption of certain governmental functions by the State to assist municipal issuers to raise revenues. Total local assistance from the State's General Fund was budgeted at approximately 75% of General Fund expenditures in recent years, including the effect of implementing reductions in certain aid programs. To reduce State General Fund support for school districts, the 1992-93 and 1993-94 Budget Acts caused local governments to transfer $3.9 billion of property tax revenues to school districts, representing loss of the post-Proposition 13 "bailout" aid. Local governments have in return received greater revenues and greater flexibility to operate health and welfare programs. In 1997, a new program provided for the State to substantially take over funding for local trial courts (saving cities and counties some $400 million annually). For 2001-02, the State has provided over $350 million to support local law enforcement costs. The current fiscal crisis may result in some reductions in these payments in 2002-03. To the extent the State should be constrained by its Article XIIIB appropriations limit, or its obligation to conform to Proposition 98, or other fiscal considerations, the absolute level, or the rate of growth, of State assistance to local governments may continue to be reduced. Any such reductions in State aid could compound the serious fiscal constraints already experienced by many local governments, particularly counties. Los Angeles County, the largest in the State, was forced to make significant cuts in services and personnel, particularly in the health care system, in order to balance its budget in FY1995-96 and FY1996-97. Orange County, which emerged from Federal Bankruptcy Court protection in June 1996, has significantly reduced county services and personnel, and faces strict financial conditions following large investment fund losses in 1994 which resulted in bankruptcy. The recent economic slowdown in the State, with its corresponding reduction in State and local revenues, will put additional pressure on local government finances in the coming years. Counties and cities may face further budgetary pressures as a result of changes in welfare and public assistance programs, which were enacted in August, 1997 in order to comply with the federal welfare reform law. Generally, counties play a large role in the new system, and are given substantial flexibility to develop and administer programs to bring aid recipients into the workforce. Counties are also given financial incentives if either at the county or statewide level, the "Welfare-to-Work" programs exceed minimum targets; counties 1-26 are also subject to financial penalties for failure to meet such targets. Counties remain responsible to provide "general assistance" for able-bodied indigents who are ineligible for other welfare programs. The long-term financial impact of the new CalWORKs system on local governments is still unknown. Assessment Bonds. California Municipal Obligations which are assessment bonds may be adversely affected by a general decline in real estate values or a slowdown in real estate sales activity. In many cases, such bonds are secured by land which is undeveloped at the time of issuance but anticipated to be developed within a few years after issuance. In the event of such reduction or slowdown, such development may not occur or may be delayed, thereby increasing the risk of a default on the bonds. Because the special assessments or taxes securing these bonds are not the personal liability of the owners of the property assessed, the lien on the property is the only security for the bonds. Moreover, in most cases the issuer of these bonds is not required to make payments on the bonds in the event of delinquency in the payment of assessments or taxes, except from amounts, if any, in a reserve fund established for the bonds. California Long Term Lease Obligations. Based on a series of court decisions, certain long-term lease obligations, though typically payable from the general fund of the State or a municipality, are not considered "indebtedness" requiring voter approval. Such leases, however, are subject to "abatement" in the event the facility being leased is unavailable for beneficial use and occupancy by the municipality during the term of the lease. Abatement is not a default, and there may be no remedies available to the holders of the certificates evidencing the lease obligation in the event abatement occurs. The most common cases of abatement are failure to complete construction of the facility before the end of the period during which lease payments have been capitalized and uninsured casualty losses to the facility (e.g., due to earthquake). In the event abatement occurs with respect to a lease obligation, lease payments may be interrupted (if all available insurance proceeds and reserves are exhausted) and the certificates may not be paid when due. Although litigation is brought from time to time which challenges the constitutionality of such lease arrangements, the California Supreme Court issued a ruling in August, 1998 which reconfirmed the legality of these financing methods. Other Considerations The repayment of industrial development securities secured by real property may be affected by California laws limiting foreclosure rights of creditors. Securities backed by health care and hospital revenues may be affected by changes in State regulations governing cost reimbursements to health care providers under Medi-Cal (the State's Medicaid program), including risks related to the policy of awarding exclusive contracts to certain hospitals. Limitations on ad valorem property taxes may particularly affect "tax allocation" bonds issued by California redevelopment agencies. Such bonds are secured solely by the increase in assessed valuation of a redevelopment project area after the start of redevelopment activity. In the event that assessed values in the redevelopment project decline (e.g., because of a major natural disaster such as an earthquake), the tax increment revenue may be insufficient to make principal and interest payments on these bonds. Both Moody's and S&P suspended ratings on California tax allocation bonds after the enactment of Articles XIIIA and XIIIB, and only resumed such ratings on a selective basis. Proposition 87, approved by California voters in 1988, requires that all revenues produced by a tax rate increase go directly to the taxing entity which increased such tax rate to repay that entity's general obligation indebtedness. As a result, redevelopment agencies (which, typically, are the issuers of tax allocation securities) no longer receive an increase in tax increment when taxes on property in the project area are increased to repay voter-approved bonded indebtedness. The effect of these various constitutional and statutory changes upon the ability of California municipal securities issuers to pay interest and principal on their obligations remains unclear. Furthermore, other measures affecting the taxing or spending authority of California or its political subdivisions may be approved or enacted in the future. Legislation has been or may be introduced which would modify existing taxes or other revenue-raising 1-27 measures or which either would further limit or, alternatively, would increase the abilities of state and local governments to impose new taxes or increase existing taxes. It is not possible, at present, to predict the extent to which any such legislation will be enacted. Nor is it possible, at present, to determine the impact of any such legislation on California Municipal Obligations in which the Fund may invest, future allocations of state revenues to local governments or the abilities of state or local governments to pay the interest on, or repay the principal of, such California Municipal Obligations. Substantially all of California is within an active geologic region subject to major seismic activity. Northern California in 1989 and Southern California in 1994 experienced major earthquakes causing billions of dollars in damages. The federal government provided more than $13 billion in aid for both earthquakes, and neither event has had any long-term negative economic impact. Any California Municipal Obligation in the Fund could be affected by an interruption of revenues because of damaged facilities, or, consequently, income tax deductions for casualty losses or property tax assessment reductions. Compensatory financial assistance could be constrained by the inability of (i) an issuer to have obtained earthquake insurance coverage rates; (ii) an insurer to perform on its contracts of insurance in the event of widespread losses; or (iii) the federal or State government to appropriate sufficient funds within their respective budget limitations. ADDITIONAL INFORMATION CONCERNING FLORIDA State Economy General. Florida is the nation's fourth most populous state with an estimated population of 15,982,378 as of December 31, 2000. Only California, New York and Texas have populations larger than Florida. The State's population grew from 6,800,000 in 1970, to 12,937,000 in 1990, and to 15,982,378 in 2000. This represents a 23.5% growth since the 1990 Census. Florida's population is primarily an urban population with approximately 85% of its population located in urbanized areas. The Demographic Estimating Conference Database projects Florida's population will exceed 18,800,000 by 2010 and 21,700,000 by 2020. Economic Conditions and Outlook. The current Florida Economic Consensus estimating Conference forecast shows that the Florida economy is expected to grow at a slower pace than was experienced in the last years, but will continue to outperform the U.S. as a whole. Total non-farm employment is expected to increase 1.4% for the 2002-03 fiscal year which will begin July 1, 2002. By the end of fiscal year 2001-02, non-farm employment is expected to reach 7.5 million. Trade and service employment, the two largest sectors, account for more than half of total non-farm employment. Florida's unemployment rate was 3.6% for 2000-01, and is forecasted to rise to 4.3% in 2001-02. Tourism is an important element of Florida's economy. Since September's terrorist attacks, Florida has experienced a precipitous drop in tourist arrivals. Another important element of Florida's economy is construction. The number of combined single and multi-family private housing starts is expected to fall 22,900 units this year. Total construction expenditures are expected to decrease 2.2% this year, but increase by 1.8% in 2002-03. Florida's Budget Process Balanced Budget Requirement. Florida's constitution requires an annual balanced budget. In addition, the constitution requires a Budget Stabilization Fund equal to 5% of the last fully completed fiscal year's net revenue collections for the General Revenue Fund. State Revenue Limitations. On November 8, 1994, the citizens of Florida enacted a Constitutional Amendment on state revenue. This amendment provides that the rate of growth in state revenues is limited to no more than the average annual growth rate in Florida personal income during the past five years. 1-28 Revenue growth in excess of the limitation is to be deposited into the Budget Stabilization Fund unless two-thirds of the members of both houses of the Legislature vote to raise the limit. The revenue limit is determined by multiplying the average annual growth rate in Florida personal income over the past five years times state revenues for the previous year. Budget Process. Chapter 216, Florida Statutes, promulgates the process used to develop the budget for the State of Florida. By September 1 of each year, the head of each State agency and the Chief Justice of the Supreme Court for the Judicial Branch submit a final annual budget request to the Governor and Legislature. Then, at least 45 days before the scheduled annual legislative session in each year, the Governor, as chief budget officer, submits his recommended budget to each legislator. The Governor also provides estimates of revenues sufficient to fund the recommended appropriations. Estimates for the General Revenue Fund, Budget Stabilization Fund and Working Capital Fund are made by the Revenue Estimating Conference. This group includes members of the executive and legislative branches with forecasting experience who develop official information regarding anticipated State and local government revenues as needed for the state budgeting process. In addition to the Revenue Estimating Conference, other consensus estimating conferences cover national and state economics, national and state demographics, the state public education system, criminal justice system, social services system, transportation planning and budgeting, the child welfare system, the juvenile justice system and the career education planning process. Trust fund revenue estimates are generally made by the agency that administers the fund. These estimates are reviewed by the Governor and then incorporated into his recommended budget. The Governor's recommended budget forms the basis of the appropriations bill. As amended and approved by the Legislature (subject to the line-item veto power of the Governor and override authority of the Legislature), this bill becomes the General Appropriations Act. The Governor and the Comptroller are responsible for detecting conditions which could lead to a deficit in any agency's funds and reporting that fact to the Administration Commission and the Chief Justice of the Supreme Court. Article VII, Section 1(d) of the constitution states, a Provision shall be made by law for raising sufficient revenue to defray the expenses of the State for each fiscal year. The Legislature is responsible for annually providing direction in the General Appropriations Act regarding the use of the Working Capital Fund to offset General Revenue Fund deficits. Absent any specific direction to the contrary, the Governor and the Chief Justice of the Supreme Court shall comply with guidelines provided in Section 216.221(5), Florida Statutes, for reductions in the approved operating budgets of the executive branch and the judicial branch. The State of Florida is progressing toward full implementation of a performance-based budgeting system. Chapter 216, Florida Statutes, designates when each department will be phased into this new budgeting method. Some agencies are already subject to the performance-based budgeting standards and all agencies will be under this new system by the fiscal year ended June 30, 2002. With performance-based budgeting, a department receives a lump-sum appropriation from the Legislature for each designated program at the beginning of the year. The Governor, for State agencies, or the Chief Justice, for the judicial branch, is responsible for allocating the amounts among the traditional appropriation categories so that specified performance standards can be met. At any time during the year, the agency head or Chief Justice may transfer appropriations between categories within the performance-based program with no limit on the amount of the transfer in order for the designated program to accomplish its objectives. However, no transfer from any other budget entity may be made into the performance-based program, nor may any funds be transferred from the performance-based program to another budget entity, except pursuant to Section 216.77, Florida Statues. Line Item Veto. Florida's Constitution grants the Governor the power to veto any specific appropriation in a general appropriation bill, but the Governor may not veto any qualification or restriction without also vetoing the 1-29 appropriation to which it relates. A statement identifying the items vetoed and containing his or her objections thereto must be delivered to the appropriate house in which the bill originated, if in session, otherwise to the Secretary of State. The legislature may reconsider and restate the vetoed specific appropriation items by a two-thirds vote of each house. Revenues. The State accounts for its receipts using fund accounting. It has established the General Revenue Fund, the Working Capital Fund and various other trust funds, which are maintained for the receipt of monies which under law or trust agreements must be maintained separately. The General Revenue Fund consists of all monies received by the State from every source whatsoever which are not allocable to the other funds. Major sources of tax revenues for all governmental fund types are the sales and use tax, the motor fuel tax, and the corporate income tax, which were 15.8%, 1.7% and 1.4%, respectively, of the total receipts of that fund for fiscal year 2000-01. Florida's Constitution and statutes mandate that the state budget as a whole and each separate fund within the state budget be kept in balance from currently available revenues for each fiscal year. Sales and Use Tax. The greatest single source of tax receipts in Florida is the sales and use tax, which amounted to $15.8 billion for fiscal year 2000-01. The sales tax rate is 6% of the sales price of tangible personal property sold at retail in the State. The use tax rate is 6% of the cash price or fair market value of tangible personal property when it is not sold but is used, or stored for use, in the State. In other words, the use tax applies to the use of tangible personal property in Florida, which was purchased in another state but would have been subject to the sales tax if purchased in Florida. Approximately 10% of the sales tax is designated for local governments and is distributed to the respective counties in which collected for use by such counties and municipalities therein. In addition to this distribution, local governments may (by referendum) assess a 1% sales surtax within their county. Proceeds from this local option sales surtax can be earmarked for funding countywide bus and rapid transit systems, local infrastructure construction and maintenance, medical care for indigents and capital projects for county school districts as set forth in Section 212.055(2), Florida Statutes. The two taxes, sales and use, stand as complements to each other, and taken together provide a uniform tax upon either the sale at retail or the use of all tangible personal property irrespective of where it may have been purchased. The sales tax also includes a levy on the following: (a) rentals of tangible personal property and accommodations in hotels, motels, some apartments, offices, real estate, parking and storage places in parking lots, garages and marinas for motor vehicles or boats; (b) admissions to places of amusements, most sports and recreation events; (c) utilities, except those used in homes; and (d) restaurant meals and expendables used in radio and television broadcasting. Exemptions include: groceries; medicines; hospital rooms and meals; seeds, feeds, fertilizers and farm crop protection materials; purchases by religious, charitable and educational nonprofit institutions; professional services; insurance and certain personal service transactions; newspapers; apartments used as permanent dwellings; and kindergarten through community college athletic contests or amateur plays. Other State Taxes. Other taxes which Florida levies include the motor fuel tax, intangible property tax, documentary stamp tax, gross-receipts utilities tax and severance tax on the production of oil and gas and the mining of solid minerals, such as phosphate and sulfur. Tax Cuts. Due to recent budget surpluses, the state has begun to implement a series of tax cuts in addition to funding the Budget Stabilization Fund, Working Capital Fund and other reserve funds. The 2001-02 budget contained approximately $313 million in tax cuts. The legislature has yet to determine the level of tax cuts in the 2002-03 budget. The most significant source of tax cuts has been a reduction in the intangible property tax rate, which is in the final phase of a four-year plan to eliminate the tax. Historically, for a short period each year, the sales and use taxes are suspended on purchases of certain essential items priced less than $100, such as items of clothing. It is not expected that this provision will be included in the 2002-03 budget. The burden of state taxes is expected to be reduced from 6.35% of personal income, to 6.09%, the lowest level since1991. Government Debt. Florida maintains a high bond rating from Moody's Investors Service ("Moody's") (Aa2), Standard and Poor's Ratings Services ("S&P") (AA+) and Fitch IBCA, Inc. ("Fitch") (AA) on all state general 1-30 obligation bonds. Outstanding general obligation bonds have been issued to finance capital outlay for educational projects of local school districts, community colleges and state universities, environmental protection and highway construction. Numerous government units, counties, cities, school districts and special taxing districts, issue general obligation bonds backed by their taxing power. State and local government units may issue revenue obligations, which are supported by the revenues generated from the particular projects or enterprises. Examples include obligations issued to finance the construction of water and sewer systems, health care facilities and educational facilities. In some cases, sewer or water revenue obligations may be further secured by the full faith and credit of the State. State revenue bonds may be issued without a vote of the electors to finance or refinance the cost of state fixed capital outlay projects authorized by law, as long as they are payable solely from funds derived directly from sources other than State tax revenues. Revenue bonds may be issued to establish a student loan fund, as well as to finance or refinance housing and related facilities so long as repayments come solely from revenues derived from the fund or projects so financed. The Constitution imposes no limit on the principal amount of revenue bonds which may be issued by the state and Local Governmental Agency. Local Governmental Agencies, such as counties, school boards or municipalities may issue bonds, certificates of indebtedness or any form of tax anticipation certificate, payable from ad valorem taxes and maturing more than 12 months from the date of issuance only to finance or refinance capital projects authorized by law, and only when approved by a vote of the electors who are property owners living within boundaries of the agency. Generally, ad valorem taxes levied by a Local Governmental Agency may not exceed 10 mils on the value of real estate and tangible personal property unless approved by the electors. Local Governmental Agencies may issue revenue bonds to finance or refinance the cost of capital projects for airports or port facilities or for industrial or manufacturing plants, without the vote of electors, so long as the revenue bonds are payable solely from revenues derived form the projects. Florida's Constitution generally limits state bonds pledging the full faith and credit of the state, to those necessary to finance or refinance the cost of state fixed capital outlay projects authorized by law, and then only upon approval by a vote of the electors. The constitution further limits the total outstanding principal of such bonds to no more than 50% of the total tax revenues of the state for the two preceding fiscal years, excluding any tax revenues held in trust. Exceptions to the requirement for voter approval are: (a) bonds issued for pollution control and abatement and solid waste disposal facilities and other water facilities authorized by general law and operated by state or local governmental agencies; and (b) bonds issued to finance or refinance the cost of acquiring real property or rights thereto for state roads as defined by law, or to finance or refinance the cost of state bridge construction. The state's outstanding debt which is primarily payable from state revenue and secured by the full faith and credit of the state, increased from $9.3 billion in fiscal year 1999-2000, to $9.5 billion in fiscal year 2000-01, but decreased to $9.4 billion in fiscal year 2001-02. For the same years, the state's debt service payments equaled $696 million, $717 million and $737 million or 1.99%, 1.90% and 1.80% of total state expenditures for each respective year. Other Factors. The performance of the obligations issued by Florida, its municipalities, subdivisions and instrumentalities are in part tied to state-wide, regional and local conditions within Florida. Adverse changes to state-wide, regional or local economies may adversely affect the creditworthiness of Florida and its political subdivisions. Also, some revenue obligations may be issued to finance construction of capital projects which are leased to nongovernmental entities. Adverse economic conditions might affect those lessees' ability to meet their obligations to the respective governmental authority which in turn might jeopardize the repayment of the principal of, or the interest on, the revenue obligations. Litigation Due to its size and broad range of activities, the State is involved in numerous routine legal actions. The ultimate disposition and fiscal 1-31 consequences of these lawsuits are not presently determinable; however, according to the departments involved, the results of such litigation pending or anticipated will not materially affect the State of Florida's financial position. The information disclosed in this Litigation Section has been deemed material by the Florida Auditor General and has been derived in part from information disclosed in the Florida Comptroller's Annual Report dated February 15, 2001. No assurance can be made that other litigation has not been filed or is not pending which may have a material impact on the State's financial position. A. Bank of America (formerly Barnett Bank) v. Florida Department of Revenue Case No. 97-02375, Duval County Circuit Court, 4th Judicial Circuit. This case involved the issue of whether Florida's refund statute for dealer repossessions authorizes the Department to grant a refund to a financial institution as the assignee of numerous security agreements governing the sale of automobiles and other property sold by dealers. The question turned on whether the Legislature intended the statute only to provide a refund or credit to the dealer who actually sold the tangible personal property and collected and remitted the tax or intended that right to be assignable. Judgment was granted in the Plaintiff's favor; however, the First District Court of Appeal overturned the trial court's decision on January 5, 2000, in favor of the Department. The Florida Supreme Court and United States Supreme Court have declined to hear appeals of the First District Court of Appeal's decision. No further action on this case is expected. B. Nathan M. Hameroff, M.D., et al v. Agency for Health Care Admin., et al Case No. 95-5936, Leon County Circuit Court, 2nd Judicial Circuit. This is a class action suit, among other similar suits, wherein the plaintiffs challenge the constitutionality of the Public Medical Assistance Trust Fund (PMATF) annual assessment on net operating revenue of free-standing out-patient facilities offering sophisticated radiology services. The case went to trial October 3-4, 2000. On February 5, 2001, the trial court ruled that Section 395.705, Florida Statutes, was unconstitutional and disallowed further assessments. Judgment was entered against the Agency on February 15, 2001. The Agency has appealed and filed its initial brief in July 2001. The potential refund liability could total approximately $144 million. C. Savona, et al v. Agency for Health Care Administration Case No. 96-6323, Leon County Circuit Court, 2nd Judicial Circuit. In this case, Plaintiffs sought retroactive and prospective relief on behalf of a class of Medicaid providers (doctors), demanding reimbursement of differential between Medicare and Medicaid rates for dual-enrolled eligibles. This case was settled on October 6, 2000. A total of $98 million, inclusive of interest, fees, and costs, would be paid by the Agency for Health Care Administration over three years subject to legislative approval. The State's share (within the Medicaid Program) would be 45 percent of the $98 million. Final judgment on the settlement was entered on June 18, 2001. The Legislature appropriated $32 million in the 2001-02 budget for the first installment, which was paid on July 27, 2001. D. Tower Environmental v. Florida Department of Environmental Protection Case No. 98-01312, Hillsborough County Circuit Court, 13th Judicial Circuit. Tower Environmental has sued the state and the Florida Department of Environmental Protection (FDEP) alleging that both the State and FDEP "breached" contracts with them by changing the petroleum contamination reimbursement program. Alternatively, Tower claims that these actions constitute torts or impairment of contractual obligations. Tower also alleges that the termination of the reimbursement program pursuant to Section 376.3071, Florida Statutes, is a breach of contract. In addition to damages, Tower seeks recovery of attorneys' fees and costs. There has been a ruling that the statute was a written contract and that the state's sovereign immunity defense was therefore invalid. A settlement in the amount of $1.6 million has been reached and a mutual release frees the State and Department from liability. The legislature appropriated the settlement for the 2001-02 fiscal year and $1.6 million was paid on July 9, 2001. 1-32 E. State Contracting and Engineering Corp. v. Florida Department of Transportation, et al Case No. 98006566(11), 17th Circuit Court, Broward County. The Florida Department of Transportation used a Value Engineering Change Proposal (VECP) design submitted by State Contracting and Engineering Corp. (SCEC) for the construction of a barrier soundwall in Broward County and several subsequent Department projects. Subsequent to the initial use of the VECP design, SCEC patented the design. SCEC claims that the Department owes SCEC royalties and compensation for other damages involving the Department's use of the VECP design on the subsequent projects. The case is awaiting a ruling by the Judge as to the application of recent U.S. Supreme Court cases to certain legal issues in this lawsuit. The case is scheduled to go to trial in 2002. If the State is unsuccessful in its actions, potential losses could range from $30 to $60 million. F. Cone Constructors, Inc. v. Florida Department of Transportation Case No. CI 00-6996, 9th Judicial Circuit, Orange County, Florida. The Florida Department of Transportation terminated Cone Constructors, Inc. on a construction contract involving a portion of the Suncoast Parkway. Cone Constructors sued claiming breach of contract and wrongful termination. Subsequent to the initial court filings, Cone filed for bankruptcy and the Department settled the dispute with the bankruptcy trustee for a payment of $575,000. G. Riscorp Insurance Company, et al v. Florida Department of Labor and Employ-ment Security and Mary B. Hooks Case No. 99-5027, Leon County Circuit Court, 2nd Judicial Circuit. Pursuant to Section 440.51, Florida Statutes, the Department collects assessments on "net premiums collected" and "net premiums written" from carriers of workers compensation insurance and by self-insurers in the State. Claimants allege that there is no statutory definition of "net premiums" and the Department does not currently have a rule providing guidance as to how "net premiums" are calculated. Claimants allege that industry standards would allow them to deduct various costs of doing business in calculating "net premiums." Riscorp is seeking refunds of approximately $35 million. On December 27, 2001, the Court granted plaintiffs' motion for partial final summary judgment, ruling that the plaintiffs were entitled to deduct ceded premiums from their premium in calculating assessments. A trial on liability is scheduled for early 2002, and a separate trial for damages is scheduled for later that year. H. U.S. Environmental Protection Agency v. Florida Department of Transportation The issue constitutes an environmental claim. Title to contaminated land is in dispute. The Department maintains that it is not the owner of the contaminated land. The U.S. Environmental Protection Agency (EPA) is conducting additional tests at the site for pollution and has asserted a cost recovery claim against the Department of approximately $25.6 million. The Department's Motion for Declaratory Judgment on the Department's ownership of the property was denied and upheld on appeal. The EPA is currently preparing an Amended Record of Decision. On October 5, 2001, a Tolling Agreement was signed which extended the time to sue until May 2002. I. Sarnoff v. Department of Highway Safety and Motor Vehicles Case No. SC01-351 Florida Supreme Court. This suit alleges the improper setting of the fee for the motor vehicle inspection program. Plaintiffs challenge the constitutionality of Section 325.214(2), Florida Statutes, which imposes a $10.00 fee on the emissions inspection of automobiles in seven of Florida's 67 counties, and seek class action certification, declaratory judgment and refund claims. On December 29, 2000, the First District Court of Appeal reversed the trial court's class certification order, and a rehearing was denied on February 2, 2001. Plaintiffs have invoked the discretionary review of the Florida Supreme Court on this issue. Oral Argument was held on November 7, 2001. The decision of the Florida Supreme Court has not been made. The amount of potential loss to the State is estimated to be $96-106 million. 1-33 J. Paul K. Mateo, et al., v. Florida Department of Revenue, et al. Case No. 1D01-4836, First District Court of Appeal. This is a class action suit seeking declaratory relief and a tax refund of sales taxes paid on the lease of motor vehicles where the concerned price included a $2.00 surcharge imposed by Section 212.0606, Florida Statutes. The Department was successful in moving to dismiss Plaintiff's Complaint in the trial court. A trial court dismissed an Amended Complaint challenging the constitutionality of the statute with prejudice. The trial court found that the Plaintiff had not complied with the requirements of Section 215.26, Florida Statutes, thereby making the plaintiff's non-compliance with the statute fatal to his refund request. The Plaintiff timely appealed the trial court's order of dismissal. Potential loss to the State may be in excess of $25 million. K. Transitions Optical, Inc. v. Florida Department of Revenue, et al. Case No. 2D00-4208, Section District Court of Appeal. In this case, Transitions Optical and co-Plaintiff, Pepperidge Farm, brought a class action suit (Case No. 99-8574-CI-20, 6th Judicial Circuit) on behalf of themselves and all other similarly situated businesses, challenging the imposition of ad valorem county taxes on the computer software owned and operated by them in their places of business, and seeking a refund of all ad valorem taxes previously paid. The estimated loss to the State may be in excess of $25 million. On August 25, 2000, the trial court granted Plaintiff's Motion for Clarification and for Reconsideration and Rehearing and as to Pepperidge Farm, Inc. (Pepperidge Farm, Inc., v. Florida Department of Revenue, et al.) Transition Optical Inc., timely filed its notice of appeal relating to the dismissal on September 18, 2000. In the Pepperidge Farm Polk County case, the parties are in the discovery phase. L. Rendon v. Florida Department of Transportation, et al. Case No. 96-18090(27) Eleventh Judicial Circuit. The Plaintiffs (persons covered by the Americans with Disabilities Act or ADA) in this certified class action suit, seek a declaratory judgment that Sections 320.0848 (2) and (3), Florida Statutes, violate the Americans with Disabilities Act of 1990 in that the surtax charged for a disabled parking permit is illegal. Issues include the right to proceed with refund claims when no one has applied for a refunds claim. On November 14, 2001, the trial court granted Plaintiffs' motion for summary judgment. On November 26, 2001, the State served its Motion for Rehearing, Reconsideration and Clarification Regarding Appropriateness of Remedy and Scope of Relief. On December 18, 2001, the trail court heard the State's motion and Plaintiffs' motion for Contempt and Sanctions. The court has not yet made its decision. Estimated loss to the State could be in excess of $25 million. ADDITIONAL INFORMATION CONCERNING NEW JERSEY New Jersey Municipal Securities The financial condition of the State of New Jersey (State), its public and its local governments, could affect the market values and marketability of, and therefore the net asset value per share and the interest income of New Jersey Municipal Money Market Fund, or result in the default of existing obligations, including obligations which may be held by the Fund. The following section provides only a brief summary of the complex factors affecting the financial situation in New Jersey and is based on information obtained from New Jersey, certain of its authorities and certain other localities within the State, as publicly available on the date of this SAI. The information contained in such publicly available documents has not been independently verified. It should be noted that the creditworthiness of obligations issued by local issuers may be unrelated to the creditworthiness of New Jersey, and that there is no obligation on the part of New Jersey to make payment on such local obligations in the event of default in the absence of a specific guarantee or pledge provided by New Jersey. 1-34 Economic Factors New Jersey is the ninth largest state in population and the fifth smallest in land area. According to the United States Bureau of the Census and the Department of Labor, the population of New Jersey was 7,170,000 in 1970, 7,365,000 in 1980, 7,730,000 in 1990 and 8,414,350 in 2000. Historically, New Jersey's average per capita income has been well above the national average, and in 2000 the State ranked third among the states in per capita personal income ($36,983). The State's economic base is diversified, consisting of a variety of manufacturing, construction and service industries, supplemented by rural areas with selective commercial agriculture. The extensive facilities of the Port Authority of New York and New Jersey, the Delaware River Port Authority and the South Jersey Port Corporation across the Delaware River from Philadelphia augment the air, land and water transportation complex which has influenced much of the State's economy. The State's central location in the northeastern corridor, the transportation and port facilities and proximity to New York City make the State an attractive location for corporate headquarters and international business offices. While New Jersey's economy continued to expand during the late 1980s, the level of growth slowed considerably after 1987. By the beginning of the national recession in July 1990 (according to the National Bureau of Economic Research), construction activity had already been declining in New Jersey for nearly two years, growth had tapered off markedly in the service sectors and the long-term downward trend of factory employment had accelerated, partly because of a leveling off of industrial demand nationally. The onset of recession caused an acceleration of New Jersey's job losses in construction and manufacturing, as well as an employment downturn in such previously growing sectors as wholesale trade, retail trade, finance, utilities and trucking and warehousing. The net effect was a decline in the State's total non-farm wage and salary employment, according to the U.S. Dept. of Labor, from a peak of 3.69 million in 1989 to a low of 3.46 million in 1992. This low has been followed by an employment gain, reaching 4.03 million in April 2001. The New Jersey Department of Labor reports that employment stood at 4.02 million in April 2002. The annual average jobless rate has fallen from 8.5 percent in 1992, to 5.1 percent in 1997, to 4.6 percent in 1998, reaching an estimated 4.5% in 1999. In March 2000, the State's unemployment rate reached a ten year low at 3.6%. In February and March 2002, the unemployment rate was 5.2% and 5.5%, respectively. The New Jersey Department of Labor reports that for March 2002, on a seasonally adjusted basis, private non-farm employment was down 0.7% to 3.41 million from March 2001. Conditions have slowly improved in the construction industry, where employment has risen since its low in May 1992. Between 1992 and 1996, this sector's hiring rebound was driven primarily by increased homebuilding and nonresidential projects. During 1996 and early 1997, public works projects and homebuilding became the growth segments while nonresidential construction lessened but remained positive. Construction employment, after falling from 163,400 in 1987 to 110,200 in 1992, has recovered to a level of 162,800 in March 2002. In the manufacturing sector, employment losses have continued during the past fifteen years. Total manufacturing employment in New Jersey was 672,200 in 1987, 530,400 in 1992, 463,500 in 1999, 451,500 in 2001, and 430,200 in March 2002, a reduction of 36%. Looking forward, the New Jersey Department of Labor projects that the State's non-farm employment growth will occur almost exclusively in the service industries, such as transportation, communications, utilities, wholesale and retail trade, financial services, insurance, real estate and public education. The State projects continuing slow decline in manufactured goods employment. 1-35 State Finances The State operates on a fiscal year beginning July 1 and ending June 30. For example, "Fiscal Year 2003" refers to the State's fiscal year beginning July 1, 2002 and ending June 30, 2003. The General Fund is the fund into which all State revenues not otherwise restricted by statute are deposited and from which appropriations are made. The largest part of the total financial operations of the State are accounted for in the General Fund. Revenues received from taxes, most Federal revenue and certain miscellaneous revenue items are recorded in the General Fund. The Appropriations Act provide the basic framework for the operation of the General Fund. Undesignated Fund Balances are available for appropriation in succeeding fiscal years. There have been positive Undesignated Fund Balances in the General Fund at the end of each year since the State Constitution was adopted in 1947. The estimates for Fiscal Year 2002 and Fiscal Year 2003 reflect the amounts contained in the Governor's Fiscal Year 2003 Budget Message delivered on March 26, 2002. General Fund beginning balances for Fiscal Years 2002 and 2003 are projected to be $388.6 million and $435.0 million, respectively. Total Undesignated Fund balances for Fiscal Years 2002 and 2003 are projected to be $1,287.6 million and $500.0 million, respectively. Fiscal Years 2002 and 2003 State Revenue Estimates The current estimate of $20.9 billion in total fiscal 2002 revenue is $2.0 billion less than when the Acting Governor certified revenues in June 2001. The three largest taxes, Gross Income, Sales and Use, and Corporation Business, account for 69% of total revenues and are expected to yield $14.4 billion. Sales and Use Tax. The Sales and Use Tax is estimated to generate $6.0 billion in fiscal year 2002, a moderate 3.3% growth compared to the 6.2% rate originally projected. The estimate was lowered as the economy entered a recession, which started during the second half of 2000, and was compounded by the events of September 11. The slumping financial markets, deteriorating corporate profits and layoffs adversely affected both business investments and consumer purchases of durable goods. Consumer confidence declined significantly in 2001, dropping more than 48 points between July 2000 and December 2001. The Fiscal Year 2003 estimate of $6.2 billion, is a 4.6% increase from the revised Fiscal Year 2002 estimate. This reflects an expectation of continued improvement in the underlying economic fundamentals during fiscal year 2003. The favorable low-interest environment is expected to reinforce growing consumer confidence and spending by mid-2002. Gross Income Tax. The Gross Income Tax (GIT) forecast for fiscal year 2002 is revised down to $7.3 billion, a decrease of $1.3 billion compared to the June 2001 certified revenue estimate. This represents an 8.7% decline rather than the 7.2% growth anticipated in June 2001. Such a strong decline is not surprising given that 2000 yielded extraordinarily high revenue. Employer withholdings fell by 3% in calendar year 2001, against the double-digit growth of 17% in 2000, underscoring the decline in the 2001 tax base. This was exacerbated further by weaker than anticipated estimated payments, which fell by 21% in 2001 after growing at 29% the year before. The fiscal year 2003 forecast of $7.8 billion is an increase of $486 million, or 6.7%, over revised fiscal year 2002. Although this appears impressive compared to the steep expected decline in fiscal year 2002, it remains well below the double-digit growth rates in the previous three fiscal years. This is a reflection of the economic slowdown and turmoil after the financial markets peaked in 2000. New Jersey Total Income, which is the tax base, is expected to drop by over 3% in fiscal year 2001 after peaking at a record 11.8% growth rate in the previous year. In 2002 and 2003, the tax base is projected to grow at 4.3% and 4.9%, respectively, approaching the 1991-99 average growth of 5.4% by 2004. The amount of income on tax returns reporting 1-36 over $100,000 in total income, which grew at the 18% average annual rate (1995-2000), fueled the GIT revenue growth since 1995. It is expected to decline by 7% in 2001 after spiking at 20%+ in 2000, and rebound to the 7%-8% range in 2002 and 2003 as the economy recovers. Corporation Business Tax. The Corporation Business Tax (CBT) is revised down by $711 million to $1.1 billion for fiscal year 2002. This represents a decline of 14.7% compared to the 10.3% decline in fiscal year 2001. In June the CBT revenues were anticipated to grow nearly 40%, due largely to the $420 million in additional revenues generated by legislation directed towards limited liability companies (LLCs). This downward shift in the CBT estimate is in line with sinking corporate profits and the generally weak economy in 2001. The revised estimate also reflects a downward revision in the anticipated LLC net revenue yield. The fiscal year 2003 CBT revenue forecast of $1.8 billion represents an increase of $711 million (or 64%), compared with revised fiscal year 2002. This upward revision assumes an underlying negative growth of 10.3% in gross payments and refund growth of 12.6% in fiscal year 2003. It also adjusts for the one-time nature of part of the initial LLC revenue gain and discounts the likelihood of substantial LLC prepayments for 2003. There is an additional $25 million loss due to legislative changes relating to effluent and energy equipment, and Neighborhood Revitalization. It also includes adjustments for the restructuring of the tax. General Considerations. Estimated receipts from State taxes and revenues, including the three principal taxes set forth above, are forecasts based on the best information available at the time of such forecasts. Changes in economic activity in the State and the nation, consumption of durable goods, corporate financial performance and other factors that are difficult to predict may result in actual collections being more or less than forecasted. Should revenues be less than the amount anticipated in the budget for a fiscal year, the Governor may, pursuant to statutory authority, prevent any expenditure under any appropriation. There are additional means by which the Governor may ensure that the State is operated efficiently and does not incur a deficit. No supplemental appropriation may be enacted after adoption of an appropriations act except where there are sufficient revenues on hand or anticipated, as certified by the Governor, to meet such appropriation. In the past when actual revenues have been less than the amount anticipated in the budget, the Governor has exercised his plenary powers leading to, among other actions, implementation of a hiring freeze for all State departments and the discontinuation of programs for which appropriations were budgeted but not yet spent. Under the State Constitution, no general appropriations law or other law appropriating money for any State purpose may be enacted if the amount of money appropriated therein, together with all other prior appropriations made for the same fiscal year, exceeds the total amount of revenue on hand and anticipated to be available for such fiscal year, as certified by the Governor. ADDITIONAL INFORMATION CONCERNING NEW YORK General New York State ("New York" or the "State") is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse, with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment, and a very small share of the nation's farming and mining activity. The State's location and its air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries. In the calendar years 1987 through 1998, the State's rate of economic growth was somewhat slower than that of the nation. In particular, during the 1990-91 recession and post recession period, the economy of the State, and that of the rest of the Northeast, was more heavily damaged than that of the nation as a whole and has been slower to recover. However, the situation has been improving during recent years. In 1999, for the first time in 13 years, the employment growth rate of the State surpassed the national growth rate. Although 1-37 the State unemployment rate has been higher than the national rate since 1991, the gap between them has narrowed in recent years. State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies. The State estimates that tens of thousands of jobs have been lost or displaced from New York, at least temporarily, due to the terrorist attack of September 11, 2001. The sector hardest hit by the disaster was the finance industry, which is estimated to have lost more than 30,000 workers, many of whom have been either laid off or relocated out-of-state. Other industries estimated to have experienced severe losses are business and media services, hotel and motel services, retail trade, arts and entertainment services, and transportation. In contrast, as part of the reconstruction process, the construction sector is expected to experience a net gain in employment. On an annual average basis, State employment is expected to have grown a modest 0.1 percent for 2001 and to decline 1.2 percent for 2002. The State estimates that the events of September 11 will also have a significantly negative impact on securities industry profits. The fall in profit growth is expected to result in a severe decline in finance and insurance industry cash bonuses. This decline will likely be exacerbated by firms weighting their bonus payouts more heavily than usual in favor of stock options as well as by the transfer of dislocated workers out-of-state. Lower growth in both employment and bonus income is expected to have resulted in personal income growth of 2.6 percent for 2001, followed by growth of 1.1 percent for 2002. There are significant risks to the current forecast. If either monetary or fiscal policy is less effective than expected, the recession could be both longer and deeper than predicted. Weaker corporate profits than projected could, in turn, produce even more employee layoffs and less capital investment than anticipated. Similarly, if the stock market fails to perform as expected in calendar 2002, the resulting additional loss of household wealth, coupled with employee layoffs, could further reduce wage, personal income, and consumption growth. World economic growth could be substantially worse than expected. However, if monetary and fiscal policies are more effective than projected, or if the stock market rebounds earlier than expected, economic growth could rise above the 0.4 percent forecast for 2002. Finally, the current outlook is predicated upon the assumption that no additional major disruption will occur again within the forecasting period. However, with the nation at war abroad and on high alert domestically, the risk of an adverse shock to the U.S. economy is extremely high. Fiscal Year 2001-02 The State ended its 2001-02 fiscal year on March 31, 2002 with a General Fund closing balance of $1.03 billion as reported by the Division of the Budget (the "DOB"). Of this balance, $710 million was held in the Tax Stabilization Reserve Fund (after a deposit of $83 million in fiscal year 2001-02), $157 million in the Contingency Reserve Fund, $159 million in the Community Projects Fund, and $5 million in the Universal Pre-Kindergarten Fund. In addition to the General Fund closing balance of $1.03 billion, the State had a balance of $1.68 billion on deposit in the refund reserve account at the end of the 2001-02 fiscal year. The amount consists of $1.07 billion in reserves for economic uncertainties that is planned for use in fiscal year 2002-03 and $611 million set aside to pay for tax refunds during 2002-03. 1-38 Fiscal Year 2002-03 On March 26, 2002, the State Legislature enacted appropriations for all State-supported, contingent contractual, and certain other debt service obligations for the entire 2002-03 fiscal year. However, the State failed to take final action on all other Executive Budget recommendations by April 1, the start of the 2002-03 fiscal year. In prior years when the State failed to enact the budget by April 1, the State has enacted interim appropriations to permit the State to continue operations until final action on the budget. Since April 1, 2002, the State has periodically enacted similar interim appropriations and expects to do so until final action on the 2002-03 budget. The Governor and Legislative leaders are continuing negotiations over the budget for fiscal year 2002-03. However, there can be no assurance that the Legislature will enact the Executive Budget as currently proposed or that the State's actions will be sufficient to preserve budgetary balance or to align recurring receipts and disbursements in either 2001-02 or in future fiscal years. Personal income tax collections deposited to the General Fund for fiscal year 2002-03 are projected to total $23.29 billion, a decrease of $3.69 billion (14 percent) from fiscal year 2001-02. This change is due largely to the impact of refund reserve and deposits to the School Tax Relief Fund under the School Tax Relief (STAR) program. In addition, the decline is due to decreases in income tax liability mainly attributable to the significant weakening in the economy following the events of September 11. The 2002-03 Financial Plan projects that tax liability will decrease annually by 5.4 percent in 2001 and 0.9 percent in 2002. Declines in State employment, wages, Wall Street bonuses, and non-wage income levels contribute to an adjusted gross income decline for 2001 and a minimal increase for 2002. User tax and fee receipts in 2001-02 are expected to decrease by $13 million to $7.07 billion. The decrease is caused in part by the incremental impact of approximately $70 million in already-enacted tax reductions, and the earmarking of certain motor vehicle fees and the auto rental tax to dedicated transportation funds. Adjusted for these changes, the underlying growth of user tax and fee receipts is projected at 3.7 percent. In fiscal year 2002-03, receipts from the sales and use tax, the largest component of user tax and fee receipts, are projected to total $6.29 billion, an increase of $165 million from fiscal year 2001-02. Weakness in the economy in 2001 produced an actual decline in the base of the sales and use tax for fiscal year 2001-02 of 1.9 percent. The most significant statutory changes affecting fiscal year 2002-03 General Fund sales tax receipts are the next phase of a rate reduction applied to the transmission and distribution of electricity and gas. Total business taxes in 2001-02 are expected to total $3.78 billion, $54 million below 2001-02 estimated results. Corporate franchise tax receipts for 2002-03 are projected to increase by $6 million to $1.76 billion in fiscal year 2002-03, resulting from improved corporate profitability, offset by the impact of enacted and proposed tax reductions. Receipts from the bank tax in 2002-03 are projected to be $503 million, $46 million above 2001-02 estimates, reflecting a modest rebound in bank earnings. Net collections from insurance taxes are expected to decline $114 million from 2001-02 to $516 million, largely due to losses attributable to the WTC disaster. Miscellaneous receipts for fiscal year 2002-03 are projected to be $1.61 billion, essentially unchanged from fiscal year 2001-02. The estimate projects a large reduction in investment income that is more than offset by several one-time receipts, including $150 million from the State of New York Mortgage Agency, $50 million from the New York State Housing Finance Agency, and $16 million from the Port Authority of New York and New Jersey. Transfers from other funds to the General Fund are projected to total $2.33 billion, an increase of $172 million from 2001-2002. Transfers of sales tax receipts in excess of debt service requirements for the Local Government Assistance Corporation are expected to increase by $42 million, and all other transfers by $130 million, primarily from the Clean Water/Clean Air Fund. 1-39 General Fund disbursements and transfers to other funds are projected to total $40.22 billion in 2002-03, a decrease of $1.23 billion (3.0 percent) from 2001-02. The spending is consistent with fiscal year 2001-02 funding levels for most ongoing programmatic activities. The annual decline results primarily from the utilization of revenues from the Federal Temporary Assistance for Needy Families ("TANF") program ($885 million) and other revenue sources ($1.1 billion, including assessment increases, Health Care Reform Act program financing, and Patient Income Account offsets) to maintain program commitments at a reduced General Fund cost. These reductions are partially offset by increases for the Judiciary ($38 million), pensions and other fringe benefit costs ($227 million), and underlying programmatic cost increases in health care. The annual change in spending is explained in more detail below. Grants to Local Governments (also known as local assistance) include financial aid to local governments and non-profit organizations, as well as entitlement payments to individuals. The largest areas of spending in local assistance are for aid to public schools (46 percent) and for the State's share of Medicaid payments to medical providers (23 percent). Spending for mental hygiene programs (6 percent), higher education programs (5 percent), children and families services (4 percent), public health programs (2 percent) and welfare assistance (2 percent) represent the next largest areas of local aid. Local assistance spending reflects continuation of the same level of program spending in education and higher education, with generally flat spending or modest reductions in all other local assistance programs. Transfers in support of debt service in 2002-03 are projected at $2.82 billion, a $91 million decrease over 2001-02. Debt service transfers decrease by $267 million primarily due to the continued savings from the use of $1 billion in Debt Reduction Reserve Fund proceeds and the impact of proposed legislation that will enhance the State's ability to reduce borrowing costs. The legislation would, among other things, authorize a limited amount of variable rate debt obligations and swap agreements. A total of $562 million in one-time actions is incorporated in the 2002-03 Financial Plan, consisting primarily of transferring available balances from the State of New York Mortgage Agency ($150 million), the New York State Housing Finance Agency ($50 million), the Port Authority of New York and New Jersey ($16 million), the Environmental Protection Fund ($100 million) and various health and Medicaid Special Revenue Funds ($114 million). Recoveries of school aid and welfare recipient overpayments ($39 million), change in collection procedures ($38 million), and various routine fund transfers ($55 million) account for the remainder of the non-recurring resources. The State projects a General Fund closing balance of $710 million at the end of the 2002-03 fiscal year, a decline of $1.37 billion from 2001-02. The balance of $710 million represents the monies on deposit in the Tax Stabilization Reserve Fund, which is available to guard against unforeseen shortfalls during the fiscal year. In addition, the State expects to have a balance of $677 million in the tax refund reserve account at the close of fiscal year 2002-03. State Debt As of March 31, 2001, the total amount of outstanding general obligation debt was $4.3 billion. The amount of general obligation bonds and bond anticipation notes issued in the 1998-99 through 2000-01 fiscal years (excluding bonds issued to redeem bond anticipation notes and refunding bonds) were $249 million, $208 million, and $219 million, respectively. The State did not anticipate issuing new BANs during the 2001-02 fiscal year. The State has not yet released information with respect to the actual issuance of State debt during fiscal year 2001-02. Authorities and Localities Metropolitan Transportation Authority ("MTA"). The MTA reported that certain portions of its regional transportation operations were affected by the terrorist attack on the World Trade Center. The MTA noted that the most significant infrastructure damage involved the subway tunnel running beneath the World Trade Center on the #1 and #9 subway lines that will need to be completely rebuilt, along with the related stations and infrastructure, and damage to the N/R Line Cortland Street Station. All estimates of the adverse impact on the MTA 1-40 and the regional economy are of necessity preliminary and are subject to adjustment as more information becomes available. The MTA currently estimates property damage to the transit system at $855 million. The MTA currently expects that insurance proceeds and federal disaster assistance will cover substantially all of the property and business interruption losses related to this event. While the loss of revenues associated with the WTC disaster may be significant, the MTA does not expect that it will materially affect its obligations to bondholders and others. New York City. Continuing recovery, cleanup and repair efforts following the September 11, 2001, attack on the World Trade Center will result in substantial expenditures for the City. The U.S. Congress passed emergency legislation which appropriates $40 billion for increased disaster assistance, increased security costs, rebuilding infrastructure systems and other public facilities, and disaster recovery and related activities, at least $20 billion of which is for disaster recovery activities and assistance in New York, Pennsylvania and Virginia. Congress has already appropriated over $10 billion toward this $20 billion commitment to recovery, and funding is currently available to reimburse localities for clean up costs, to reimburse hospitals for lost revenue, and to provide funding for job training activities and economic redevelopment. On March 9, 2002 the President signed nation-wide economic stimulus legislation, which includes $5 billion toward the $20 billion commitment in the form of temporary tax provisions aimed at creating redevelopment incentives for businesses located in the Liberty Zone, the areas surrounding the World Trade Center site. The Liberty Zone provisions expand the work opportunity tax credit, authorize the issuance of $8 billion in tax-exempt private activity bonds, allow for advance refunding of certain bonds for facilities in New York City and increase the small business expensing limit. Prior to September 11, 2001 the national and local economies had been weakening, reflecting lower business investment, increased unemployment, and declining consumer confidence. The destruction of the World Trade Center had a substantial impact on the City and its economy. Reduced economic activity lowered corporate profits, increased the rate of job loss, and reduced consumer spending, which reduced collections for several of the City's major economically sensitive tax revenues and negatively impacted tentative fiscal year 2003 property tax values for some parcels, especially in the downtown area. With the national economy beginning to recover from the recession, the prospects for the financial firms in the City are improving and a lift in the financial markets is expected. In June 2001, the City issued a Financial Plan that projected a balanced budget for fiscal year 2002 and budget gaps of $2.8 billion in fiscal year 2003, $2.6 billion in fiscal year 2004, and $2.2 billion in fiscal year 2005. In February 2002, the City released a modification to the June Financial Plan, which reflects changes since the June Financial Plan (as previously modified in December 2001) that decreased projected net revenues and increased projected net expenditures. Changes in projected revenues include a decline in projected net tax revenues of $792 million, $1.3 billion, $1.2 billion, and $1.3 billion in fiscal years 2002 through 2005, respectively, reflecting primarily decreases in projected personal income, business and sales tax revenues as a result of the September 11th attack and the national recession. Changes in projected expenditures since the June Financial Plan include higher pension costs, resulting primarily from investment losses in fiscal year 2001, and an increase in labor costs to reflect the cost of wage increases for the uniformed forces coalition above the settlement with the union that represents most civilian employees. Litigation New York is currently involved in certain litigation where adverse decisions could have a material impact on State finances. Included in this litigation are the following: Campaign for Fiscal Equity, Inc., et al. v. State, et al., where plaintiffs claim that the State's method of determining funding levels for New York City public schools has a disparate impact on plaintiffs in violation of Title VI of the Civil Rights Act of 1964 and does not provide a "sound basic education" as required by the State Constitution; Oneida Indian Nation of New York, where the plaintiff claims that a 250,000 acre area in Madison and Oneida counties was illegally sold to the State in 1795; and Cayuga Indian Nation of New York where the federal District Court granted plaintiffs $211 million in prejudgment interest on 64,000 acres held to be illegally sold to the State in 1795. 1-41 ADDITIONAL INFORMATION CONCERNING PENNSYLVANIA The financial condition of the Commonwealth of Pennsylvania (Commonwealth), its public authorities and its local governments could affect the market values and marketability of, and therefore the net asset value per share and the interest income of the Pennsylvania Municipal Money Market Fund, or result in the default of existing obligations, including obligations which may be held by the Fund. The following section provides only a brief summary of the complex factors that may affect the financial situation in Pennsylvania and is based on information obtained from Pennsylvania, certain of its public authorities and certain other localities within the Commonwealth as publicly available on the date of this SAI. The information contained in such publicly available documents has not been independently verified. It should be noted that the creditworthiness of obligations issued by local issuers might be unrelated to the creditworthiness of Pennsylvania. There is no obligation on the part of Pennsylvania to make payment on such local obligations in the event of default in the absence of a specific guarantee or pledge provided by Pennsylvania. General The Commonwealth of Pennsylvania, the sixth 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 many major corporations. Pennsylvania's average annual unemployment rate for each year since 1986 has generally not been more than one percent greater or lesser than the nation's annual average unemployment rate. The seasonally adjusted unemployment rate for Pennsylvania for March 2002 was 5.6% and for the United States for March 2002 was 5.7%. The population of Pennsylvania, 12.28 million people in 2001 according to the U.S. Bureau of the Census, represents an increase from the 1988 estimate of 11.85 million. Per capita income in Pennsylvania for 2000 of $29,533 was higher than the per capita income of the United States of $29,451. 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, 1999, June 30, 2000 and June 30, 2001 with positive fund balances of $2,863 million, $4,264 million and $4,485 million, 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 $5,416.2 million at June 30, 2001. 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 February 1, 2002, all outstanding general obligation bonds of the Commonwealth were rated AA by S&P and Aa2 by Moody's (see Part 2 of this SAI). There can be no assurance that these ratings will remain in effect in the future. Over the five-year period ending June 30, 2006, the Commonwealth has projected that it will issue notes and bonds totaling $3,201 million and retire bonded debt in the principal amount of $2,500.5 million. Certain agencies created by the Commonwealth have statutory authorization to incur debt for which Commonwealth appropriations to pay debt service thereon are not required. As of June 30, 2000, the combined total debt outstanding for all these agencies was $11,386 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 1-42 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 benefiting hospitals and educational institutions, and industrial development authorities, whose obligations benefit industrial or commercial occupants. In some cases, sewer or water revenue obligations are guaranteed by taxing bodies and have the credit characteristics of general obligations debt. Litigation Pennsylvania is currently involved in certain litigation where adverse decisions could have an adverse impact on its ability to pay debt service. For example, Unisys Corporation v. Commonwealth involves a challenge on constitutional and statutory grounds to the statutory three-factor apportionment formula used for the apportionment of capital stock value in the franchise tax. Northbrook Life Insurance Co. is the lead case in potential litigation with the entire insurance industry that does business in Pennsylvania, in which the Pennsylvania Department of Revenue's application of portions of the Life and Health Guarantee Association Act of 1982 is being challenged. County of Allegheny v. Commonwealth of Pennsylvania involves litigation regarding the state constitutionality of the statutory scheme for county funding of the judicial system. Powell v. Ridge involves a challenge to the Commonwealth's system for funding public schools on the grounds that such system has the effect of discriminating on the basis of race in violation of Title VI of the Civil Rights Act of 1964. In PPG Industries, Inc. v. Commonwealth of Pennsylvania, the Pennsylvania Supreme Court held that the manufacturing exemption under Pennsylvania's capital stock and franchise tax is unconstitutional and must be stricken from the statute. The court remanded the case for implementation of remedies that could include: (i) a refund for those taxpayers that had paid the discriminatory part of the tax, (ii) the assessment and collection of back taxes on taxpayers to the extent that they did not pay the tax because of the exemption, or (iii) some combination of the foregoing remedies. The Commonwealth has not provided definite estimates of the amount of these claims or remedies. The specific litigation matters described above are provided as an example only and do not compromise a complete listing of material ongoing or pending litigation involving the Commonwealth of Pennsylvania, its agencies, subdivisions and instrumentalities. Other Factors The performance of the obligations held by the Fund issued by the Commonwealth, its agencies, subdivisions and instrumentalities are in part tied to state-wide, regional and local conditions within the Commonwealth and to the creditworthiness of certain non-Commonwealth related obligors, depending upon the Pennsylvania Municipal Money Market Fund's portfolio mix at any given time. Adverse changes to the state-wide, regional or local economies or changes in government may adversely affect the creditworthiness of the Commonwealth, its agencies and municipalities, and certain other non-government related obligors 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 that 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. 1-43 EVERGREEN FUNDS Statement of Additional Information (SAI) PART 2 ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES The prospectus describes the Fund's investment objective and the securities in which it primarily invests. The following describes other securities the Fund may purchase and investment strategies it may use. Some of the information below will not apply to the Fund or the Class in which you are interested. See the list under Other Securities and Practices in Part 1 of this SAI to determine which of the sections below are applicable. Money Market Instruments The Fund may invest up to 100% of its assets in high quality money market instruments, such as notes, certificates of deposit, commercial paper, banker's acceptances, bank deposits or U.S. government securities if, in the opinion of the investment advisor, market conditions warrant a temporary defensive investment strategy. U.S. Government Agency Securities The Fund may invest in securities issued or guaranteed by U.S. Government agencies or instrumentalities. These securities are backed by (1) the discretionary authority of the U.S. Government to purchase certain obligations of agencies or instrumentalities or (2) the credit of the agency or instrumentality issuing the obligations. Some government agencies and instrumentalities may not receive financial support from the U.S. Government. Examples of such agencies are: (i) Farm Credit System, including the National Bank for Cooperatives, Farm Credit Banks and Banks for Cooperatives; (ii) Farmers Home Administration; (iii)Federal Home Loan Banks; (iv) Federal Home Loan Mortgage Corporation; (v) Federal National Mortgage Association; and Student Loan Marketing Association. Securities Issued by the Government National Mortgage Association (GNMA). The Fund may invest in securities issued by the GNMA, a corporation wholly owned by the U.S. Government. GNMA securities or "certificates" represent ownership in a pool of underlying mortgages. The timely payment of principal and interest due on these securities is guaranteed. Unlike conventional bonds, the principal on GNMA certificates is not paid at maturity but over the life of the security in scheduled monthly payments. While mortgages pooled in a GNMA certificate may have maturities of up to 30 years, the certificate itself will have a shorter average maturity and less principal volatility than a comparable 30-year bond. 2-1 The market value and interest yield of GNMA certificates can vary due not only to market fluctuations, but also to early prepayments of mortgages within the pool. Since prepayment rates vary widely, it is impossible to accurately predict the average maturity of a GNMA pool. In addition to the guaranteed principal payments, GNMA certificates may also make unscheduled principal payments resulting from prepayments on the underlying mortgages. Although GNMA certificates may offer yields higher than those available from other types of U.S. Government securities, they may be less effective as a means of locking in attractive long-term rates because of the prepayment feature. For instance, when interest rates decline, prepayments are likely to increase as the holders of the underlying mortgages seek refinancing. As a result, the value of a GNMA certificate is not likely to rise as much as the value of a comparable debt security would in response to same decline. In addition, these prepayments can cause the price of a GNMA certificate originally purchased at a premium to decline in price compared to its par value, which may result in a loss. When-Issued, Delayed-Delivery and Forward Commitment Transactions The Fund may purchase securities on a when-issued or delayed delivery basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. The Fund may purchase securities under such conditions only with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the Fund may be required to pay more at settlement than the security is worth. In addition, the purchaser is not entitled to any of the interest earned prior to settlement. Upon making a commitment to purchase a security on a when-issued, delayed delivery or forward commitment basis the Fund will hold liquid assets worth at least the equivalent of the amount due. The liquid assets will be monitored on a daily basis and adjusted as necessary to maintain the necessary value. Purchases made under such conditions may involve the risk that yields secured at the time of commitment may be lower than otherwise available by the time settlement takes place, causing an unrealized loss to the Fund. In addition, when the Fund engages in such purchases, it relies on the other party to consummate the sale. If the other party fails to perform its obligations, the Fund may miss the opportunity to obtain a security at a favorable price or yield. Repurchase Agreements The Fund may enter into repurchase agreements with entities that are registered as U.S. Government securities dealers, including member banks of the Federal Reserve System having at least $1 billion in assets, primary dealers in U.S. Government securities or other financial institutions believed by the investment advisor to be creditworthy. In a repurchase agreement the Fund obtains a security and simultaneously commits to return the security to the seller at a set price (including principal and interest) within a period of time usually not exceeding seven days. The resale price reflects the purchase price plus an agreed upon market rate of interest which is unrelated to the coupon rate or maturity of the underlying security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is in effect secured by the value of the underlying security. The Fund's custodian or a third party will take possession of the securities subject to repurchase agreements, and these securities will be marked to market daily. To the extent that the original seller does not repurchase the securities from the Fund, the Fund could receive less than the repurchase price on any sale of such securities. In the event that such a defaulting seller filed for bankruptcy or became insolvent, disposition of such securities by the Fund might be delayed pending court action. The Fund's investment advisor believes that under the regular procedures normally in effect for custody of the Fund's 2-2 portfolio securities subject to repurchase agreements, a court of competent jurisdiction would rule in favor of the Fund and allow retention or disposition of such securities. The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker-dealers, which are deemed by the investment advisor to be creditworthy pursuant to guidelines established by the Board of Trustees. Reverse Repurchase Agreements As described herein, the Fund may also enter into reverse repurchase agreements. These transactions are similar to borrowing cash. In a reverse repurchase agreement, the Fund transfers possession of a portfolio instrument to another person, such as a financial institution, broker, or dealer, in return for a percentage of the instrument's market value in cash, and agrees that on a stipulated date in the future the Fund will repurchase the portfolio instrument by remitting the original consideration plus interest at an agreed upon rate. The use of reverse repurchase agreements may enable the Fund to avoid selling portfolio instruments at a time when a sale may be deemed to be disadvantageous, but the ability to enter into reverse repurchase agreements does not ensure that the Fund will be able to avoid selling portfolio instruments at a disadvantageous time. When effecting reverse repurchase agreements, liquid assets of the Fund, in a dollar amount sufficient to make payment for the obligations to be purchased, are segregated at the trade date. These securities are marked to market daily and maintained until the transaction is settled. Leverage The Fund may engage in transactions that create leverage with up to 30% of its net assets in accordance with Evergreen's Leverage Policy. Leverage creates special risks for the Fund which are created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund's risk of loss and potential for gain. Examples of transactions which create leverage include mortgage dollar rolls (see descriptions herein). Dollar Roll Transactions The Fund may enter into dollar rolls in which the Fund sells securities and simultaneously contracts to repurchase substantially similar securities on a specified future date. In the case of dollar rolls involving mortgage-related securities, the mortgage-related securities that are purchased typically will be of the same type and will have the same or similar interest rate and maturity as those sold, but will be supported by different pools of mortgages. The Fund forgoes principal and interest paid during the roll period on the securities sold in a dollar roll, but it is compensated by the difference between the current sales price and the price for the future purchase as well as by any interest earned on the proceeds of the securities sold. The Fund could also be compensated through receipt of fee income. Dollar rolls are not treated as borrowings or other senior securities and will be excluded from the calculation of the Fund's borrowings and other senior securities. Investing in dollar rolls creates leverage (unless they are "covered dollar rolls," see description below) and are included in the calculation of the Fund's total leverage-creating transaction. In addition to the general risks involved in leveraging, dollar rolls are subject to the same risks as repurchase and reverse repurchase agreements. Covered Dollar Rolls The Fund may enter into covered dollar rolls which are the same as the dollar roll transactions described above except that the dollar roll position is offset with a cash or cash equivalent position. The offsetting cash/cash equivalent position effectively collateralizes the Fund's right to receive the security at the end of the roll period, and also serves to minimize the leveraging effect of the transaction. Covered dollar rolls are not treated as a borrowing or other senior security and will be excluded from the calculation of 2-3 the Fund's borrowings and other senior securities. Covered dollar rolls are not considered to be a transaction that creates leverage and will be excluded from the calculation of the Fund's total leverage-creating transaction. Securities Lending The Fund may lend portfolio securities to brokers, dealers and other financial institutions to earn additional income for the Fund. These transactions must be fully collateralized at all times with cash or short-term debt obligations, but involve some risk to the Fund if the other party should default on its obligation and the Fund is delayed or prevented from exercising its rights in respect of the collateral. Any investment of collateral by the Fund would be made in accordance with the Fund's investment objective and policies described in the prospectus. Convertible Securities The Fund may invest in convertible securities. Convertible securities include fixed-income securities that may be exchanged or converted into a predetermined number of shares of the issuer's underlying common stock at the option of the holder during a specified period. Convertible securities may take the form of convertible preferred stock, convertible bonds or debentures, bonds with warrants attached or bonds with a combination of the features of several of these securities. The investment characteristics of each convertible security vary widely, which allow convertible securities to be employed for a variety of investment strategies. The Fund will exchange or convert convertible securities into shares of underlying common stock when, in the opinion of its investment advisor, the investment characteristics of the underlying common shares will assist the Fund in achieving its investment objective. The Fund may also elect to hold or trade convertible securities. In selecting convertible securities, the investment advisor evaluates the investment characteristics of the convertible security as a fixed-income instrument, and the investment potential of the underlying equity security for capital appreciation. In evaluating these matters with respect to a particular convertible security, the investment advisor considers numerous factors, including the economic and political outlook, the value of the security relative to other investment alternatives, trends in the determinants of the issuer's profits, and the issuer's management capability and practices. Preferred Stocks The Fund may purchase preferred stock. Preferred stock, unlike common stock, has a stated dividend rate payable from the corporation's earnings. Preferred stock dividends may be cumulative or non-cumulative, participating, or auction rate. "Cumulative" dividend provisions require all or a portion of prior unpaid dividends to be paid. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, which can be a negative feature when interest rates decline. Preferred stock also generally has a preference over common stock on the distribution of a corporation's assets in the event of liquidation of the corporation. Preferred stock may be "participating" stock, which means that it may be entitled to a dividend exceeding the stated dividend in certain cases. The rights of preferred stock on distribution of a corporation's assets in the event of a liquidation are generally subordinate to the rights associated with a corporation's debt securities.Warrants The Fund may invest in warrants. Warrants are options to purchase common stock at a specific price (usually at a premium above the market value of the optioned common stock at issuance) valid for a specific period of time. Warrants may have a life ranging from less than one year to twenty years, or they may be perpetual. However, most warrants have expiration dates after which they are worthless. In addition, a warrant is worthless if the market price of the common stock does not exceed the warrant's exercise price during the life of the warrant. Warrants have no voting rights, pay no dividends, and have no 2-4 rights with respect to the assets of the corporation issuing them. The percentage increase or decrease in the market price of the warrant may tend to be greater than the percentage increase or decrease in the market price of the optioned common stock. Swaps, Caps, Floors and Collars The Fund may enter into interest rate, currency and index swaps and the purchase or sale of related caps, floors and collars. The Fund expects to enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its portfolio, to protect against currency fluctuations, as a duration management technique or to protect against any increase in the price of securities the Fund anticipates purchasing at a later date. The Fund would use these transactions as hedges and not as speculative investments and would not sell interest rate caps or floors where it does not own securities or other instruments providing the income stream the Fund may be obligated to pay. Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. A currency swap is an agreement to exchange cash flows on a notional amount of two or more currencies based on the relative value differential among them and an index swap is an agreement to swap cash flows on a notional amount based on changes in the values of the reference indices. The purchase of a cap entitles the purchaser to receive payments on a notional principal amount from the party selling such cap to the extent that a specified index exceeds a predetermined interest rate or amount. The purchase of a floor entitles the purchaser to receive payments on a notional principal amount from the party selling such floor to the extent that a specified index falls below a predetermined interest rate or amount. A collar is a combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates or values. The Fund will usually enter into swaps on a net basis, i.e., the two payment streams are netted out in a cash settlement on the payment date or dates specified in the instrument, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. The Fund will not enter into any swap, cap, floor or collar transaction unless, at the time of entering into such transaction, the unsecured long-term debt of the counterparty, combined with any credit enhancements, is rated at least A by Standard & Poor's Ratings Services (S&P) or Moody's Investors Service, Inc. (Moody's) or has an equivalent rating from another nationally recognized securities rating organization or is determined to be of equivalent credit quality by the Fund's investment advisor. If there is a default by the counterparty, the Fund may have contractual remedies pursuant to the agreements related to the transaction. As a result, the swap market has become relatively liquid. Caps, floors and collars are more recent innovations for which standardized documentation has not yet been fully developed and, accordingly, they are less liquid than swaps. Indexed Securities The Fund may invest in indexed securities, the values of which are linked to currencies, interest rates, commodities, indices or other financial indicators ("reference instruments"). Most indexed securities have maturities of three years or less. Indexed securities differ from other types of debt securities in which the Fund may invest in several respects. First, the interest rate or, unlike other debt securities, the principal amount payable at maturity of an indexed security may vary based on changes in one or more specified reference instruments, such as an interest rate compared with a fixed interest rate or the currency exchange rates between two currencies (neither of which need be the currency in which the instrument is denominated). The reference instrument need not be related to the terms of the indexed security. For example, the principal amount of a U.S. dollar denominated indexed security may vary based on the exchange rate of two foreign currencies. An indexed security may be positively or negatively indexed; that is, its value may increase or decrease if the value of the reference instrument increases. Further, the change in the principal amount payable or the interest rate of an indexed security may be a multiple of the percentage change (positive or negative) in the value of the underlying reference instrument(s). 2-5 Investment in indexed securities involves certain risks. In addition to the credit risk of the security's issuer and the normal risks of price changes in response to changes in interest rates, the principal amount of indexed securities may decrease as a result of changes in the value of reference instruments. Further, in the case of certain indexed securities in which the interest rate is linked to a reference instrument, the interest rate may be reduced to zero, and any further declines in the value of the security may then reduce the principal amount payable on maturity. Finally, indexed securities may be more volatile than the reference instruments underlying indexed securities. To reduce the effect of currency fluctuations on the value of existing or anticipated holdings of portfolio securities, the Fund may also engage in proxy hedging. Proxy hedging is often used when the currency to which the Fund is exposed is difficult to hedge or to hedge against the dollar. Proxy hedging entails entering into a forward contract to sell a currency whose changes in value are generally considered to be linked to a currency or currencies in which some or all of the Fund's securities are or are expected to be denominated, and to buy U.S. dollars. The amount of the contract would not exceed the value of the Fund's securities denominated in linked currencies. For example, if the Fund's investment advisor considers that the Austrian schilling is linked to the German deutschmark (the "D-mark"), the Fund holds securities denominated in schillings and the investment advisor believes that the value of schillings will decline against the U.S. dollar, the investment advisor may enter into a contract to sell D-marks and buy dollars. Options and Futures Strategies The Fund may at times seek to hedge against either a decline in the value of its portfolio securities or an increase in the price of securities which the investment advisor plans to purchase through the writing and purchase of options and the purchase or sale of futures contracts and related options. Expenses and losses incurred as a result of such hedging strategies will reduce the Fund's current return. The ability of the Fund to engage in the options and futures strategies described below will depend on the availability of liquid markets in such instruments. It is impossible to predict the amount of trading interest that may exist in various types of options or futures. Therefore, no assurance can be given that the Fund will be able to utilize these instruments effectively for the purposes stated below. Writing Covered Options on Securities. The Fund may write covered call options and covered put options on optionable securities of the types in which it is permitted to invest from time to time as the investment advisor determines is appropriate in seeking to attain the Fund's investment objective. Call options written by the Fund give the holder the right to buy the underlying security from the Fund at a stated exercise price; put options give the holder the right to sell the underlying security to the Fund at a stated price. The Fund may only write call options on a covered basis or for cross-hedging purposes and will only write covered put options. A put option would be considered "covered" if the Fund owns an option to sell the underlying security subject to the option having an exercise price equal to or greater than the exercise price of the "covered" option at all time while the put option is outstanding. A call option is covered if the Fund owns or has the right to acquire the underlying securities subject to the call option (or comparable securities satisfying the cover requirements of securities exchanges) at all times during the option period. A call option is for cross-hedging purposes if it is not covered, but is designed to provide a hedge against another security which the Fund owns or has the right to acquire. In the case of a call written for cross-hedging purposes or a put option, the Fund will maintain in a segregated account at the Fund's custodian bank cash or short-term U.S. government securities with a value equal to or greater than the Fund's obligation under the option. The Fund may also write combinations of covered puts and covered calls on the same underlying security. The Fund will receive a premium from writing an option, which increases the Fund's return in the event the option expires unexercised or is terminated at a profit. The amount of the premium will reflect, among other things, the relationship of the market price of the underlying security to the exercise price of the option, the term of the option, and the volatility of the market price of the underlying security. By writing a call option, the Fund will limit its opportunity to profit from any increase in the market value of the 2-6 underlying security above the exercise price of the option. By writing a put option, the Fund will assume the risk that it may be required to purchase the underlying security for an exercise price higher than its then current market price, resulting in a potential capital loss if the purchase price exceeds market price plus the amount of the premium received. The Fund may terminate an option which it has written prior to its expiration, by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The Fund will realize a profit (or loss) from such transaction if the cost of such transaction is less (or more) than the premium received from the writing of the option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option may be offset in whole or in part by unrealized appreciation of the underlying security owned by the Fund. Purchasing Put and Call Options on Securities. The Fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. This protection is provided during the life of the put option since the Fund, as holder of the put, is able to sell the underlying security at the exercise price regardless of any decline in the underlying security's market price. For the purchase of a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, any profit which the Fund might otherwise have realized on the underlying security will be reduced by the premium paid for the put option and by transaction costs. The Fund may also purchase a call option to hedge against an increase in price of a security that it intends to purchase. This protection is provided during the life of the call option since the Fund, as holder of the call, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. For the purchase of a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. By using call options in this manner, any profit which the Fund might have realized had it bought the underlying security at the time it purchased the call option will be reduced by the premium paid for the call option and by transaction costs. The Fund may enter into financial futures contracts and write options on such contracts. The Fund intends to enter into such contracts and related options for hedging purposes. The Fund will enter into futures on securities or index-based futures contracts in order to hedge against changes in interest or exchange rates or securities prices. A futures contract on securities is an agreement to buy or sell securities at a specified price during a designated month. A futures contract on a securities index does not involve the actual delivery of securities, but merely requires the payment of a cash settlement based on changes in the securities index. The Fund does not make payment or deliver securities upon entering into a futures contract. Instead, it puts down a margin deposit, which is adjusted to reflect changes in the value of the contract and which continues until the contract is terminated. The Fund may sell or purchase futures contracts. When a futures contract is sold by the Fund, the value of the contract will tend to rise when the value of the underlying securities declines and to fall when the value of such securities increases. Thus, the Fund sells futures contracts in order to offset a possible decline in the value of its securities. If a futures contract is purchased by the Fund, the value of the contract will tend to rise when the value of the underlying securities increases and to fall when the value of such securities declines. The Fund intends to purchase futures contracts in order to establish what is believed by the investment advisor to be a favorable price or rate of return for securities the Fund intends to purchase. The Fund also intends to purchase put and call options on futures contracts for hedging purposes. A put option purchased by the Fund would give it the right to assume a position as the seller of a futures contract. A call option purchased by the Fund would give it the right to assume a position as the purchaser of a futures contract. The purchase of an option on a futures contract requires the Fund to pay a premium. In exchange for the premium, the Fund becomes entitled to exercise the benefits, if any, provided by the futures contract, but is not required to take any action under the contract. If the 2-7 option cannot be exercised profitably before it expires, the Fund's loss will be limited to the amount of the premium and any transaction costs. The Fund may enter into closing purchase and sale transactions in order to terminate a futures contract and may sell put and call options for the purpose of closing out its options positions. The Fund's ability to enter into closing transactions depends on the development and maintenance of a liquid secondary market. There is no assurance that a liquid secondary market will exist for any particular contract or at any particular time. As a result, there can be no assurance that the Fund will be able to enter into an offsetting transaction with respect to a particular contract at a particular time. If the Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain the margin deposits on the contract and to complete the contract according to its terms, in which case it would continue to bear market risk on the transaction. Although futures and options transactions are intended to enable the Fund to manage market, interest rate or exchange rate risk, unanticipated changes in interest rates or market prices could result in poorer performance than if it had not entered into these transactions. Even if the investment advisor correctly predicts interest rate movements, a hedge could be unsuccessful if changes in the value of the Fund's futures position did not correspond to changes in the value of its investments. This lack of correlation between the Fund's futures and securities positions may be caused by differences between the futures and securities markets or by differences between the securities underlying the Fund's futures position and the securities held by or to be purchased for the Fund. The Fund's investment advisor will attempt to minimize these risks through careful selection and monitoring of the Fund's futures and options positions. The Fund does not intend to use futures transactions for speculation or leverage. The Fund has the ability to write options on futures, but currently intends to write such options only to close out options purchased by the Fund. The Fund will not change these policies without supplementing the information in the prospectus and SAI. "Margin" in Futures Transactions. Unlike the purchase or sale of a security, the Fund does not pay or receive money upon the purchase or sale of a futures contract. Rather the Fund is required to deposit an amount of "initial margin" in cash or U.S. Treasury bills with its custodian (or the broker, if legally permitted). The nature of initial margin in futures transactions is different from that of margin in securities transactions in that futures contract initial margin does not involve the borrowing of funds by the Fund to finance the transactions. Initial margin is in the nature of a performance bond or good faith deposit on the contract which is returned to the Fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. A futures contract held by the Fund is valued daily at the official settlement price of the exchange on which it is traded. Each day the Fund pays or receives cash, called "variation margin," equal to the daily change in value of the futures contract. This process is known as "marking to market". Variation margin does not represent a borrowing or loan by the Fund but is instead settlement between the Fund and the broker of the amount one would owe the other if the futures contract expired. In computing its daily net asset value the Fund will mark-to-market its open futures positions. The Fund is also required to deposit and maintain margin when it writes call options on futures contracts. Limitations. The Fund will not purchase or sell futures contracts or options on futures contracts if, as a result, the sum of the initial margin deposits on its existing futures contracts and related options positions and premiums paid for options on futures contracts would exceed 5% of the net assets of the Fund unless the transaction meets certain "bona fide hedging" criteria. The Fund will not maintain open positions in futures contracts it has sold or call options it has written on futures contracts if, in the aggregate, the value of the open positions (marked to market) exceeds the current market value of its securities portfolio plus or minus the unrealized gain or loss on those open positions, adjusted for the correlation of volatility between the hedged securities and the futures contracts. If this limitation is exceeded at any time, the Fund will take prompt action to close out a sufficient number of open contracts to bring its open futures and options positions within this limitation. 2-8 Risks of Options and Futures Strategies. The effective use of options and futures strategies depends, among other things, on the Fund's ability to terminate options and futures positions at times when the investment advisor deems it desirable to do so. Although the Fund will not enter into an option or futures position unless the investment advisor believes that a liquid market exists for such option or future, there can be no assurance that the Fund will be able to effect closing transactions at any particular time or at an acceptable price. The investment advisor generally expects that options and futures transactions for the Fund will be conducted on recognized exchanges. In certain instances, however, the Fund may purchase and sell options in the over-the-counter market. The staff of the Securities and Exchange Commission (SEC) considers over-the-counter options to be illiquid. The Fund's ability to terminate option positions established in the over-the-counter market may be more limited than in the case of exchange traded options and may also involve the risk that securities dealers participating in such transactions would fail to meet their obligations to the Fund. The use of options and futures involves the risk of imperfect correlation between movements in options and futures prices and movements in the price of the securities that are the subject of the hedge. The successful use of these strategies also depends on the ability of the Fund's investment advisor to forecast correctly interest rate movements and general stock market price movements. The risk increases as the composition of the securities held by the Fund diverges from the composition of the relevant option or futures contract. Brady Bonds The Fund may also invest in Brady Bonds. Brady Bonds are created through the exchange of existing commercial bank loans to foreign entities for new obligations in connection with debt restructuring under a plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Bonds have been issued only recently, and, accordingly, do not have a long payment history. They may be collateralized or uncollateralized and issued in various currencies (although most are U.S. dollar-denominated) and they are actively traded in the over-the-counter secondary market. U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed-rate par bonds or floating rate discount bonds, are generally collateralized in full as to principal due at maturity by U.S. Treasury zero coupon obligations that have the same maturity as the Brady Bonds. Interest payments on these Brady Bonds generally are collateralized by cash or securities in an amount that, in the case of fixed rate bonds, is equal to at least one year of rolling interest payments based on the applicable interest rate at that time and is adjusted at regular intervals thereafter. Certain Brady Bonds are entitled to "value recovery payments" in certain circumstances, which in effect constitute supplemental interest payments, but generally are not collateralized. Brady Bonds are often viewed as having up to four valuation components: (1) collateralized repayment of principal at final maturity, (2) collateralized interest payments, (3) uncollateralized interest payments, and (4) any uncollateralized repayment of principal at maturity (these uncollateralized amounts constitute the "residual risk"). In the event of a default with respect to collateralized Brady Bonds as a result of which the payment obligations of the issuer are accelerated, the U.S. Treasury zero coupon obligations held as collateral for the payment of principal will not be distributed to investors, nor will such obligations be sold and the proceeds distributed. The collateral will be held by the collateral agent to the scheduled maturity of the defaulted Brady Bonds, which will continue to be outstanding, at which time the face amount of the collateral will equal the principal payments that would have then been due on the Brady Bonds in the normal course. In addition, in light of the residual risk of Brady Bonds and, among other factors, the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds, investments in Brady Bonds are to be viewed as speculative. Obligations of Foreign Branches of United States Banks The Fund may invest in obligations of foreign branches of U.S. banks. These may be general obligations of the parent bank in addition to the issuing branch, or may be limited by the terms of a specific obligation and by government regulation. Payment of interest and principal upon these obligations 2-9 may also be affected by governmental action in the country of domicile of the branch (generally referred to as sovereign risk). In addition, evidences of ownership of such securities may be held outside the U.S. and the Fund may be subject to the risks associated with the holding of such property overseas. Examples of governmental actions would be the imposition of currency controls, interest limitations, withholding taxes, seizure of assets or the declaration of a moratorium. Various provisions of federal law governing domestic branches do not apply to foreign branches of domestic banks. Obligations of United States Branches of Foreign Banks The Fund may invest in obligations of U.S. branches of foreign banks. These may be general obligations of the parent bank in addition to the issuing branch, or may be limited by the terms of a specific obligation and by federal and state regulation as well as by governmental action in the country in which the foreign bank has its head office. In addition, there may be less publicly available information about a U.S. branch of a foreign bank than about a domestic bank. Foreign Securities The Fund may invest in foreign securities or U.S. securities traded in foreign markets. In addition to securities issued by foreign companies, permissible investments may also consist of obligations of foreign branches of U.S. banks and of foreign banks, including European certificates of deposit, European time deposits, Canadian time deposits and Yankee certificates of deposit. The Fund may also invest in Canadian commercial paper and Europaper. These instruments may subject the Fund to investment risks that differ in some respects from those related to investments in obligations of U.S. issuers. Such risks include the possibility of adverse political and economic developments; imposition of withholding taxes on interest or other income; seizure, nationalization, or expropriation of foreign deposits; establishment of exchange controls or taxation at the source; greater fluctuations in value due to changes in exchange rates, or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on such obligations. Such investments may also entail higher custodial fees and sales commissions than domestic investments. Foreign issuers of securities or obligations are often subject to accounting treatment and engage in business practices different from those respecting domestic issuers of similar securities or obligations. Foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements than those applicable to domestic branches of U.S. banks. The Fund may also invest in the stocks of companies located in emerging markets. These countries generally have economic structures that are less diverse and mature, and political systems that are less stable than those of developed countries. Emerging markets may be more volatile than the markets of more mature economies, and the securities of companies located in emerging markets are often subject to rapid and large price fluctuations; however, these markets may also provide higher long-term rates of return. Foreign Currency Transactions As one way of managing exchange rate risk, the Fund may enter into forward currency exchange contracts (agreements to purchase or sell currencies at a specified price and date). The exchange rate for the transaction (the amount of currency the Fund will deliver and receive when the contract is completed) is fixed when the Fund enters into the contract. The Fund usually will enter into these contracts to stabilize the U.S. dollar value of a security it has agreed to buy or sell. The Fund intends to use these contracts to hedge the U.S. dollar value of a security it already owns, particularly if the Fund expects a decrease in the value of the currency in which the foreign security is denominated. Although the Fund will attempt to benefit from using forward contracts, the success of its hedging strategy will depend on the investment advisor's ability to predict accurately the future exchange rates between foreign currencies and the U.S. dollar. The value of the Fund's investments denominated in foreign currencies will depend on the relative strengths of those currencies and the U.S. dollar, and the Fund may be affected favorably or unfavorably by changes in the exchange rates or exchange control regulations between foreign currencies and the U.S. dollar. Changes in foreign currency 2-10 exchange rates also may affect the value of dividends and interest earned, gains and losses realized on the sale of securities and net investment income and gains, if any, to be distributed to shareholders by the Fund. The Fund may also purchase and sell options related to foreign currencies in connection with hedging strategies. Premium Securities The Fund may at times invest in premium securities which are securities bearing coupon rates higher than prevailing market rates. Such "premium" securities are typically purchased at prices greater than the principal amount payable on maturity. Although the Fund generally amortizes the amount of any such premium into income, the Fund may recognize a capital loss if such premium securities are called or sold prior to maturity and the call or sale price is less than the purchase price. Additionally, the Fund may recognize a capital loss if it holds such securities to maturity. High Yield, High Risk Bonds The Fund may invest a portion of its assets in lower rated bonds. Bonds rated below BBB by S&P or Fitch IBCA, Inc. (Fitch) or below Baa by Moody's, commonly known as "junk bonds," offer high yields, but also high risk. While investment in junk bonds provides opportunities to maximize return over time, they are considered predominantly speculative with respect to the ability of the issuer to meet principal and interest payments. Investors should be aware of the following risks: (1) The lower ratings of junk bonds reflect a greater possibility that adverse changes in the financial condition of the issuer or in general economic conditions, or both, or an unanticipated rise in interest rates may impair the ability of the issuer to make payments of interest and principal, especially if the issuer is highly leveraged. Such issuer's ability to meet its debt obligations may also be adversely affected by the issuer's inability to meet specific forecasts or the unavailability of additional financing. Also, an economic downturn or an increase in interest rates may increase the potential for default by the issuers of these securities. (2) The value of junk bonds may be more susceptible to real or perceived adverse economic or political events than is the case for higher quality bonds. (3) The value of junk bonds, like those of other fixed income securities, fluctuates in response to changes in interest rates, generally rising when interest rates decline and falling when interest rates rise. For example, if interest rates increase after a fixed income security is purchased, the security, if sold prior to maturity, may return less than its cost. The prices of junk bonds, however, are generally less sensitive to interest rate changes than the prices of higher-rated bonds, but are more sensitive to news about an issuer or the economy which is, or investors perceive as, negative. (4) The secondary market for junk bonds may be less liquid at certain times than the secondary market for higher quality bonds, which may adversely effect (a) the bond's market price, (b) the Fund's ability to sell the bond, and (c) the Fund's ability to obtain accurate market quotations for purposes of valuing its assets. For bond ratings descriptions, see "Corporate and Municipal Bond Ratings" below. Illiquid and Restricted Securities The Fund may not invest more than 15% (10% for money market funds) of its net assets in securities that are illiquid. A security is illiquid when the Fund cannot dispose of it in the ordinary course of business within seven days at approximately the value at which the Fund has the investment on its books. The Fund may invest in "restricted" securities, i.e., securities subject to restrictions on resale under federal securities laws. Rule 144A under the Securities Act of 1933 ("Rule 144A") allows certain restricted securities to trade freely among qualified institutional investors. Since Rule 144A securities may have limited markets, the Board of Trustees will determine whether such securities should be considered illiquid for the purpose of determining the 2-11 Fund's compliance with the limit on illiquid securities indicated above. In determining the liquidity of Rule 144A securities, the Trustees will consider: (1) the frequency of trades and quotes for the security; (2) the number of dealers willing to purchase or sell the security and the number of other potential buyers; (3) dealer undertakings to make a market in the security; and (4) the nature of the security and the nature of the marketplace trades. Investment in Other Investment Companies The Fund may purchase the shares of other investment companies to the extent permitted under the 1940 Act. Currently, the Fund may not (1) own more than 3% of the outstanding voting shares of another investment company, (2) invest more than 5% of its assets in any single investment company, and (3) invest more than 10% of its assets in investment companies. However, the Fund may invest all of its investable assets in securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and limitations as the Fund. Investing in other investment companies may expose a Fund to duplicate expenses and lower its value. Notwithstanding the foregoing, as a result of an exemptive order received from the SEC, the Fund may invest cash balances in shares of other money market funds advised by the Fund's investment advisor or an affiliate of the investment advisor, in amounts up to 25% of the Fund's total assets. Short Sales A short sale is the sale of a security the Fund has borrowed. The Fund expects to profit from a short sale by selling the borrowed security for more than the cost of buying it to repay the lender. After a short sale is completed, the value of the security sold short may rise. If that happens, the cost of buying it to repay the lender may exceed the amount originally received for the sale by the Fund. The Fund may engage in short sales, but it may not make short sales of securities or maintain a short position unless, at all times when a short position is open, it owns an equal amount of such securities or of securities which, without payment of any further consideration, are convertible into or exchangeable for securities of the same issue as, and equal in amount to, the securities sold short. The Fund may effect a short sale in connection with an underwriting in which the Fund is a participant. Municipal Securities The Fund may invest in municipal bonds of any state, territory or possession of the United States (U.S.), including the District of Columbia. The Fund may also invest in municipal bonds of any political subdivision, agency or instrumentality (e.g., counties, cities, towns, villages, districts, authorities) of the U.S. or its possessions. Municipal bonds are debt instruments issued by or for a state or local government to support its general financial needs or to pay for special projects such as airports, bridges, highways, public transit, schools, hospitals, housing and water and sewer works. Municipal bonds may also may be issued to refinance public debt. Municipal bonds are mainly divided between "general obligation" and "revenue" bonds. General obligation bonds are backed by the full faith and credit of governmental issuers with the power to tax. They are repaid from the issuer's general revenues. Payment, however, may be dependent upon legislative approval and may be subject to limitations on the issuer's taxing power. Enforcement of payments due under general obligation bonds varies according to the law applicable to the issuer. In contrast, revenue bonds are supported only by the revenues generated by the project or facility. The Fund may also invest in industrial development bonds. Such bonds are usually revenue bonds issued to pay for facilities with a public purpose operated by private corporations. The credit quality of industrial development bonds is usually directly related to the credit standing of the owner or user of the facilities. To qualify as a municipal bond, the interest paid on an industrial development bond must qualify as fully exempt from federal income tax. However, the interest paid on an industrial development bond may be subject to the federal alternative minimum tax. 2-12 The yields on municipal bonds depend on such factors as market conditions, the financial condition of the issuer and the issue's size, maturity date and rating. Municipal bonds are rated by S&P, Moody's and Fitch. Such ratings, however, are opinions, not absolute standards of quality. Municipal bonds with the same maturity, interest rates and rating may have different yields, while municipal bonds with the same maturity and interest rate, but different ratings, may have the same yield. Once purchased by the Fund, a municipal bond may cease to be rated or receive a new rating below the minimum required for purchase by the Fund. Neither event would require the Fund to sell the bond, but the Fund's investment advisor would consider such events in determining whether the Fund should continue to hold it. The ability of the Fund to achieve its investment objective depends upon the continuing ability of issuers of municipal bonds to pay interest and principal when due. Municipal bonds are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors. Such laws extend the time for payment of principal and/or interest, and may otherwise restrict the Fund's ability to enforce its rights in the event of default. Since there is generally less information available on the financial condition of municipal bond issuers compared to other domestic issuers of securities, the Fund's investment advisor may lack sufficient knowledge of an issue's weaknesses. Other influences, such as litigation, may also materially affect the ability of an issuer to pay principal and interest when due. In addition, the market for municipal bonds is often thin and can be temporarily affected by large purchases and sales, including those by the Fund. From time to time, Congress has considered restricting or eliminating the federal income tax exemption for interest on municipal bonds. Such actions could materially affect the availability of municipal bonds and the value of those already owned by the Fund. If such legislation were passed, the Trust's Board of Trustees may recommend changes in the Fund's investment objectives and policies or dissolution of the Fund. U.S. Virgin Islands, Guam and Puerto Rico The Fund may invest in obligations of the governments of the U.S. Virgin Islands, Guam and Puerto Rico to the extent such obligations are exempt from the income or intangibles taxes, as applicable, of the state for which the Fund is named. The Fund does not presently intend to invest more than (a) 10% of its net assets in the obligations of each of the U.S. Virgin Islands and Guam or (b) 25% of its net assets in the obligations of Puerto Rico. Accordingly, the Fund may be adversely affected by local political and economic conditions and developments within the U.S. Virgin Islands, Guam and Puerto Rico affecting the issuers of such obligations. Tender Option Bonds A tender option bond is a municipal obligation (generally held pursuant to a custodial arrangement) having a relatively long maturity and bearing interest at a fixed rate substantially higher than prevailing short-term, tax-exempt rates. The bond is typically issued in conjunction with the agreement of a third party, such as a bank, broker-dealer or other financial institution, pursuant to which the institution grants the security holder the option, at periodic intervals, to tender its securities to the institution. As consideration for providing the option, the financial institution receives periodic fees equal to the difference between the bond's fixed coupon rate and the rate, as determined by a remarketing or similar agent, that would cause the securities, coupled with the tender option, to trade at par on the date of such determination. Thus, after payment of this fee, the security holder effectively holds a demand obligation that bears interest at the prevailing short-term, tax-exempt rate. An institution will normally not be obligated to accept tendered bonds in the event of certain defaults or a significant downgrading in the credit rating assigned to the issuer of the bond. The tender option will be taken into account in determining the maturity of the tender option bonds and a Fund's average portfolio maturity. There is a risk that a Fund will not be considered the owner of a tender option bond for federal income tax purposes, and thus will not be entitled to treat such interest as exempt from federal income tax. Certain tender option bonds may be illiquid or may become illiquid 2-13 as a result of a credit rating downgrade, payment default or a disqualification from tax-exempt status. Master Demand Notes The Fund may invest in master demand notes. These are unsecured obligations that permit the investment of fluctuating amounts by the Fund at varying rates of interest pursuant to direct arrangements between the Fund, as lender, and the issuer, as borrower. Master demand notes may permit daily fluctuations in the interest rate and daily changes in the amounts borrowed. The Fund has the right to increase the amount under the note at any time up to the full amount provided by the note agreement, or to decrease the amount. The borrower may repay up to the full amount of the note without penalty. Master demand notes permit the Fund to demand payment of principal and accrued interest at any time (on not more than seven days' notice). Notes acquired by the Fund may have maturities of more than one year, provided that (1) the Fund is entitled to payment of principal and accrued interest upon not more than seven days' notice, and (2) the rate of interest on such notes is adjusted automatically at periodic intervals, which normally will not exceed 31 days, but may extend up to one year. The notes are deemed to have a maturity equal to the longer of the period remaining to the next interest rate adjustment or the demand notice period. Because these types of notes are direct lending arrangements between the lender and borrower, such instruments are not normally traded and there is no secondary market for these notes, although they are redeemable and thus repayable by the borrower at face value plus accrued interest at any time. Accordingly, the Fund's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. In connection with master demand note arrangements, the Fund`s investment advisor considers, under standards established by the Board of Trustees, earning power, cash flow and other liquidity ratios of the borrower and will monitor the ability of the borrower to pay principal and interest on demand. These notes are not typically rated by credit rating agencies. Unless rated, the Fund may invest in them only if at the time of an investment the issuer meets the criteria established for high quality commercial paper, i.e., rated A-1 by S&P, Prime-1 by Moody's or F-1 by Fitch. Payment-in-kind Securities The Fund may invest in payment-in-kind (PIK) securities. PIKs pay interest in either cash or additional securities, at the issuer's option, for a specified period. The issuer's option to pay in additional securities typically ranges from one to six years, compared to an average maturity for all PIK securities of eleven years. Call protection and sinking fund features are comparable to those offered on traditional debt issues. PIKs, like zero coupon bonds, are designed to give an issuer flexibility in managing cash flow. Several PIKs are senior debt. In other cases, where PIKs are subordinated, most senior lenders view them as equity equivalents. An advantage of PIKs for the issuer -- as with zero coupon securities - -- is that interest payments are automatically compounded (reinvested) at the stated coupon rate, which is not the case with cash-paying securities. However, PIKs are gaining popularity over zeros since interest payments in additional securities can be monetized and are more tangible than accretion of a discount. As a group, PIK bonds trade flat (i.e., without accrued interest). Their price is expected to reflect an amount representing accreted interest since the last payment. PIKs generally trade at higher yields than comparable cash-paying securities of the same issuer. Their premium yield is the result of the lesser desirability of non-cash interest, the more limited audience for non-cash paying securities, and the fact that many PIKs have been issued to equity investors who do not normally own or hold such securities. Calculating the true yield on a PIK security requires a discounted cash flow analysis if the security (ex interest) is trading at a premium or a discount because the realizable value of additional payments is equal to the current market value of the underlying security, not par. Regardless of whether PIK securities are senior or deeply subordinated, 2-14 issuers are highly motivated to retire them because they are usually their most costly form of capital. Zero Coupon "Stripped" Bonds The Fund may invest in zero coupon "stripped" bonds. These represent ownership in serially maturing interest payments or principal payments on specific underlying notes and bonds, including coupons relating to such notes and bonds. The interest and principal payments are direct obligations of the issuer. Interest zero coupon bonds of any series mature periodically from the date of issue of such series through the maturity date of the securities related to such series. Principal zero coupon bonds mature on the date specified therein, which is the final maturity date of the related securities. Each zero coupon bond entitles the holder to receive a single payment at maturity. There are no periodic interest payments on a zero coupon bond. Zero coupon bonds are offered at discounts from their face amounts. In general, owners of zero coupon bonds have substantially all the rights and privileges of owners of the underlying coupon obligations or principal obligations. Owners of zero coupon bonds have the right upon default on the underlying coupon obligations or principal obligations to proceed directly and individually against the issuer and are not required to act in concert with other holders of zero coupon bonds. For federal income tax purposes, a purchaser of principal zero coupon bonds or interest zero coupon bonds (either initially or in the secondary market) is treated as if the buyer had purchased a corporate obligation issued on the purchase date with an original issue discount equal to the excess of the amount payable at maturity over the purchase price. The purchaser is required to take into income each year as ordinary income an allocable portion of such discounts determined on a "constant yield" method. Any such income increases the holder's tax basis for the zero coupon bond, and any gain or loss on a sale of the zero coupon bonds relative to the holder's basis, as so adjusted, is a capital gain or loss. If the holder owns both principal zero coupon bonds and interest zero coupon bonds representing an interest in the same underlying issue of securities, a special basis allocation rule (requiring the aggregate basis to be allocated among the items sold and retained based on their relative fair market value at the time of sale) may apply to determine the gain or loss on a sale of any such zero coupon bonds. Mortgage-Backed or Asset-Backed Securities The Fund may invest in mortgage-backed securities and asset-backed securities. Two principal types of mortgage-backed securities are collateralized mortgage obligations (CMOs) and real estate mortgage investment conduits (REMICs). CMOs are securities collateralized by mortgages, mortgage pass-throughs, mortgage pay-through bonds (bonds representing an interest in a pool of mortgages where the cash flow generated from the mortgage collateral pool is dedicated to bond repayment), and mortgage-backed bonds (general obligations of the issuers payable out of the issuers' general funds and additionally secured by a first lien on a pool of single family detached properties). Many CMOs are issued with a number of classes or series which have different maturities and are retired in sequence. Investors purchasing CMOs in the shortest maturities receive or are credited with their pro rata portion of the scheduled payments of interest and principal on the underlying mortgages plus all unscheduled prepayments of principal up to a predetermined portion of the total CMO obligation. Until that portion of such CMO obligation is repaid, investors in the longer maturities receive interest only. Accordingly, the CMOs in the longer maturity series are less likely than other mortgage pass-throughs to be prepaid prior to their stated maturity. Although some of the mortgages underlying CMOs may be supported by various types of insurance, and some CMOs may be backed by GNMA certificates or other mortgage pass-throughs issued or guaranteed by U.S. government agencies or instrumentalities, the CMOs themselves are not generally guaranteed. REMICs are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities. 2-15 In addition to mortgage-backed securities, the Fund may invest in securities secured by other assets including company receivables, truck and auto loans, leases, and credit card receivables. These issues may be traded over-the-counter and typically have a short-intermediate maturity structure depending on the pay down characteristics of the underlying financial assets which are passed through to the security holder. Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. Most issuers of asset-backed securities backed by automobile receivables permit the servicers of such receivables to retain possession of the underlying obligations. If the servicers were to sell these obligations to another party, there is a risk that the purchaser would acquire an interest superior to that of the holders of the related asset-backed securities. In addition, because of the large number of vehicles involved in a typical issuance and technical requirements under state laws, the trustee for the holders of related asset-backed securities backed by automobile receivables may not have a proper security interest in all of the obligations backing such receivables. Therefore, there is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities. In general, issues of asset-backed securities are structured to include additional collateral and/or additional credit support to protect against the risk that a portion of the collateral supporting the asset-backed securities may default and/or may suffer from these defects. In evaluating the strength of particular issues of asset-backed securities, the investment advisor considers the financial strength of the guarantor or other provider of credit support, the type and extent of credit enhancement provided as well as the documentation and structure of the issue itself and the credit support. Variable or Floating Rate Instruments The Fund may invest in variable or floating rate instruments which may involve a demand feature and may include variable amount master demand notes which may or may not be backed by bank letters of credit. Variable or floating rate instruments bear interest at a rate which varies with changes in market rates. The holder of an instrument with a demand feature may tender the instrument back to the issuer at par prior to maturity. A variable amount master demand note is issued pursuant to a written agreement between the issuer and the holder, its amount may be increased by the holder or decreased by the holder or issuer, it is payable on demand, and the rate of interest varies based upon an agreed formula. The quality of the underlying credit must, in the opinion of the investment advisor, be equivalent to the long-term bond or commercial paper ratings applicable to permitted investments for the Fund. The investment advisor will monitor, on an ongoing basis, the earning power, cash flow, and liquidity ratios of the issuers of such instruments and will similarly monitor the ability of an issuer of a demand instrument to pay principal and interest on demand. Real Estate Investment Trusts The Fund may invest in investments related to real estate including real estate investment trusts (REITs). Risks associated with investments in securities of companies in the real estate industry include: decline in the value of real estate; risks related to general and local economic conditions, overbuilding and increased competition; increases in property taxes and operating expenses; changes in zoning laws; casualty or condemnation losses; variations in rental income; changes in neighborhood values; the appeal of properties to tenants; and increases in interest rates. In addition, equity REITs may be affected by changes in the values of the underlying property owned by the trusts, while mortgage real estate investment trusts may be affected by the quality of credit extended. REITs are dependent upon management skills, may not be diversified and are subject to the risks of financing projects. Such REITs are also subject to heavy cash flow dependency, defaults by borrowers, self liquidation and the possibility of failing to qualify for tax-free pass-through of income under the Internal Revenue Code of 1986, as amended (the "Code") and to maintain exemption from the 1940 Act. In the event an issuer of debt securities collateralized by real estate defaults, it is conceivable that the REITs could end up holding the underlying real estate. 2-16 Limited Partnerships The Fund may invest in limited and master limited partnerships. A limited partnership is a partnership consisting of one or more general partners, jointly and severally responsible as ordinary partners, and by whom the business is conducted, and one or more limited partners who contribute cash as capital to the partnership and who generally are not liable for the debts of the partnership beyond the amounts contributed. Limited partners are not involved in the day-to-day management of the partnership. They receive income, capital gains and other tax benefits associated with the partnership project in accordance with terms established in the partnership agreement. Typical limited partnerships are in real estate, oil and gas and equipment leasing, but they also finance movies, research and development, and other projects. For an organization classified as a partnership under the Code, each item of income, gain, loss, deduction, and credit is not taxed at the partnership level but flows through to the holder of the partnership unit. This allows the partnership to avoid double taxation and to pass through income to the holder of the partnership unit at lower individual rates. A master limited partnership is a publicly traded limited partnership. The partnership units are registered with the SEC and are freely exchanged on a securities exchange or in the over-the-counter market. Stand-by Commitments When the Fund purchases tax-exempt securities, it has the authority to acquire stand-by commitments from banks and broker-dealers with respect to those tax-exempt securities. A stand-by commitment may be considered a security independent of the state tax-exempt security to which it relates. The amount payable by a bank or dealer during the time a stand-by commitment is exercisable, absent unusual circumstances, would be substantially the same as the market value of the underlying tax-exempt security to a third party at any time. The Fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. No Fund expects to assign any value to stand-by commitments. PURCHASE AND REDEMPTION OF SHARES You may buy shares of the Fund through Evergreen Distributor, Inc. (EDI), broker-dealers that have entered into special agreements with EDI or certain other financial institutions. With certain exceptions, the Fund may offer up to seven different classes of shares that differ primarily with respect to sales charges and distribution fees. Depending upon the class of shares, you will pay a front-end sales charge when you buy the Fund's shares, a contingent deferred sales charge (a "CDSC") when you redeem the Fund's shares or no sales charges at all. Each Fund offers different classes of shares. Refer to the prospectus to determine which classes of shares are offered by each Fund. Class A Shares With certain exceptions, when you purchase Class A shares you will pay a maximum sales charge of 5.75%. The prospectus contains a complete table of applicable sales charges and a discussion of sales charge reductions or waivers that may apply to purchases. If you purchase Class A shares in the amount of $1 million or more, without an front-end sales charge, the Fund will charge a CDSC of 1.00% if you redeem during the month of your purchase or the 12-month period following the month of your purchase (see "Contingent Deferred Sales Charge" below). No front-end sales charges are imposed on Class A shares purchased by (a) institutional investors, which may include bank trust departments and registered investment advisors; (b) investment advisors, consultants or financial planners who place trades for their own accounts or the accounts of their clients and who charge such clients a management, consulting, advisory or other fee; (c) clients of investment advisors or financial planners who place 2-17 trades for their own accounts if the accounts are linked to the master account of such investment advisors or financial planners on the books of the broker-dealer through whom shares are purchased; (d) institutional clients of broker-dealers, including retirement and deferred compensation plans and the trusts used to fund these plans, which place trades through an omnibus account maintained with the Fund by the broker-dealer; (e) shareholders of record on October 12, 1990 in any series of Evergreen Investment Trust in existence on that date, and the members of their immediate families; and (f) current and retired employees of First Union National Bank (FUNB) and its affiliates, EDI and any broker-dealer with whom EDI has entered into an agreement to sell shares of the Fund, and members of the immediate families of such employees; and (g) upon the initial purchase of an Evergreen Fund by investors reinvesting the proceeds from a redemption within the preceding 30 days of shares of other mutual funds, provided such shares were initially purchased with a front-end sales charge or subject to a CDSC. These provisions are generally intended to provide additional job-related incentives to persons who serve the Fund or work for companies associated with the Fund and selected dealers and agents of the Fund. Since these persons are in a position to have a basic understanding of the nature of an investment company as well as a general familiarity with the Fund, sales to these persons, as compared to sales in the normal channels of distribution, require substantially less sales effort. Similarly, these provisions extend the privilege of purchasing shares at net asset value (NAV) to certain classes of institutional investors who, because of their investment sophistication, can be expected to require significantly less than normal sales effort on the part of the Fund and EDI. In addition, the provisions allow the Fund to be competitive in the mutual fund industry, where similar allowances are common. Class B Shares The Fund offers Class B shares at NAV without an front-end sales charge. With certain exceptions, however, the Fund will charge a CDSC on shares you redeem within 72 months after the month of your purchase, in accordance with the following schedule: REDEMPTION TIME CDSC RATE Month of purchase and the first 12-month period following the month of purchase........................ 5.00% Second 12-month period following the month of purchase........ 4.00% Third 12-month period following the month of purchase......... 3.00% Fourth 12-month period following the month of purchase........ 3.00% Fifth 12-month period following the month of purchase......... 2.00% Sixth 12-month period following the month of purchase......... 1.00% Thereafter.................................................... 0.00% Class B shares that have been outstanding for seven years after the month of purchase will automatically convert to Class A shares without imposition of a front-end sales charge or exchange fee. Conversion of Class B shares represented by stock certificates will require the return of the stock certificate to Evergreen Service Company, LLC (ESC). Class C Shares Class C shares are available only through broker-dealers who have entered into special distribution agreements with EDI. The Fund offers Class C shares at NAV without an front-end sales charge. With certain exceptions, however, the Fund will charge a CDSC on shares you redeem within 24 months after the month of your purchase, in accordance with the following schedule: REDEMPTION TIME CDSC RATE Month of purchase and the first 12-month period following the month of purchase 2.00% Second 12-month period following the month of purchase 1.00% Thereafter 0.00% 2-18 See "Contingent Deferred Sales Charge" below. Class C shares purchased through an omnibus account with Merrill Lynch Investment Manager, L.P. will be charged a 1.00% CDSC if redeemed within 12 months after the month of purchase. Redemptions made thereafter will not be charged a CDSC. Class I Shares (formerly Class Y Shares) No CDSC is imposed on the redemption of Class I shares. Class I shares are not offered to the general public and are available only to (1) persons who at or prior to December 31, 1994 owned Class I shares of an Evergreen Fund,(2) certain institutional investors and (3) investment advisory clients of an investment advisor of an Evergreen Fund or the advisor's affiliates. Class I shares are offered at NAV without a front-end or back-end sales charge and do not bear any Rule 12b-1 distribution expenses. Class S and Class S1 Shares Class S and Class S1 shares of the Evergreen money market funds are offered at NAV without an front-end or deferred sales charge through certain broker-dealers and financial institutions who have entered into selling agreements with EDI. Investors should refer to their broker-dealer or financial institution as appropriate for instructions and further information. Administrative Shares, Institutional Shares, Institutional Service Shares, Investor Shares, Participant Shares, Reserve Shares, Resource Shares Each institutional class of shares is sold without a front-end sales charge or deferred sales charge. Administrative, Institutional Service, Investor, Participant, Reserve and Resource shares each pay Rule 12b-1 distribution expenses. Institutional shares do not pay Rule 12b-1 distribution expenses. The minimum initial investment in any institutional class of shares is $1 million, which may be waived in certain circumstances. There is no minimum amount required for subsequent purchases. Contingent Deferred Sales Charge The Fund charges a CDSC as reimbursement for certain expenses, such as commissions or shareholder servicing fees, that it has incurred in connection with the sale of its shares (see "Distribution Expenses Under Rule 12b-1," below). Administrative, Institutional, Institutional Service, Investor, Participant, Reserve and Resource shares do not charge a CDSC. If imposed, the Fund deducts the CDSC from the redemption proceeds you would otherwise receive. The CDSC is a percentage of the lesser of (1) the net asset value of the shares at the time of redemption or (2) the shareholder's original net cost for such shares. Upon request for redemption, to keep the CDSC a shareholder must pay as low as possible, the Fund will first seek to redeem shares not subject to the CDSC and/or shares held the longest, in that order. The CDSC on any redemption is, to the extent permitted by the NASD Regulation, Inc., paid to EDI or its predecessor. Redemption-in-kind The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase order by making payment in whole or in part in readily marketable securities chosen by the Fund and valued as they are for purposes of computing the Fund's net asset value (a redemption-in-kind). If payment is made in securities, a shareholder may incur transaction expenses in converting these securities to cash. The Trust has elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a result of which the Fund is obligated to redeem shares, with respect to any one shareholder during any 90-day period, solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of the period. 2-19 SALES CHARGE WAIVERS AND REDUCTIONS The following information is not applicable to Class S, Class S1, Class I, Administrative, Institutional, Institutional Service, Investor, Participant, Reserve and Resource shares. If you are making a large purchase, there are several ways you can combine multiple purchases of Class A shares in Evergreen Funds and take advantage of lower sales charges. These are described below. Combined Purchases You may reduce your front-end sales charge if you purchase Class A shares in multiple Evergreen Funds, excluding Evergreen money market funds, at the same time. The combined dollar amount invested will determine the front-end sales charge applied to all your current purchases. For example, if you invested $75,000 in each of two different Evergreen Funds, you would pay a sales charge based on a $150,000 purchase (i.e., 3.75% of the offering price, rather than 4.75% for Funds with a 4.75% front-end sales charge). See prospectus for the specific sales charge applicable to the Fund. Rights of Accumulation You may add the value of all of your existing Evergreen Fund investments in all share classes, excluding Evergreen money market funds, to determine the front-end sales charge to be applied to your current Class A purchase. Your account, and therefore your rights of accumulation, can be linked to immediate family members which includes father and mother, brothers and sisters, and sons and daughters. The same rule applies with respect to individual retirement plans. Please note, however, that retirement plans involving employees stand alone and do not pass on rights of accumulation. Letter of Intent You may reduce the sales charge on a current purchase if you agree to invest at least $50,000 in Class A shares of an Evergreen Fund over a 13-month period. You will pay the same sales charge as if you had invested the full amount all at one time. The Fund will hold a certain portion of your investment in escrow until your commitment is met. Waiver of Front-end Sales Charges The Fund may sell its shares at net asset value without an front-end sales charge to: 1. purchasers of shares in the amount of $1 million or more; 2. a corporate or certain other qualified retirement plan or a non-qualified deferred compensation plan or a Title 1 (ERISA) tax-sheltered annuity or TSA plan sponsored by an organization having 100 or more eligible employees (a "Qualifying Plan") or a TSA plan sponsored by a public educational entity having 5,000 or more eligible employees (an "Educational TSA Plan"); 3. institutional investors, which may include bank trust departments and registered investment advisors; 4. investment advisors, consultants or financial planners who place trades for their own accounts or the accounts of their clients and who charge such clients a management, consulting, advisory or other fee; 2-20 5. clients of investment advisors or financial planners who place trades for their own accounts if the accounts are linked to a master account of such investment advisors or financial planners on the books of the broker-dealer through whom shares are purchased; 6. institutional clients of broker-dealers, including retirement and deferred compensation plans and the trusts used to fund these plans, which place trades through an omnibus account maintained with the Fund by the broker-dealer; 7. employees of FUNB, its affiliates, EDI, any broker-dealer with whom EDI has entered into an agreement to sell shares of the Fund, and members of the immediate families of such employees; 8. certain Directors, Trustees, officers and employees of the Evergreen Funds, EDI or their affiliates and to the immediate families of such persons; or 9. a bank or trust company acting as trustee for a single account in the name of such bank or trust company if the initial investment in any of the Evergreen Funds made pursuant to this waiver is at least $500,000 and any commission paid at the time of such purchase is not more than 1% of the amount invested. With respect to items 8 and 9 above, the Fund will only sell shares to these parties upon the purchasers written assurance that the purchase is for their personal investment purposes only. Such purchasers may not resell the securities except through redemption by the Fund. The Fund will not charge any CDSC on redemptions by such purchasers. Waiver of CDSCs The Fund does not impose a CDSC when the shares you are redeeming represent: 1. an increase in the share value above the net cost of such shares; 2. certain shares for which the Fund did not pay a commission on issuance, including shares acquired through reinvestment of dividend income and capital gains distributions; 3. shares that are in the accounts of a shareholder who has died or become disabled; 4. a lump-sum distribution from a 401(k) plan or other benefit plan qualified under the Employee Retirement Income Security Act of 1974 (ERISA); 5. a systematic withdrawal from the ERISA plan of a shareholder who is at least 59 years old; 6. shares in an account that we have closed because the account has an aggregate net asset value of less than $1,000; 7. an automatic withdrawal under a Systematic Withdrawal Plan of up to 1.00% per month of your initial account balance; 8. a withdrawal consisting of loan proceeds to a retirement plan participant; 9. a financial hardship withdrawal made by a retirement plan participant; 10. a withdrawal consisting of returns of excess contributions or excess deferral amounts made to a retirement plan; or 11. a redemption by an individual participant in a Qualifying Plan that purchased Class C shares (this waiver is not available in the event a Qualifying Plan, as a whole, redeems substantially all of its assets). 2-21 Exchanges Investors may exchange shares of the Fund for shares of the same class of any other Evergreen Fund which offers the same class of shares. See "By Exchange" under "How to Buy Shares" in the prospectus. Before you make an exchange, you should read the prospectus of the Evergreen Fund into which you want to exchange. The Trust's Board of Trustees reserves the right to discontinue, alter or limit the exchange privilege at any time. Automatic Reinvestment As described in the prospectus, a shareholder may elect to receive dividends and capital gains distributions in cash instead of shares. However, ESC will automatically reinvest all dividends and distributions in additional shares when it learns that the postal or other delivery service is unable to deliver checks or transaction confirmations to the shareholder's address of record. When a check is returned, the Fund will hold the check amount in a no-interest account in the shareholder's name until the shareholder updates his or her address or automatic reinvestment begins. Uncashed or returned redemption checks will also be handled in the manner described above. PRICING OF SHARES Calculation of Net Asset Value The Fund calculates its NAV once daily on Monday through Friday, as described in the prospectus. The Fund will not compute its NAV on the days the New York Stock Exchange is closed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Evergreen reserves the right to adjust the closing time to coincide with an earlier closing of the New York Stock Exchange or due to other unusual circumstances. The NAV of the Fund is calculated by dividing the value of the Fund's net assets attributable to that class by all of the shares issued for that class. Valuation of Portfolio Securities Current values for the Fund's portfolio securities are determined as follows: (1) Securities that are traded on an established securities exchange or the over-the-counter National Market System (NMS) are valued on the basis of the last sales price on the exchange where primarily traded or on the NMS prior to the time of the valuation, provided that a sale has occurred. (2) Securities traded on an established securities exchange or in the over-the-counter market for which there has been no sale and other securities traded in the over-the-counter market are valued at the mean of the bid and asked prices at the time of valuation. (3) Short-term investments maturing in more than 60 days, for which market quotations are readily available, are valued at current market value. (4) Short-term investments maturing in sixty days or less are valued at amortized cost, which approximates market. 2-22 (5) Securities, including restricted securities, for which market quotations are not readily available; listed securities or those on NMS if, in the investment advisor's opinion, the last sales price does not reflect an accurate current market value; and other assets are valued at prices deemed in good faith to be fair under procedures established by the Board of Trustees. (6) Municipal bonds are valued by an independent pricing service at fair value using a variety of factors which may include yield, liquidity, interest rate risk, credit quality, coupon, maturity and type of issue. Foreign securities are generally valued on the basis of valuations provided by a pricing service, approved by the Trust's Board of Trustees, which uses information with respect to transactions in such securities, quotations from broker-dealers, market transactions in comparable securities, and various relationships between securities and yield to maturity in determining value. PERFORMANCE CALCULATIONS Average Annual Total Return Described below are the total return calculations the Fund may use from time to time in advertisements. Return Before Taxes Total return quotations for a class of shares of the Fund are calculated by finding the average annual compounded rates of return over one, five and ten year periods, or the time periods for which such class of shares has been effective, whichever is relevant, on a hypothetical $1,000 investment that would equate the initial amount invested in the class to the ending redeemable value. To the initial investment all dividends and distributions are added, and all recurring fees charged to all shareholder accounts are deducted. The ending redeemable value assumes a complete redemption at the end of the relevant periods. The following is the formula used to calculate average annual total return: [OBJECT OMITTED] P = initial payment of $1,000. T = average annual total return. n = number of years. ERV = ending redeemable value of the initial $1,000. Return After Taxes on Distributions Total return quotations, less the taxes due on distributions, for a class of shares of the Fund are calculated by finding the average annual compounded rates of return over one, five and ten year periods, or the time periods for which such class of shares has been effective, whichever is relevant, on a hypothetical $1,000 investment that would equate the initial amount invested in the class to the ending redeemable value. To the initial investment, all dividends and distributions are added, less the taxes due on such distributions, and all recurring fees charged to all shareholder accounts are deducted. To calculate the taxes due on distributions, the highest marginal federal income tax rate in effect on the reinvestment date is used. The after-tax quotations do not reflect the effect of state and local taxes. The ending redeemable value assumes a complete redemption at the end of the relevant periods. The following is the formula used to calculate average annual total return after taxes on distributions: [OBJECT OMITTED]D 2-23 Where: P = initial payment of $1,000. T = average annual total return (after taxes on distributions). n = number of years. ATVD = ending redeemable value of the initial $1,000, after taxes on fund distributions but not after taxes on redemption. Return After Taxes on Distributions and Redemption Total return quotations, less taxes due on distributions and redemption, for a class of shares of the Fund are calculated by finding the average annual compounded rates of return over one, five and ten year periods, or the time periods for which such class of shares has been effective, whichever is relevant, on a hypothetical $1,000 investment that would equate the initial amount invested in the class to the ending redeemable value. To the initial investment, all dividends and distributions are added, less taxes due on such distributions and redemption, and all recurring fees charged to all shareholder accounts are deducted. To calculate taxes due on distributions, the highest marginal federal income tax rate in effect on the reinvestment date is used. To calculate taxes due on redemptions, returns are adjusted to reflect the effect of capital gains taxes resulting from the redemption offset by the tax benefit from capital losses resulting from the redemption. Capital gains taxes, or the benefit resulting from tax losses, are calculated using the highest federal individual capital gains tax rate for gains of the appropriate character in effect on the redemption date and in accordance with federal tax law applicable on the redemption date. The after-tax quotations do not reflect the effect of state and local taxes. The ending redeemable value assumes a complete redemption at the end of the relevant periods. The following is the formula used to calculate average annual total return after taxes on distributions and redemption: [OBJECT OMITTED]DR Where: P = initial payment of $1,000. T = average annual total return (after taxes on distributions and redemptions). n = number of years. ATVDR = ending redeemable value of the initial $1,000, after taxes on fund distributions and redemption. Yield Described below are yield calculations the Fund may use. Yield quotations are expressed in annualized terms and may be quoted on a compounded basis. Yields based on these calculations do not represent the Fund's yield for any future period. 30-Day Yield If the Fund invests primarily in bonds, it may quote its 30-day yield in advertisements or in reports or other communications to shareholders. It is calculated by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period, according to the following formula: [OBJECT OMITTED] [OBJECT OMITTED] 2-24 Where: a = Dividends and interest earned during the period b = Expenses accrued for the period (net of reimbursements) c = The average daily number of shares outstanding during the period that were entitled to receive dividends d = The maximum offering price per share on the last day of the period 7-Day Current and Effective Yield If the Fund invests primarily in money market instruments, it may quote its 7-day current yield or effective yield in advertisements or in reports or other communications to shareholders. The current yield is calculated by determining the net change, excluding capital changes and income other than investment income, in the value of a hypothetical, pre-existing account having a balance of one share at the beginning of the 7-day base period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then multiplying the base period return by (365/7). The effective yield is based on a compounding of the current yield, according to the following formula: [OBJECT OMITTED] Tax Equivalent Yield If the Fund invests primarily in municipal bonds, it may quote in advertisements or in reports or other communications to shareholders a tax equivalent yield, which is what an investor would generally need to earn from a fully taxable investment in order to realize, after income taxes, a benefit equal to the tax free yield provided by the Fund. Tax equivalent yield is calculated using the following formula: [OBJECT OMITTED] The quotient is then added to that portion, if any, of the Fund's yield that is not tax exempt. Depending on the Fund's objective, the income tax rate used in the formula above may be federal or a combination of federal and state. PRINCIPAL UNDERWRITER EDI is the principal underwriter for the Trust and with respect to each class of shares of the Fund. The Trust has entered into a Principal Underwriting Agreement (Underwriting Agreement) with EDI with respect to each class of the Fund. EDI is a subsidiary of The BISYS Group, Inc. EDI, as agent, has agreed to use its best efforts to find purchasers for the shares. EDI may retain and employ representatives to promote distribution of the shares and may obtain orders from broker-dealers, and others, acting as principals, for sales of shares to them. The Underwriting Agreement provides that EDI will bear the expense of preparing, printing, and distributing advertising and sales literature and prospectuses used by it. All subscriptions and sales of shares by EDI are at the public offering price of the shares, which is determined in accordance with the provisions of the Trust's Declaration of Trust, By-Laws, current prospectuses and SAI. All orders are subject to acceptance by the Fund and the Fund reserves the right, in 2-25 its sole discretion, to reject any order received. Under the Underwriting Agreement, the Fund is not liable to anyone for failure to accept any order. EDI has agreed that it will, in all respects, duly conform with all state and federal laws applicable to the sale of the shares. EDI has also agreed that it will indemnify and hold harmless the Trust and each person who has been, is, or may be a Trustee or officer of the Trust against expenses reasonably incurred by any of them in connection with any claim, action, suit, or proceeding to which any of them may be a party that arises out of or is alleged to arise out of any misrepresentation or omission to state a material fact on the part of EDI or any other person for whose acts EDI is responsible or is alleged to be responsible, unless such misrepresentation or omission was made in reliance upon written information furnished by the Trust. The Underwriting Agreement provides that it will remain in effect as long as its terms and continuance are approved annually (i) by a vote of a majority of the Trust's Trustees who are not interested persons of the Fund, as defined in the 1940 Act (the "Independent Trustees"), and (ii) by vote of a majority of the Trust's Trustees, in each case, cast in person at a meeting called for that purpose. The Underwriting Agreement may be terminated, without penalty, on 60 days' written notice by the Board of Trustees or by a vote of a majority of outstanding shares subject to such agreement. The Underwriting Agreement will terminate automatically upon its "assignment," as that term is defined in the 1940 Act. From time to time, if, in EDI's judgment, it could benefit the sales of shares, EDI may provide to selected broker-dealers promotional materials and selling aids, including, but not limited to, personal computers, related software, and data files. DISTRIBUTION EXPENSES UNDER RULE 12b-1 The Fund bears some of the costs of selling its Class A, Class B, Class C, Class S, Class S1, Administrative, Institutional Service, Investor, Participant, Reserve and Resource shares ("Share Classes"), as applicable, including certain advertising, marketing and shareholder service expenses, pursuant to Rule 12b-1 of the 1940 Act. These 12b-1 fees are indirectly paid by the shareholder, as shown by the Fund's expense table in the prospectus. The 12b-1 fees are composed of distribution fees and service fees which are described further below. Under the Distribution Plans (each a "Plan," together, the "Plans") that the Fund has adopted for its Share Classes, other than Class I and Institutional, the Fund may incur expenses for 12b-1 fees up to a maximum annual percentage of the average daily net assets attributable to a class, as described below. Amounts paid under the Plans are used to compensate EDI pursuant to Distribution Agreements (each an "Agreement," together, the "Agreements") that the Fund has entered into with respect to its Share Classes, as applicable. Class Current Maximum 12b-1 Fees Allowed Under the Plans A 0.75%(a) B 1.00% C 1.00% S 0.75%(b) S1 0.75%(b) Administrative 0.75%(c) Institutional Service 0.75%(c) Investor 0.75%(c) Participant 0.75%(c) Reserve 0.75%(c) Resource 1.00%(d) 2-26 (a) Currently limited to 0.30% or less on Evergreen money market funds and 0.25% or less for all other Evergreen Funds. Of this amount 0.25% is to be used exclusively as a service fee. See the expense table in the prospectus of the Fund in which you are interested. (b) Currently limited to 0.60% or less on Evergreen money market funds. Of this amount 0.25% is to be used exclusively as a service fee. See the expense table in the prospectus of the Fund in which you are interested. (c) Currently limited to 0.65% or less on Evergreen institutional money market funds and Evergreen Cash Management Money Market Funds. Of this amount 0.25% is to be used exclusively as a service fee. See the expense table in the prospectus of the Fund in which you are interested. (d) Currently limited to 0.80% or less on Evergreen institutional money market funds and Evergreen Cash Management Money Market Funds. Of this amount 0.25% is to be used exclusively as a service fee. See the expense table in the prospectus of the Fund in which you are interested. Of the amounts above, each class may pay under its Plan a maximum service fee of 0.25% to compensate organizations, which may include the Fund's investment advisor or its affiliates, for personal services provided to shareholders and the maintenance of shareholder accounts. The Fund may not, during any fiscal period, pay 12b-1 fees greater than the amounts described in the chart above under "Current Maximum 12b-1 Fees Allowed Under the Plans." The Trustees may, without shareholder approval, increase the fees allowed under the Agreements up to the current maximum 12b-1 fees allowed under the Plans. The Agreements provide that EDI will use the distribution fees received from the Fund for the following purposes: (1) to compensate broker-dealers or other persons for distributing Fund shares; (2) to compensate broker-dealers, depository institutions and other financial intermediaries for providing administrative, accounting and other services with respect to the Fund's shareholders; and (3) to otherwise promote the sale of Fund shares. The Agreements also provide that EDI may use distribution fees to make interest and principal payments in respect of amounts that have been financed to pay broker-dealers or other persons for distributing Fund shares. EDI may assign its rights to receive compensation under the Plans to secure such financings. FUNB or its affiliates may finance payments made by EDI to compensate broker-dealers or other persons for distributing shares of the Fund. In the event the Fund acquires the assets of another mutual fund, compensation paid to EDI under the Agreements may be paid by EDI to the acquired fund's distributor or its predecessor. Since EDI's compensation under the Agreements is not directly tied to the expenses incurred by EDI, the compensation received by it under the Agreements during any fiscal year may be more or less than its actual expenses and may result in a profit to EDI. Distribution expenses incurred by EDI in one fiscal year that exceed the compensation paid to EDI for that year may be paid from distribution fees received from the Fund in subsequent fiscal years. Distribution fees are accrued daily and paid at least annually on Class A, Class B, Class C, Class S Class S1, Administrative, Institutional Service, Investor, Participant, Reserve and Resource shares and are charged as class expenses, as accrued. The distribution fees attributable to the Class B and Class C shares are designed to permit an investor to purchase such shares through broker-dealers without the assessment of a front-end sales charge, while 2-27 at the same time permitting EDI to compensate broker-dealers in connection with the sale of such shares. Service fees are accrued daily and paid at least annually on Class A, Class B, Class C, Class S, Class S1, Administrative, Institutional Service, Investor, Participant, Reserve and Resource shares and are charged as class expenses, as accrued. Under the Plans, the Treasurer of the Trust reports the amounts expended under the Plans and the purposes for which such expenditures were made to the Trustees of the Trust for their review on a quarterly basis. Also, each Plan provides that the selection and nomination of the Independent Trustees are committed to the discretion of such Independent Trustees then in office. The investment advisor may from time to time from its own funds or such other resources as may be permitted by rules of the SEC make payments for distribution services to EDI; the latter may in turn pay part or all of such compensation to brokers or other persons for their distribution assistance. Each Plan and the Agreement will continue in effect for successive 12-month periods provided, however, that such continuance is specifically approved at least annually by the Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of that class and, in either case, by a majority of the Independent Trustees of the Trust. The Plans permit the payment of fees to brokers and others for distribution and shareholder-related administrative services and to broker-dealers, depository institutions, financial intermediaries and administrators for administrative services as to Class A, Class B, Class C, Class S, Class S1, Administrative, Institutional Service, Investor, Participant, Reserve and Resource shares. The Plans are designed to (i) stimulate brokers to provide distribution and administrative support services to the Fund and holders of Class A, Class B, Class C, Class S, Class S1 and Institutional Service shares and (ii) stimulate administrators to render administrative support services to the Fund and holders of Class A, Class B, Class C, Class S, Class S1, Administrative, Institutional Service, Investor, Participant, Reserve and Resource shares. The administrative services are provided by a representative who has knowledge of the shareholder's particular circumstances and goals, and include, but are not limited to providing office space, equipment, telephone facilities, and various personnel including clerical, supervisory, and computer, as necessary or beneficial to establish and maintain shareholder accounts and records; processing purchase and redemption transactions and automatic investments of client account cash balances; answering routine client inquiries regarding Class A, Class B, Class C, Class S, Class S1, Administrative, Institutional Service, Investor, Participant, Reserve and Resource shares; assisting clients in changing dividend options, account designations, and addresses; and providing such other services as the Fund reasonably requests for its Class A, Class B, Class C, Class S, Class S1, Administrative, Institutional Service, Investor, Participant, Reserve and Resource shares. In the event that the Plan or Distribution Agreement is terminated or not continued with respect to one or more classes of the Fund, (i) no distribution fees (other than current amounts accrued but not yet paid) would be owed by the Fund to EDI with respect to that class or classes, and (ii) the Fund would not be obligated to pay EDI for any amounts expended under the Distribution Agreement not previously recovered by EDI from distribution services fees in respect of shares of such class or classes through deferred sales charges. All material amendments to any Plan or Agreement must be approved by a vote of the Trustees of the Trust or the holders of the Fund's outstanding voting securities, voting separately by class, and in either case, by a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval; and any Plan or Distribution Agreement may not be amended in order to increase materially the costs that a particular class of shares of the Fund may bear pursuant to the Plan or Distribution Agreement without the approval of a majority of the holders of the outstanding voting shares of the class affected. Any Plan or Distribution Agreement may be terminated (i) by the Fund without penalty at any time by a majority vote of the holders of the outstanding voting securities of the Fund, voting separately by class or by a majority vote of the Independent Trustees, or (ii) by EDI. To 2-28 terminate any Distribution Agreement, any party must give the other parties 60 days' written notice; to terminate a Plan only, the Fund need give no notice to EDI. Any Distribution Agreement will terminate automatically in the event of its assignment. For more information about 12b-1 fees, see "Expenses" in the prospectus and "12b-1 Fees" under "Expenses" in Part 1 of this SAI. SERVICE FEES AND COMMISSIONS PAID TO INVESTMENT FIRMS Service Fees EDI will pay service fees to investment firms based on the average daily net asset value of Class A, Class B, Class S, Class S1, Administrative, Investor, Participant, Reserve, Resource and Institutional Service shares of the Fund which the investment firm has sold and which are issued and outstanding on the books of the Fund during each quarter, and which are registered in the names of customers for whom the investment firm is the dealer of record ("Eligible Shares"). The rate of such service fees of the Fund for Class A, B and Institutional Service shares (excluding Evergreen money market funds, Evergreen Short-Intermediate Municipal Bond Fund, Evergreen Short-Duration Income Fund, Evergreen Equity Index Fund and Evergreen Adjustable Rate Fund) will be calculated quarterly at the rate of 0.0625% per quarter of the average daily net asset value of all such Eligible Shares (approximately 0.25% annually) during such quarter. The rate of service fees of the Fund with Administrative Shares will be calculated quarterly at the rate of 0.0125% per quarter of the average daily net asset value of all such Eligible Shares (approximately 0.05% annually) during such quarter. The rate of service fees of the Fund with Investor Shares will be calculated quarterly at the rate of 0.025% per quarter of the average daily net asset value of all such Eligible Shares (approximately 0.10% annually) during such quarter. The rate of service fees of the Fund with Participant Shares will be calculated quarterly at the rate of 0.125% per quarter of the average daily net asset value of all such Eligible Shares (approximately 0.50% annually) during such quarter. The rate of service fees of the Fund with Reserve Shares will be calculated quarterly at the rate of 0.1625% per quarter of the average daily net asset value of all such Eligible Shares (approximately 0.65% annually) during such quarter. The rate of service fees of the Fund with Resource Shares will be calculated quarterly at the rate of 0.20% per quarter of the average daily net asset value of all such Eligible Shares (approximately 0.80% annually) during such quarter. The rate of service fees of the Fund with Class S and Class S1 Shares will be calculated quarterly at the rate of 0.15% per quarter of the average daily net asset value of all such Eligible Shares (approximately 0.60% annually) during such quarter. For Evergreen money market funds, the quarterly rate paid to investment firms for sales of Eligible Shares of Class A will be 0.075% or approximately 0.30% annually. For Evergreen Short-Intermediate Municipal Bond Fund, Evergreen Short-Duration Income Fund and Evergreen Adjustable Rate Fund, the quarterly rate paid to investment firms for sales of Eligible Shares of Class A will be 0.025% or approximately 0.10% annually. For Evergreen Adjustable Rate Fund, this rate applies to sales made after January 1, 1997. EDI will pay the investment firm a full year's service fee in advance of the dealer's sales of Class C shares of such Fund at the rate of 0.25% of the aggregate net asset value of such shares. EDI will pay service fees to the investment firms based on the average daily net asset value of Class C shares of 2-29 the Fund they have sold, provided such shares have been on the books of the Fund for a minimum of 14 months from the date of purchase (plus any reinvested distributions attributable to such shares), which have been issued and outstanding on the books of such Fund during the respective quarter and which are registered in the names of customers for whom the investment firm is the dealer of record ("Class C Eligible Shares"). Such service fees will be calculated quarterly at the rate of 0.0625% per quarter of the average daily net asset value of all such Class C Eligible Shares (approximately 0.25% annually). In any quarter in which total service fees earned by the investment firm on such Eligible Shares of all Funds are less than $50.00 in the aggregate, no service fees will be paid to the investment firm nor will such amounts be carried over for payment in a future quarter. Service fees will be paid within five business days after the end of the service commission period in the respective quarter. EDI will pay service fees only to the extent that such amounts have been paid to EDI by the Fund. No service fees are paid on sales of any Class I or Institutional shares of the Fund. Commissions EDI will also pay commissions to the investment firms based on the average daily net asset value of Class C shares of the Fund sold provided such shares have been on the books of the Fund for a minimum of 14 months from the date of purchase (plus any reinvested distributions attributable to such shares), which have been issued and outstanding on the books of such Fund during the calendar quarter and which are registered in the names of customers for whom the investment firm is the dealer of record ("Eligible Shares"). Such commissions will be calculated quarterly at the rate of 0.1875% per quarter of the average daily net asset value of all such Eligible Shares (approximately 0.75% annually) during such quarter. Such commissions will be paid by the twentieth day of the month before the end of the respective quarter. Such commissions will continue to be paid to the investment firm quarterly so long as aggregate payments do not exceed applicable NASD limitations and other governing regulations. No commissions are paid on sales of any Class I or Institutional shares of the Fund. TAX INFORMATION Requirements for Qualifications as a Regulated Investment Company The Fund intends to qualify for and elect the tax treatment applicable to regulated investment companies (RIC) under Subchapter M of the Code. (Such qualification does not involve supervision of management or investment practices or policies by the Internal Revenue Service.) In order to qualify as a RIC, the Fund must, among other things, (i) derive at least 90% of its gross income from dividends, interest, payments with respect to proceeds from securities loans, gains from the sale or other disposition of securities or foreign currencies and other income (including gains from options, futures or forward contracts) derived with respect to its business of investing in such securities; and (ii) diversify its holdings so that, at the end of each quarter of its taxable year, (a) at least 50% of the market value of the Fund's total assets is represented by cash, U.S. government securities and other securities limited in respect of any one issuer, to an amount not greater than 5% of the Fund's total assets and 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of its total assets is invested in the securities of any one issuer (other than U.S. government securities and securities of other regulated investment companies). By so qualifying, the Fund is not subject to federal income tax if it timely distributes its investment company taxable income and any net realized capital gains. A 4% nondeductible excise tax will be imposed on the Fund to the extent it does not meet certain distribution requirements by the end of each calendar year. The Fund anticipates meeting such distribution requirements. 2-30 Taxes on Distributions Unless the Fund is a municipal bond or municipal money market fund, distributions will be taxable to shareholders whether made in shares or in cash. Shareholders electing to receive distributions in the form of additional shares will have a cost basis for federal income tax purposes in each share so received equal to the net asset value of a share of the Fund on the reinvestment date. To calculate ordinary income for federal income tax purposes, shareholders must generally include dividends paid by the Fund from its investment company taxable income (net taxable investment income plus net realized short-term capital gains, if any). The Fund will include dividends it receives from domestic corporations when the Fund calculates its gross investment income. Unless the Fund is a municipal bond, municipal money market fund or U.S. Treasury or U.S. Government money market fund, it anticipates that all or a portion of the ordinary dividends which it pays will qualify for the 70% dividends-received deduction for corporations. The Fund will inform shareholders of the amounts that so qualify. If the Fund is a municipal bond, municipal money market fund, corporate bond fund or U.S. Treasury or U.S. Government money market fund, none of its income will consist of corporate dividends; therefore, none of its distributions will qualify for the 70% dividends-received deduction for corporations. From time to time, the Fund will distribute the excess of its net long-term capital gains over its short-term capital loss to shareholders (i.e., capital gain dividends). For federal tax purposes, shareholders must include such capital gain dividends when calculating their net long-term capital gains. Capital gain dividends are taxable as net long-term capital gains to a shareholder, no matter how long the shareholder has held the shares. Distributions by the Fund reduce its NAV. A distribution that reduces the Fund's NAV below a shareholder's cost basis is taxable as described above, although from an investment standpoint, it is a return of capital. In particular, if a shareholder buys Fund shares just before the Fund makes a distribution, when the Fund makes the distribution the shareholder will receive what is in effect a return of capital. Nevertheless, the shareholder may incur taxes on the distribution. Therefore, shareholders should carefully consider the tax consequences of buying Fund shares just before a distribution. All distributions, whether received in shares or cash, must be reported by each shareholder on his or her federal income tax return. Each shareholder should consult a tax advisor to determine the state and local tax implications of Fund distributions. If more than 50% of the value of the Fund's total assets at the end of a fiscal year is represented by securities of foreign corporations and the Fund elects to make foreign tax credits available to its shareholders, a shareholder will be required to include in his gross income both cash dividends and the amount the Fund advises him is his pro rata portion of income taxes withheld by foreign governments from interest and dividends paid on the Fund's investments. The shareholder may be entitled, however, to take the amount of such foreign taxes withheld as a credit against his U.S. income tax, or to treat the foreign tax withheld as an itemized deduction from his gross income, if that should be to his advantage. In substance, this policy enables the shareholder to benefit from the same foreign tax credit or deduction that he would have received if he had been the individual owner of foreign securities and had paid foreign income tax on the income therefrom. As in the case of individuals receiving income directly from foreign sources, the credit or deduction is subject to a number of limitations. Special Tax Information for Shareholders of Municipal Bond or Municipal Money Market Funds The Fund expects that substantially all of its dividends will be "exempt interest dividends," which should be treated as excludable from federal gross income. In order to pay exempt interest dividends, at least 50% of the value of the Fund's assets must consist of federally tax-exempt obligations at the close of each quarter. An exempt interest dividend is any dividend or part thereof (other than a capital gain dividend) paid by the Fund with respect to its net federally excludable municipal obligation interest and designated as an exempt interest dividend in a written notice mailed to each shareholder not later than 60 days after the close of its taxable year. The percentage of the 2-31 total dividends paid by the Fund with respect to any taxable year that qualifies as exempt interest dividends will be the same for all shareholders of the Fund receiving dividends with respect to such year. If a shareholder receives an exempt interest dividend with respect to any share and such share has been held for six months or less, any loss on the sale or exchange of such share will be disallowed to the extent of the exempt interest dividend amount. Any shareholder of the Fund who may be a "substantial user" (as defined by the Code, as amended.) of a facility financed with an issue of tax-exempt obligations or a "related person" to such a user should consult his tax advisor concerning his qualification to receive exempt interest dividends should the Fund hold obligations financing such facility. Under regulations to be promulgated, to the extent attributable to interest paid on certain private activity bonds, the Fund's exempt interest dividends, while otherwise tax-exempt, will be treated as a tax preference item for alternative minimum tax purposes. Corporate shareholders should also be aware that the receipt of exempt interest dividends could subject them to alternative minimum tax under the provisions of Section 56(g) of the Code (relating to "adjusted current earnings"). Interest on indebtedness incurred or continued by shareholders to purchase or carry shares of the Fund will not be deductible for federal income tax purposes to the extent of the portion of the interest expense relating to exempt interest dividends. Such portion is determined by multiplying the total amount of interest paid or accrued on the indebtedness by a fraction, the numerator of which is the exempt interest dividends received by a shareholder in his taxable year and the denominator of which is the sum of the exempt interest dividends and the taxable distributions out of the Fund's investment income and long-term capital gains received by the shareholder. Taxes on The Sale or Exchange of Fund Shares Upon a sale or exchange of Fund shares, a shareholder will realize a taxable gain or loss depending on his or her basis in the shares. A shareholder must treat such gains or losses as a capital gain or loss if the shareholder held the shares as capital assets. Capital gain on assets held for more than 12 months is generally subject to a maximum federal income tax rate of 20% for an individual. Generally, the Code will not allow a shareholder to realize a loss on shares he or she has sold or exchanged and replaced within a 61-day period beginning 30 days before and ending 30 days after he or she sold or exchanged the shares. The Code will not allow a shareholder to realize a loss on the sale of Fund shares held by the shareholder for six months or less to the extent the shareholder received exempt interest dividends on such shares. Moreover, the Code will treat a shareholder's loss on shares held for six months or less as a long-term capital loss to the extent the shareholder received distributions of net capital gains on such shares. Shareholders who fail to furnish their taxpayer identification numbers to the Fund and to certify as to its correctness and certain other shareholders may be subject to a federal income tax backup withholding requirement at the rate of 30% in 2002 and slightly lesser in subsequent years on dividends, distributions of capital gains and redemption proceeds paid to them by the Fund. If the withholding provisions are applicable, any such dividends or capital gain distributions to these shareholders, whether taken in cash or reinvested in additional shares, and any redemption proceeds will be reduced by the amounts required to be withheld. Investors may wish to consult their own tax advisors about the applicability of the backup withholding provisions. Other Tax Considerations The foregoing discussion relates solely to U.S. federal income tax law as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations, partnerships, trusts and estates). It does not reflect the special tax consequences to certain taxpayers (e.g., banks, insurance companies, tax exempt organizations and foreign persons). Shareholders are encouraged to consult their own tax advisors regarding specific questions relating to federal, state and local tax consequences of investing in shares of the Fund. Each shareholder who is not a U.S. person should consult his or her 2-32 tax advisor regarding the U.S. and foreign tax consequences of ownership of shares of the Fund, including the possibility that such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under a tax treaty) on amounts treated as income from U.S. sources under the Code. BROKERAGE Brokerage Commissions If the Fund invests in equity securities, it expects to buy and sell them through brokerage transactions for which commissions are payable. Purchases from underwriters will include the underwriting commission or concession, and purchases from dealers serving as market makers will include a dealer's mark-up or reflect a dealer's mark-down. Where transactions are made in the over-the-counter market, the Fund will deal with primary market makers unless more favorable prices are otherwise obtainable. If the Fund invests in fixed income securities, it expects to buy and sell them directly from the issuer or an underwriter or market maker for the securities. Generally, the Fund will not pay brokerage commissions for such purchases. When the Fund buys a security from an underwriter, the purchase price will usually include an underwriting commission or concession. The purchase price for securities bought from dealers serving as market makers will similarly include the dealer's mark up or reflect a dealer's mark down. When the Fund executes transactions in the over-the-counter market, it will deal with primary market makers unless more favorable prices are otherwise obtainable. Masters Fund may incur higher brokerage costs than would be the case if a single investment advisor or sub-advisor were managing the entire portfolio. Selection of Brokers When buying and selling portfolio securities, the advisor seeks brokers who can provide the most benefit to the Fund. When selecting a broker, the investment advisor will primarily look for the best price at the lowest commission, but in the context of the broker's: 1. ability to provide the best net financial result to the Fund; 2. efficiency in handling trades; 3. ability to trade large blocks of securities; 4. readiness to handle difficult trades; 5. financial strength and stability; and 6. provision of "research services," defined as (a) reports and analyses concerning issuers, industries, securities and economic factors and (b) other information useful in making investment decisions. The Fund may pay higher brokerage commissions to a broker providing it with research services, as defined in item 6, above, including First Union Securities, Inc., an affiliate of the Fund's investment advisor. Pursuant to Section 28(e) of the Securities Exchange Act of 1934, this practice is permitted if the commission is reasonable in relation to the brokerage and research services provided. Research services provided by a broker to the investment advisor do not replace, but supplement, the services the investment advisor is required to deliver to the Fund. It is impracticable for the investment advisor to allocate the cost, value and specific application of such research services among its clients because research services intended for one client may indirectly benefit another. When selecting a broker for portfolio trades, the investment advisor may also consider the amount of Fund shares a broker has sold, subject to the other requirements described above. First Union Securities, Inc., an affiliate of the Fund's investment advisor and a member of the New York and American Stock Exchanges, may, effect portfolio transactions on those exchanges for the Fund. Wachovia Securities, 2-33 Inc., is a wholly owned subsidiary of Wachovia Corporation, the Fund's investment advisor's parent. Simultaneous Transactions The investment advisor makes investment decisions for the Fund independently of decisions made for its other clients. When a security is suitable for the investment objective of more than one client, it may be prudent for the investment advisor to engage in a simultaneous transaction, that is, buy or sell the same security for more than one client. The investment advisor strives for an equitable result in such transactions by using an allocation formula. The high volume involved in some simultaneous transactions can result in greater value to the Fund, but the ideal price or trading volume may not always be achieved for the Fund. ORGANIZATION The following is qualified in its entirety by reference to the Trust's Declaration of Trust. Description of Shares The Declaration of Trust authorizes the issuance of an unlimited number of shares of beneficial interest of series and classes of shares. Each share of the Fund represents an equal proportionate interest with each other share of that series and/or class. Upon liquidation, shares are entitled to a pro rata share of the Trust based on the relative net assets of each series and/or class. Shareholders have no preemptive or conversion rights. Shares are redeemable and transferable. Voting Rights Under the terms of the Declaration of Trust, the Trust is not required to hold annual meetings. At meetings called for the initial election of Trustees or to consider other matters, each share is entitled to one vote for each dollar of "NAV" applicable to such share. Shares generally vote together as one class on all matters. Classes of shares of the Fund have equal voting rights. No amendment may be made to the Declaration of Trust that adversely affects any class of shares without the approval of a majority of the votes applicable to the shares of that class. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the votes applicable to shares voting for the election of Trustees can elect 100% of the Trustees to be elected at a meeting and, in such event, the holders of the remaining shares voting will not be able to elect any Trustees. After the initial meeting as described above, no further meetings of shareholders for the purpose of electing Trustees will be held, unless required by law (for such reasons as electing or removing Trustees, changing fundamental policies, and approving advisory agreements or 12b-1 plans), unless and until such time as less than a majority of the Trustees holding office have been elected by shareholders, at which time, the Trustees then in office will call a shareholders' meeting for the election of Trustees. Limitation of Trustees' Liability The Declaration of Trust provides that a Trustee will not be liable for errors of judgment or mistakes of fact or law, but nothing in the Declaration of Trust protects a Trustee against any liability to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his duties involved in the conduct of his office. Code of Ethics The Trust and its various investment advisors have each adopted a code of ethics pursuant to the requirements of Rule 17j-1 of the 1940 Act ("Code of Ethics"). Each of these Codes of Ethics permits Fund personnel to invest in securities for their own accounts and is on file with, and available from, the SEC. 2-34 INVESTMENT ADVISORY AGREEMENT On behalf of the Fund, the Trust has entered into an investment advisory agreement with the Fund's investment advisor (the "Advisory Agreement"). Under the Advisory Agreement, and subject to the supervision of the Trust's Board of Trustees, the investment advisor furnishes to the Fund (unless the Fund is Evergreen Masters Fund) investment advisory, management and administrative services, office facilities, and equipment in connection with its services for managing the investment and reinvestment of the Fund's assets. The investment advisor pays for all of the expenses incurred in connection with the provision of its services. If the Fund is Evergreen Masters Fund, the Advisory Agreement is similar to the above except that the investment advisor selects sub-advisors (hereinafter referred to as "Managers") for the Fund and monitors each Manager's investment program and results. The investment advisor has primary responsibility under the multi-manager strategy to oversee the Managers, including making recommendations to the Trust regarding the hiring, termination and replacement of Managers. The Fund pays for all charges and expenses, other than those specifically referred to as being borne by the investment advisor, including, but not limited to, (1) custodian charges and expenses; (2) bookkeeping and auditors' charges and expenses; (3) transfer agent charges and expenses; (4) fees and expenses of Independent Trustees; (5) brokerage commissions, brokers' fees and expenses; (6) issue and transfer taxes; (7) applicable costs and expenses under the Distribution Plan (as described above) (8) taxes and trust fees payable to governmental agencies; (9) the cost of share certificates; (10) fees and expenses of the registration and qualification of the Fund and its shares with the SEC or under state or other securities laws; (11) expenses of preparing, printing and mailing prospectuses, SAIs, notices, reports and proxy materials to shareholders of the Fund; (12) expenses of shareholders' and Trustees' meetings; (13) charges and expenses of legal counsel for the Fund and for the Independent Trustees on matters relating to the Fund; (14) charges and expenses of filing annual and other reports with the SEC and other authorities; and (15) all extraordinary charges and expenses of the Fund. For information on advisory fees paid by the Fund, see "Expenses" in Part 1 of this SAI. The Advisory Agreement continues in effect for two years from its effective date and, thereafter, from year to year only if approved at least annually by the Board of Trustees of the Trust or by a vote of a majority of the Fund's outstanding shares. In either case, the terms of the Advisory Agreement and continuance thereof must be approved by the vote of a majority of the Independent Trustees cast in person at a meeting called for the purpose of voting on such approval. The Advisory Agreement may be terminated, without penalty, on 60 days' written notice by the Trust's Board of Trustees or by a vote of a majority of outstanding shares. The Advisory Agreement will terminate automatically upon its "assignment" as that term is defined in the 1940 Act. In approving the renewal of the existing investment advisory agreement of each Fund, the Board of Trustees reviewed, on a Fund by Fund basis, the management fees and other expenses and compared the data to that of Funds of comparable size and investment objectives in the Lipper peer group. In addition, the Board of Trustees considered its discussions with management on the personnel and resources committed to management of the Fund and the nature and quality of the service provided to the Fund. In reviewing the overall profitability of the management fee to the Fund's investment advisor, the Board of Trustees also considered the fact that affiliates provide transfer agency and administrative services to the Fund for which they receive compensation. Managers (Evergreen Masters Fund only) Evergreen Masters Fund's investment program is based upon the investment advisor's multi-manager concept. The investment advisor allocates the Fund's portfolio assets on an equal basis among a number of investment management organizations - currently four in number - each of which employs a different investment style, and periodically rebalances the Fund's portfolio among itself and the Managers so as to maintain an approximate equal allocation of the portfolio among them throughout all market cycles. Each Manager provides these services under a Portfolio Management Agreement. Each Manager has 2-35 discretion, subject to oversight by the Trustees and the investment advisor, to purchase and sell portfolio assets consistent with the Fund's investment objectives, policies and restrictions and specific investment strategies developed by the investment advisor. EIMC is the Fund's investment advisor and manages a portion of the Fund's portfolio. Along with EIMC, the Fund's current Managers, MFS Institutional Advisors, Inc., OppenheimerFunds, Inc. and Putnam Investment Management, LLC also manage portions of the Fund's portfolio. The Trust and EIMC have received an order from the SEC that permits the investment advisor to employ a "manager of managers" strategy in connection with its management of the Fund. The exemptive order permits the investment advisor, subject to certain conditions, and without shareholder approval, to: (a) select new Managers who are unaffiliated with the investment advisor with the approval of the Trust's Board of Trustees; (b) change the material terms of the Portfolio Management Agreements with the Managers; and (c) continue the employment of a Manager after an event which would otherwise cause the automatic termination of a Portfolio Management Agreement. Shareholders would be notified of any Manager changes. Shareholders have the right to terminate arrangements with a Manager by vote of a majority of the outstanding shares of the Fund. The order also permits the Fund to disclose the Managers' fees only in the aggregate. Transactions Among Advisory Affiliates The Trust has adopted procedures pursuant to Rule 17a-7 of the 1940 Act ("Rule 17a-7 Procedures"). The Rule 17a-7 Procedures permit the Fund to buy or sell securities from another investment company for which a subsidiary of Wachovia Corporation (formerly First Union Corporation) is an investment advisor. The Rule 17a-7 Procedures also allow the Fund to buy or sell securities from other advisory clients for whom a subsidiary of Wachovia Corporation is an investment advisor. The Fund may engage in such transaction if it is equitable to each participant and consistent with each participant's investment objective. MANAGEMENT OF THE TRUST The Trust is supervised by a Board of Trustees that is responsible for representing the interest of the shareholders. The Trustees meet periodically throughout the year to oversee the Fund's activities, reviewing, among other things, the Fund's performance and its contractual arrangements with various service providers. Each Trustee is paid a fee for his or her services. See "Expenses-Trustee Compensation" in Part 1 of this SAI. The Trust has an Executive Committee which consists of the Chairman of the Board, Michael S. Scofield, K. Dun Gifford and Russell A. Salton, III, each of whom is an Independent Trustee. The Executive Committee recommends Trustees to fill vacancies, prepares the agenda for Board Meetings and acts on routine matters between scheduled Board meetings. For the fiscal year ended January 31, 2002, the Executive Committee held eleven committee meetings. The Executive Committee may solicit suggestions for persons to fill vacancies on the Boards of Trustees from such sources as they deem appropriate, including EIMC. Nominations by shareholders will not be considered.The Trustees will consider such nominations at the next regularly scheduled Board meeting. The Trust has an Audit Committee which consists of the Chairman of the Committee, K. Dun Gifford, Charles A. Austin, III, Gerald M. McDonnell, David M. Richardson and Richard Shima. The purpose of the Audit Committee is to evaluate financial management, meet with the auditors and deal with other matters of a financial nature that they deem appropriate. For the fiscal year ended January 31, 2002, the Audit Committee held four committee meetings. The Trust has a Performance Committee which consists of the Chairman of the Committee, Russell A. Salton, III, Thomas L. McVerry, Dr. Leroy Keith, William W. Pettit and Richard Wagoner. The Performance Committee reviews all activities involving investment-related issues and activities of EIMC and any sub-advisors to the Evergreen Funds, reviews the performance of the other 2-36 service providers to the Evergreen Funds, and assesses the performance of the Evergreen Funds. For the fiscal year ended January 31, 2002, the Performance Committee held four committee meetings. Set forth below are the Trustees of each of the nine Evergreen Trusts. Unless otherwise indicated, the address for each Trustee is 200 Berkeley Street, Boston, Massachusetts 02116. Independent Trustees: Name and Date of Birth/Position with Trust/Beginning Year of Term of Office*/ Principal Occupations for Last Five Years/Number of Portfolios Overseen in Evergreen Funds complex/Other Directorships held outside of Evergreen Funds complex Charles A. Austin III DOB: 10/23/34/Trustee/1991/ Investment Counselor, Anchor Capital Advisors, Inc. (investment advice); Former Director, Executive Vice President and Treasurer, State Street Research & Management Company (investment advice); Director, The Andover Companies (insurance); Trustee, Arthritis Foundation of New England; Director, The Francis Ouimet Society; Former Investment Counselor, Appleton Partners, Inc. (investment advice); Former Director, Health Development Corp. (fitness-wellness centers); Former Director, Mentor Income Fund, Inc.; Former Trustee, Mentor Funds and Cash Resource Trust./98/None K. Dun Gifford DOB: 10/23/38/Trustee/1974/ Chairman and President, Oldways Preservation and Exchange Trust (education); Trustee, Treasurer and Chairman of the Finance Committee, Cambridge College; Former Managing Partner, Roscommon Capital Corp.; Former Chairman of the Board, Director, and Executive Vice President, The London Harness Company (leather goods purveyor); Former Chairman, Gifford, Drescher & Associates (environmental consulting); Former Director, Mentor Income Fund, Inc.; Former Trustee, Mentor Funds and Cash Resource Trust./98/None Leroy Keith, Jr. DOB: 2/14/39/Trustee/1983/ Partner, Stonington Partners, Inc. (private investment firm); Trustee of Phoenix Series Fund, Phoenix Multi-Portfolio Fund, and The Phoenix Big Edge Series Fund; Former Chairman of the Board and Chief Executive Officer, Carson Products Company (manufacturing); Former Director of Phoenix Total Return Fund and Equifax, Inc. (worldwide information management); Former President, Morehouse College; Former Director, Mentor Income Fund, Inc.; Former Trustee, Mentor Funds and Cash Resource Trust, Phoenix Series Fund, Phoenix Multi-Portfolio Fund, and The Phoenix Big Edge Series Fund/98/Trustee 2-37 Gerald M. McDonnell DOB: 7/14/39/Trustee/1988/ Sales Manager, SMI-STEEL - South Carolina (steel producer); Former Sales and Marketing Management, Nucor Steel Company; Former Director, Mentor Income Fund, Inc.; Former Trustee, Mentor Funds and Cash Resource Trust./98/None Thomas L. McVerry DOB: 8/2/38/Trustee/1993/ Director of Carolina Cooperative Credit Union; Former Director, Mentor Income Fund, Inc.; Former Trustee, Mentor Funds and Cash Resource Trust./98/None William Walt Pettit DOB: 8/26/55/Trustee/1984/ Partner and Vice President in the law firm of Kellam & Pettit, P.A.; Former Director, Mentor Income Fund, Inc.; Former Trustee, Mentor Funds and Cash Resource Trust./98/None David M. Richardson DOB: 9/19/41/Trustee/1982/ President, Richardson, Runden & Company (new business development/consulting company); Managing Director, Kennedy Information, Inc. (executive recruitment information and research company); Trustee, 411 Technologies, LLP (communications); Director, J&M Cumming Paper Co. (paper merchandising); Columnist, Commerce and Industry Association of New Jersey; Former Vice Chairman, DHR International, Inc. (executive recruitment); Former Senior Vice President, Boyden International Inc. (executive recruitment); Former Director, Mentor Income Fund, Inc.; Former Trustee, Mentor Funds and Cash Resource Trust./98/None Russell A. Salton, III MD DOB: 6/2/47/Trustee/1984/ Medical Director, Healthcare Resource Associates, Inc.; Former Medical Director, U.S. Health Care/Aetna Health Services; Former Consultant, Managed Health Care; Former President, Primary Physician Care; Former Director, Mentor Income Fund, Inc.; Former Trustee, Mentor Funds and Cash Resource Trust./98/None Michael S. Scofield DOB: 2/20/43/Trustee/1984/ Attorney, Law Offices of Michael S. Scofield; Former Director, Mentor Income Fund, Inc.; Former Trustee, Mentor Funds and Cash Resource Trust./98/None Richard J. Shima DOB: 8/11/39/Trustee/1993/ Independent Consultant; Director, Trust Company of CT; Trustee, Saint Joseph College (CT); Director of Hartford Hospital, Old State House Association; Trustee, Greater Hartford YMCA; Former Chairman, Environmental Warranty, Inc. (insurance agency); Former Executive Consultant, Drake Beam Morin, Inc. (executive outplacement); Former Director of Enhance Financial Services, Inc.; Former Director of CTG Resources, Inc. (natural gas); Former Director Middlesex Mutual Assurance Company; Former Chairman, Board of Trustees, Hartford Graduate Center; Former Director, Mentor Income Fund, Inc.; Former Trustee, Mentor Funds and Cash Resource Trust./98/None 2-38 Interested Trustee: Richard K. Wagoner, CFA** DOB: 12/12/37/Trustee/1999/ Current Member and Former President, North Carolina Securities Traders Association; Member, Financial Analysts Society; Former Chief Investment Officer, Executive Vice President and Head of Capital Management Group, First Union National Bank; Former Consultant to the Boards of Trustees of the Evergreen Funds; Former Member, New York Stock Exchange; Former Trustee, Mentor Funds and Cash Resource Trust./98/None * Each Trustee serves until a successor is duly elected or qualified or until his death, resignation, retirement or removal from office. ** Mr. Wagoner is an "interested person" of the funds because of his ownership of shares in Wachovia Corporation (formerly First Union Corporation), the parent to the funds' investment advisor. Trustee Ownership of Evergreen Funds shares

* In addition to the above investment amounts, the Trustee has over $100,000 indirectly invested in certain of the Evergreen Funds through Deferred Compensation plans. Set forth below are the officers of each of the nine Evergreen Trusts. Name, Address and Date of Birth/Position with Trust/Principal Occupation for Last Five Years William M. Ennis/301 S. Tryon, 12th Floor Charlotte, NC 28288/DOB: 6/26/60/ President/ President and Chief Executive Officer, Evergreen Investment Company and Chief Operating Officer, Capital Management Group, Wachovia Bank, N.A.. Carol Kosel/200 Berkeley Street Boston, MA 02116/DOB: 12/25/63/Treasurer/ Senior Vice President, Evergreen Investment Services, Inc. and Treasurer, Vestaur Securities, Inc.; former Senior Manager, KPMG LLP. Michael H. Koonce/200 Berkeley Street Boston, MA 02116/DOB: 4/20/60/Secretary/ Senior Vice President and General Counsel, Evergreen Investment Services, Inc.; Senior Vice President and Assistant General Counsel, Wachovia Corporation; former Senior Vice President and General Counsel, Colonial Management Associates, Inc.; former Vice President and Counsel, Colonial Management Associates, Inc. Nimish S. Bhatt/BISYS 3435 Stelzer Road Columbus, OH 43219-8001/DOB: 6/6/63/Vice President and Assistant Treasurer/ Vice President, Tax, BISYS Fund Services; former Assistant Vice President, EAMC/First Union National Bank; former Senior Tax Consulting/Acting Manager, Investment Companies Group, PricewaterhouseCoopers LLP, New York. 2-40 Bryan Haft/BISYS 3435 Stelzer Road Columbus, OH 43219-8001/DOB: 1/23/65/Vice President/ Team Leader, Fund Administration, BISYS Fund Services. CORPORATE AND MUNICIPAL BOND RATINGS The Fund relies on ratings provided by independent rating services to help determine the credit quality of bonds and other obligations the Fund intends to purchase or already owns. A rating is an opinion of an issuer's ability to pay interest and/or principal when due. Ratings reflect an issuer's overall financial strength and whether it can meet its financial commitments under various economic conditions. If a security held by the Fund loses its rating or has its rating reduced after the Fund has purchased it, the Fund is not required to sell or otherwise dispose of the security, but may consider doing so. The principal rating services, commonly used by the Fund and investors generally, are S&P and Moody's. The Fund may also rely on ratings provided by Fitch. Rating systems are similar among the different services. As an example, the chart below compares basic ratings for long-term bonds. The "Credit Quality" terms in the chart are for quick reference only. Following the chart are the specific definitions each service provides for its ratings. COMPARISON OF LONG-TERM BOND RATINGS MOODY'S S&P FITCH Credit Quality Aaa AAA AAA Excellent Quality (lowest risk) Aa AA AA Almost Excellent Quality (very low risk) A A A Good Quality (low risk) Baa BBB BBB Satisfactory Quality (some risk) Ba BB BB Questionable Quality (definite risk) B B B Low Quality (high risk) Caa/Ca/C CCC/CC/C CCC/CC/C In or Near Default D DDD/DD/D In Default CORPORATE BONDS LONG-TERM RATINGS Moody's Corporate Long-Term Bond Ratings Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. 2-41 Aa Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities. A Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future. Baa Bonds which are rated Baa are considered as medium-grade obligations, (i.e. they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa to Caa. The modifier 1 indicates that the company ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range raking and the modifier 3 indicates that the company ranks in the lower end of its generic rating category. S&P Corporate Long-Term Bond Ratings AAA An obligation rated AAA has the highest rating assigned by S&P. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA An obligation rated AA differs from the highest-rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. 2-42 BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. BB An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions, which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet it financial commitment on the obligation. CCC An obligation rated CCC is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. CC An obligation rated CC is currently highly vulnerable to nonpayment. C The C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments on this obligation are being continued. D The D rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to D either: o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or o Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a D rating. Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. Fitch Corporate Long-Term Bond Ratings Investment Grade AAA Highest credit quality. AAA ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. AA Very high credit quality. AA ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A High credit quality. A ratings denote a lower expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. 2-43 BBB Good credit quality. BBB ratings indicate that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category. Speculative Grade BB Speculative. BB ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade. B Highly speculative. B ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment. CCC, CC, C High default risk. Default is a real possibility. Capacity for meeting financial commitment is solely reliant upon sustained, favorable business or economic developments. A CC rating indicates that default of some kind appears probable. C ratings signal imminent default. DDD, DD, D Default. Securities are not meeting current obligations and are extremely speculative. DDD designates the highest potential for recovery of amounts outstanding on any securities involved. For U.S. corporates, for example, DD indicates expected recovery of 50%-90% of such outstandings, and D the lowest recovery potential, i.e. below 50%. + or - may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA rating category or to categories below CCC. CORPORATE SHORT-TERM RATINGS Moody's Corporate Short-Term Issuer Ratings Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics. - -- Leading market positions in well-established industries. - -- High rates of return on funds employed. - -- Conservative capitalization structure with moderate reliance on debt and ample asset protection. - -- Broad margins in earnings coverage of fixed financial changes and high internal cash generation. - -- Well-established access to a range of financial markets and assured sources of alternate liquidity. Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection 2-44 measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Not Prime Issuers rated Not Prime do not fall within any of the Prime rating categories. S&P Corporate Short-Term Obligation Ratings A-1 A short-term obligation rated A-1 is rated in the highest category by S&P. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong. A-2 A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory. A-3 A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. B A short-term obligation rated B is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. C A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. D The D rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to D either: o On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or o Upon voluntary bankruptcy filing or similar action, An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a D rating. Fitch Corporate Short-Term Obligation Ratings F1 Highest credit quality. Indicates the strongest capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature. F2 Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings. F3 Fair credit quality. The capacity for timely payment of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade. B Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions. C High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment. 2-45 D Default. Denotes actual or imminent payment default. MUNICIPAL BONDS LONG-TERM RATINGS Moody's Municipal Long-Term Bond Ratings Aaa Bonds rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa Bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities. A Bonds rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future. Baa Bonds rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba Bonds rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B Bonds rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa Bonds rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca Bonds rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C Bonds rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating classification from Aa to B. The modifier 1 indicates that the company ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range raking and the modifier 3 indicates that the company ranks in the lower end of its generic rating category. 2-46 S&P Municipal Long-Term Bond Ratings AAA An obligation rated AAA has the highest rating assigned by S&P. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA An obligation rated AA differs from the highest-rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. BB An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions, which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet it financial commitment on the obligation. CCC An obligation rated CCC is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. CC An obligation rated CC is currently highly vulnerable to nonpayment. C The C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments on this obligation are being continued. D An obligation rated D is in payment default. The D rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. Fitch Municipal Long-Term Bond Ratings Investment Grade AAA Highest credit quality. AAA ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for timely 2-47 payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. AA Very high credit quality. AA ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A High credit quality. A ratings denote a lower expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. BBB Good credit quality. BBB ratings indicate that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category. Speculative Grade BB Speculative. BB ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade. B Highly speculative. B ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment. CCC, CC, C High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. A CC rating indicates that default of some kind appears probable. C ratings signal imminent default. DDD, DD, D Default. Securities are not meeting current obligations and are extremely speculative. DDD designates the highest potential for recovery of amounts outstanding on any securities involved. DD designates lower recovery potential and D the lowest. + or - may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA rating category or to categories below CCC. SHORT-TERM MUNICIPAL RATINGS Moody's Municipal Short-Term Issuer Ratings Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidence by many of the following characteristics. - -- Leading market positions in well-established industries. - -- High rates of return on funds employed. - -- Conservative capitalization structure with moderate reliance on debt and ample asset protection. - -- Broad margins in earnings coverage of fixed financial changes and high internal cash generation. - -- Well-established access to a range of financial markets and assured sources of alternate liquidity. Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be 2-48 evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Not Prime Issuers rated Not Prime do not fall within any of the Prime rating categories. Moody's Municipal Short-Term Loan Ratings MIG 1 This designation denotes best quality. There is strong protection by established cash flows, superior liquidity support, or demonstrated broad-based access to the market for refinancing. MIG 2 This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group. MIG 3 This designation denotes favorable quality. Liquidity and cash-flow protection may be narrow and market access for refinancing is likely to be less well established. SG This designation denotes speculative quality. Debt instruments in this category may lack margins of protection. S&P Commercial Paper Ratings A-1 This designation indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3 Issues carrying this designation have an adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues rated B are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with a doubtful capacity for payment. D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes such payments will be made during such grace period. S&P Municipal Short-Term Obligation Ratings SP-1 Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. 2-49 SP-3 Speculative capacity to pay principal and interest. Fitch Municipal Short-Term Obligation Ratings F1 Highest credit quality. Indicates the strongest capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature. F2 Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings. F3 Fair credit quality. The capacity for timely payment of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade. B Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions. C High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment. D Default. Denotes actual or imminent payment default. ADDITIONAL INFORMATION Except as otherwise stated in its prospectus or required by law, the Fund reserves the right to change the terms of the offer stated in its prospectus without shareholder approval, including the right to impose or change fees for services provided. No dealer, salesman or other person is authorized to give any information or to make any representation not contained in the Fund's prospectus, SAI or in supplemental sales literature issued by the Fund or EDI, and no person is entitled to rely on any information or representation not contained therein. The Fund's prospectus and SAI omit certain information contained in the Trust's registration statement, which you may obtain for a fee from the SEC in Washington, D.C. 2-50 EVERGREEN MONEY MARKET TRUST PART C OTHER INFORMATION Item 23 Exhibits Unless otherwise indicated, each of the Exhibits listed below is filed herewith.

Item 24. Persons Controlled by or Under Common Control with Registrant. None Item 25. Indemnification. Registrant has obtained from a major insurance carrier a trustees and officers liability policy covering certain types of errors and ommissions. Provisions for the indemnification of the Registrant's Trustees and officers are also contained in the Registrant's Declaration of Trust. Provisions for the indemnification of the Registrant's Investment Advisors is contained in the Evergreen Investment Management Company, LLC (EIMC) Investment Advisory and Management Agreement between EIMC and the Registrant. Provisions for the indemnification of Evergreen Distributor, Inc., the Registrant's principal underwriter, are contained in the Principal Underwriting Agreement between Evergreen Distributor, Inc. and the Registrant. Provisions for the indemnification of Evergreen Service Company, LLC, the Registrant's transfer agent, are contained in the Master Transfer and Recordkeeping Agreement between Evergreen Service Company, LLC and the Registrant. Provisions for the indemnification of State Street Bank and Trust Co., the Registrant's custodian, are contained in the Custodian Agreement between State Street Bank and Trust Co. and the Registrant. Item 26. Business or Other Connections of Investment Advisor. The information required by this item with respect to Evergreen Investment Management Company, LLC is incorporated by reference to the Form ADV (File No. 801-8327) of Evergreen Investment Management Company, LLC. Item 27. Principal Underwriters. Evergreen Distributor, Inc., acts as principal underwriter for each registered investment company or series thereof that is a part of the Evergreen "fund complex" as such term is defined in Item 22(a) of Schedule 14A under the Securities Exchange Act of 1934. The Directors and principal executive officers of Evergreen Distributor, Inc. are: Lynn C. Mangum Director, Chairman and Chief Executive Officer Dennis Sheehan Director, Chief Financial Officer William J. Tomko President Kevin J. Dell Vice President, General Counsel and Secretary Messrs. Tomko, Sheehan, Dell and Mangum are located at the following address: Evergreen Distributor, Inc., 90 Park Avenue, New York, New York 10019. Item 28. Location of Accounts and Records. All accounts and records required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules 31a-1 through 31a-3 promulgated thereunder are maintained at one of the following locations: Evergreen Investment Services, Inc., Evergreen Service Company, LLC and Evergreen Investment Management Company, LLC, all located at 200 Berkeley Street, Boston, Massachusetts 02110 Wachovia Bank, One First Union Center, 301 S. College Street, Charlotte, North Carolina 28288 Iron Mountain, 3431 Sharp Slot Road, Swansea, Massachusetts 02777 State Street Bank and Trust Company, 2 Heritage Drive, North Quincy, Massachusetts 02171 Item 29. Management Services. Not Applicable Item 30. Undertakings. The Registrant hereby undertakes to furnish each person to whom a prospectus is delivered with a copy of the Registrant's latest annual report to shareholders, upon request and without charge. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Boston, and Commonwealth of Massachusetts, on the 31st day of May, 2002. EVERGREEN MONEY MARKET TRUST By: /s/ Michael H. Koonce ----------------------------- Name: Michael H. Koonce Title: Secretary Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated on the 31st day of May, 2002.

*By: /s/ Maureen E. Towle - ------------------------------- Maureen E. Towle Attorney-in-Fact *Maureen E. Towle, 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. INDEX TO EXHIBITS Exhibit Number Exhibit - ------- ------------------------------- (h)(1) Administration Agreement between Evergreen Investment Services, Inc. and the Registrant (h)(2) Transfer Agent Agreement between the Registrant and Evergreen Service Company, LLC (j) Consent of KPMG, LLP (o) Multiple Class Plan (p) Code of Ethics May 31, 2002 EDGAR Operations Branch Division of Investment Management Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Evergreen Money Market Trust (the "Trust") Post-Effective Amendment No. 18 to Registration Statement No. 333-42181/811-08555 Ladies and Gentlemen: On behalf of the Evergreen Money Market Trust, a Delaware business trust (the "Registrant"), I submit for filing with this letter pursuant to the Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company Act of 1940, as amended, Post-Effective Amendment No. 18 to the Registration Statement on Form N-1A (the "Amendment") of the Registrant. This Amendment is being filed pursuant to Rule 485(b) under the 1933 Act for the purpose of (i) bringing the Funds' financial statements up to date pursuant to Section 10(a)(3) of the 1933 Act and (ii) to make such other non-material changes as the Trust may deem appropriate. To my knowledge, the Amendment does not contain disclosures that would render it ineligible to become effective pursuant to Rule 485(b). If you have any questions or would like further information, please call me at (617) 210-3682. Sincerely yours, /s/ Maureen E. Towle Maureen E. Towle Enclosure EX-1 3 emmtabci.htm EVERGREEN MONEY MARKET TRUST - ABCI PROSPECTUS

Prospectus, June 1, 2002

Evergreen
Money Market Funds

Evergreen California Municipal Money Market Fund
Evergreen Florida Municipal Money Market Fund
Evergreen Money Market Fund
Evergreen Municipal Money Market Fund
Evergreen New Jersey Municipal Money Market Fund
Evergreen New York Municipal Money Market Fund
Evergreen Pennsylvania Municipal Money Market Fund
Evergreen Treasury Money Market Fund
Evergreen U.S. Government Money Market Fund

Class A
Class B
Class C
Class I

The Securities and Exchange Commission has not determined that the information in this prospectus is accurate or complete, nor has it approved or disapproved these securities. Anyone who tells you otherwise is committing a crime.

FUND RISK/RETURN SUMMARIES:

Overview of Fund Risks
Evergreen California Municipal Money Market Fund
Evergreen Florida Municipal Money Market Fund
Evergreen Money Market Fund
Evergreen Municipal Money Market Fund
Evergreen New Jersey Municipal Money Market Fund
Evergreen New York Municipal Money Market Fund
Evergreen Pennsylvania Municipal Money Market Fund
Evergreen Treasury Money Market Fund
Evergreen U.S. Government Money Market Fund

GENERAL INFORMATION:

The Funds' Investment Advisor
Calculating the Share Price
How to Choose an Evergreen Fund
How to Choose the Share Class That Best Suits You
How to Buy Shares
How to Redeem Shares
Other Services
The Tax Consequences of Investing in the Funds
Fees and Expenses of the Funds
Financial Highlights
Other Fund Practices

In general,

the Funds included in this prospectus provide investors with a selection of investment alternatives which seek a high rate of current income consistent with stability of principal and liquidity. Evergreen Municipal Money Market Fund also seeks current income which is exempt from regular federal income tax and Evergreen California Municipal Money Market Fund, Evergreen Florida Municipal Money Market Fund, Evergreen New Jersey Municipal Money Market Fund, Evergreen New York Municipal Money Market Fund and Pennsylvania Municipal Money Market Fund also seek current income which is exempt from regular federal income tax and applicable state taxes.

Fund Summaries Key

Each Fund's summary is organized around the following basic topics and questions:

INVESTMENT GOAL

What is the Fund's financial objective? You can find clarification on how the Fund seeks to achieve its objective by looking at the Fund's strategy and investment policies. The Fund's Board of Trustees can change the investment objective without a shareholder vote.

INVESTMENT STRATEGY

How does the Fund go about trying to meet its goals? What types of investments does it contain? What style of investing and investment philosophy does it follow? Does it have limits on the amount invested in any particular type of security?

RISK FACTORS

What are the specific risks for an investor in the Fund?

PERFORMANCE

How well has the Fund performed in the past year? The past five years? The past ten years?

EXPENSES

How much does it cost to invest in the Fund?

Overview of Fund Risks

Money Market Funds

typically rely on a combination of the following strategies:

maintaining $1.00 per share net asset value;
investing in high quality, short-term money market instruments, including U.S. government securities;
investing in compliance with industry-standard requirements for money market funds for the quality, maturity and diversification of investments; and
selling a portfolio investment: i) when the issuer's investment fundamentals begin to deteriorate; ii) to take advantage of more attractive yield opportunities; iii) when the investment no longer appears to meet the Fund's investment objective; iv) when the Fund must meet redemptions; or v) for other investment reasons which the portfolio managers deem necessary.

may be appropriate for investors who:

are seeking a conservative investment which invests in relatively safe securities;
are seeking a fund for short-term investment; and
are seeking liquidity.

Following this overview, you will find information on each Fund's specific investment strategies and risks.

Risk Factors For All Mutual Funds

Please remember that an investment in a mutual fund is:

not guaranteed to achieve its investment goal
not a deposit with a bank
not insured, endorsed or guaranteed by the FDIC or any government agency
subject to investment risks, including possible loss of your original investment

Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds.

The following are some of the most important factors that may affect the value of your investment. Other factors may be described in the discussion following this overview:

Interest Rate Risk

When interest rates go up, the value of debt securities tends to fall. Since the Fund invests a significant portion of its portfolio in debt securities, if interest rates rise, then the value of your investment may decline. If interest rates go down, interest earned by the Fund on its debt investments may also decline, which could cause the Fund to reduce the dividends it pays. The longer the term of a debt security held by the Fund, the more the Fund is subject to interest rate risk.

Credit Risk

The value of a debt security is directly affected by the issuer's ability to repay principal and pay interest on time. Since the Fund invests in debt securities, the value of your investment may decline if an issuer fails to pay an obligation on a timely basis. The Fund may also be subject to credit risk to the extent it engages in transactions, such as repurchase agreements, which involve a promise by a third party to honor an obligation to the Fund. Such third party may be unwilling or unable to honor its financial obligations.

Concentration Risk

An investment in a fund that concentrates its investments in a single state entails greater risk than an investment in a fund that invests its assets in numerous states. The Fund may be vulnerable to any development in its named state’s economy that may weaken or jeopardize the ability of the state’s municipal security issuers to pay interest and principal on their debt obligations.

Non-Diversification Risk

An investment in a fund that is non-diversified entails greater risk than an investment in a diversified fund. When a fund is non-diversified, it may invest a greater percentage of assets in a single issuer than may be invested by a diversified fund. A higher percentage of investments among fewer issuers may result in greater fluctuation in the total market value of the Fund’s portfolio than in a fund which invests in numerous issuers.

California Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and California State Income Taxes

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Classes of Shares Offered in this Prospectus:

Class A

Class I

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbols:

ECMXX (Class A)

ECUXX (Class I)

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks as high a level of current income exempt from regular federal income tax and, to the extent possible, from California personal income tax, as is believed to be consistent with preserving capital and providing liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

The Fund invests at least 80% of its assets in municipal money market securities issued by the State of California or its political subdivisions, agencies, instrumentalities, or other governmental units (such as U.S. territories). These municipal money market securities include fixed, variable or floating rate general obligation and revenue bonds; tax, bond and revenue anticipation notes; and commercial paper obligations. Under normal circumstances, at least 80% of the Fund’s annual interest income will be exempt from federal income tax other than the federal alternative minimum tax and, to the extent possible, from California personal income tax. The Fund also invests in tender option bonds, which are demand obligations that bear interest at the prevailing short-term, tax-exempt rate.

The Fund will comply with the diversification requirements prescribed by Rule 2a-7. However, the Fund is non-diversified and therefore may invest a significant percentage of its assets in obligations of a single issuer. In determining which securities to purchase for the portfolio, the portfolio managers focus on the supply and demand of the security in the market place as well as the current interest rate environment.

The Fund may temporarily invest up to 20% of its assets in high quality, short-term taxable securities under one or more of the following circumstances: (a) pending investment of proceeds from the sale of Fund shares or portfolio securities; (b) pending settlement of purchases of portfolio securities; and (c) to maintain liquidity for the purpose of meeting anticipated redemptions. However, the Fund may temporarily invest up to 100% of its assets in taxable securities for defensive purposes, which may result in the Fund not achieving its investment objective.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

The performance of the Fund is influenced by the political, economic and statutory environment within the State of California. The Fund invests in obligations of California issuers, which results in the Fund’s performance being subject to risks associated with the most current conditions within the state. Some of these conditions may include continuing uncertainties regarding the state’s power markets, slow economic growth following a mild recession in 2001 and a cyclical downturn in the high technology sector. State revenues have been severely and adversely affected by the economic slowdown and, in particular, stock market declines since mid-2000, which have dramatically reduced income from capital gains realizations and stock option activity. The state faces an estimated $23.6 billion budget gap for the 2001-02 and 2002-03 fiscal years. The state also faces a cash flow shortfall which will require additional short-term borrowing in June, 2002 in order to assure payment of all obligation s coming due in June, July and August, 2002. These and other factors may cause rating agencies to downgrade the credit ratings on certain issues. For more information on the factors that could affect the ability of California municipal security issuers to pay interest and principal on securities acquired by the Fund, see “Additional Information Concerning California” in the Statement of Additional Information.

Distributions of capital gains and other taxable income will be subject to tax under the California personal income tax. Corporations subject to the California corporation franchise tax will generally be subject to tax on all distributions of income from the Fund.

Because the taxable money market is a broader and more liquid market and has a greater number of investors, issuers and market makers than the market for short-term, tax-exempt municipal securities, the liquidity of the Fund may not be equal to that of a money market fund which invests exclusively in short-term taxable money market instruments. The more limited marketability of short-term, tax-exempt municipal securities may make it difficult in certain circumstances to dispose of large investments advantageously.

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

Since the Fund commenced operations on 9/24/2001, total return information is not available for a full calendar year. Financial information for the Fund from 9/24/2001 through 1/31/2002 is available in the "Financial Highlights."

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ¹
Class A	0.45 %	0.30 %	0.33 %	1.08 %
Class I	0.45 %	0.00 %	0.33 %	0.78 %

1. From time to time, the Fund's investment advisor may, at its discretion, reduce or waive its fees or reimburse the Fund for certain of its expenses in order to reduce expense ratios. The Fund's investment advisor may cease these waivers or reimbursements at any time. The Annual Fund Operating Expenses do not reflect fee waivers. Including fee waivers, Total Fund Operating Expenses were 0.88% for Class A and 0.58% for Class I.

The table below shows the total expenses you would pay on a $10,000 investment over one-, three-, five- and ten-year periods. The example is intended to help you compare the cost of investing in this Fund versus other mutual funds and is for illustration purposes only. The example assumes a 5% average annual return and reinvestment of all dividends and distributions. Your actual costs may be higher or lower.

Example of Fund Expenses

After:	Class A	Class I
1 year	$ 110	$ 80
3 years	$ 343	$ 249
5 years	$ 595	$ 433
10 years	$ 1,317	$ 966

Florida Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and Florida State Taxes

Preservation of Capital

Liquidity

Stability of Principal

Principal Investment:

Municipal Money Market Securities

Classes of Shares Offered in this Prospectus:

Class A

Class I

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbols:

EFIXX (Class A)

EFMXX (Class I)

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to provide Florida residents an investment that is, to the extent possible, exempt from the Florida intangible personal property tax and to seek as high a level of current income exempt from regular federal income taxes, as is believed to be consistent with the preservation of capital, maintenance of liquidity and stability of principal.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

The Fund invests at least 80% of its assets in high quality, short-term debt obligations issued by the State of Florida, and possessions of the U.S. and their political subdivisions, which are exempt from federal income tax other than the alternative minimum tax and exempt from the Florida intangible personal property tax, and are determined to present minimal credit risk. These municipal money market securities include fixed, variable or floating rate general obligation and revenue bonds; tax, bond and revenue anticipation notes; and commercial paper obligations. The Fund also invests in tender option bonds, which are demand obligations that bear interest at the prevailing short-term, tax-exempt rate.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

The performance of the Fund is influenced by the political, economic and statutory environment within the State of Florida. The Fund invests in obligations of Florida issuers, which results in the Fund’s performance being subject to risks associated with the most current conditions within the state. Some of these conditions include state budgetary problems associated with the state’s growing population, its reliance on tourism, and the impact which both of these factors may have on the state’s tax base and revenues. These and other factors may cause rating agencies to downgrade the credit ratings on certain issues. For more information on the factors that could affect the ability of Florida municipal security issuers to pay interest and principal on securities acquired by the Fund, see “Additional Information Concerning Florida” in the Statement of Additional Information.

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

The table below shows the percentage gain or loss for the Class A shares of the Fund in each calendar year since the Class A shares' inception on 10/26/1998. It should give you a general idea of the risks of investing in the Fund by showing how the Fund’s return has varied from year-to-year. This table includes the effects of Fund expenses.

Year-by-Year Total Return for Class A Shares (%)

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
							2.66	3.49	2.21

Best Quarter:	4th Quarter 2000	+ 0.93 %
Worst Quarter:	4th Quarter 2001	+ 0.31 %
Year-to-date total return through 3/31/2002 is +0.19%.

The next table lists the Fund’s average annual total return by class over the past year and since inception. This table is intended to provide you with some indication of the risks of investing in the Fund.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 10/26/1998
Class A	10/26/1998	2.21 %	N/A	N/A	2.78 %
Class I	12/29/1998	2.52 %	N/A	N/A	3.07 %

1. Historical performance shown for Class I prior to its inception is based on the performance of Class A, the original class offered. These historical returns for Class I have not been adjusted to reflect the effect of the Class' 12b-1 fees. These fees are 0.30% for Class A. Class I does not pay 12b-1 fees. If these fees had been reflected, returns for Class I would have been higher.

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class A	0.41 %	0.30 %	0.14 %	0.85 %
Class I	0.41 %	0.00 %	0.14 %	0.55 %

Example of Fund Expenses

After:	Class A	Class I
1 year	$ 87	$ 56
3 years	$ 271	$ 176
5 years	$ 471	$ 307
10 years	$ 1,049	$ 689

Money Market Fund

FUND FACTS:

Goals:

High Current Income

Preservation of Capital

Liquidity

Principal Investments:

Money Market Instruments

Short-term Corporate Debt Securities

Classes of Shares Offered in this Prospectus:

Class A

Class B

Class C

Class I

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbols:

EMAXX (Class A)

EMBXX (Class B)

EMCXX (Class C)

EGMXX (Class I)

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income as is consistent with preserving capital and providing liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

The Fund invests principally in money market securities including short-term corporate debt obligations (such as fixed, variable or floating rate securities), certificates of deposit and bankers' acceptances, commercial paper and repurchase agreements determined to present minimal credit risk.

In addition, the Fund may invest in U.S. Treasury obligations and short-term securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, including the Inter-american Development Bank and the International Bank for Reconstruction and Development. The Fund may invest up to 30% of its assets in bank certificates of deposit and bankers' acceptances payable in U.S. dollars and issued by foreign banks (including U.S. branches of foreign banks) or by foreign branches of U.S. banks. The Fund may also invest in bank obligations.

The portfolio managers focus primarily on the interest rate environment in determining which securities to purchase for the portfolio. Generally, in a rising rate environment, the Fund will invest in securities of shorter maturities. If interest rates are high, the Fund will generally invest in securities with longer maturities; however, the Fund will not acquire any security with a remaining maturity of greater than 397 days.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

In addition to interest rate risk and credit risk, the Fund is subject to risks associated with obligations of the Inter-american Development Bank and the International Bank for Reconstruction and Development. Because these banks are supported only by appropriated but unpaid commitments of member countries, there is no assurance that the commitments will be undertaken in the future.

If the Fund invests 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, it could be exposed to certain unique risks of foreign investing. For example, political turmoil and economic instability in the countries in which the Fund invests could adversely affect the dividend yield, total return earned on and the value of your investment. Certain foreign countries have less developed and less regulated banking systems and accounting systems than the U.S.

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

The table below shows the percentage gain or loss for the Class I shares of the Fund in each of the last ten calendar years. It should give you a general idea of the risks of investing in the Fund by showing how the Fund’s return has varied from year-to-year. This table includes the effects of Fund expenses.

Year-by-Year Total Return for Class I Shares (%)

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
3.88	3.22	3.98	5.66	5.22	5.31	5.26	4.93	6.11	3.89

Best Quarter:	4th Quarter 2000	+ 1.57 %
Worst Quarter:	4th Quarter 2001	+ 0.53 %
Year-to-date total return through 3/31/2002 is +0.40%.

The next table lists the Fund’s average annual total return by class over the past one, five and ten years and since inception. This table is intended to provide you with some indication of the risks of investing in the Fund.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 11/2/1987
Class A	1/4/1995	3.58 %	4.79 %	4.53 %	5.50 %
Class B	1/26/1995	- 2.14 %	3.71 %	4.02 %	5.13 %
Class C	8/1/1997	0.86 %	4.18 %	4.28 %	5.33 %
Class I	11/2/1987	3.89 %	5.10 %	4.74 %	5.65 %

1. Historical performance shown for Classes A, B and C prior to their inception is based on the performance of Class I, the original class offered. These historical returns for Classes A, B and C have not been adjusted to reflect the effect of each Class' 12b-1 fees. These fees are 0.30% for Class A and 1.00% for Classes B and C. Class I does not pay 12b-1 fees. If these fees had been reflected, returns for Classes A, B and C would have been lower.

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

Shareholder Fees (fees paid directly from your investment)

Shareholder Transaction Expenses	Class A	Class B	Class C	Class I
Maximum deferred sales charge (as a % of either the redemption amount or initial investment, whichever is lower)	None	5.00 %	2.00 %	None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class A	0.39 %	0.30 %	0.17 %	0.86 %²
Class B	0.39 %	1.00 %	0.17 %	1.56 %
Class C	0.39 %	1.00 %	0.17 %	1.56 %
Class I	0.39 %	0.00 %	0.17 %	0.56 %

2. From time to time, 12b-1 fees for Class A may be voluntarily reduced or waived. The 12b-1 fees and Total Fund Operating Expenses do not reflect the 12b-1 fee waivers. Including fee waivers, the 12b-1 fees were 0.29% and Total Fund Operating Expenses were 0.85% for Class A.

Example of Fund Expenses

	Assuming Redemption At End of Period				Assuming No Redemption
After:	Class A	Class B	Class C	Class I	Class B	Class C
1 year	$ 88	$ 659	$ 359	$ 57	$ 159	$ 159
3 years	$ 274	$ 793	$ 493	$ 179	$ 493	$ 493
5 years	$ 477	$ 1,050	$ 850	$ 313	$ 850	$ 850
10 years	$ 1,061	$ 1,580	$ 1,856	$ 701	$ 1,580	$ 1,856

Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal Income Tax

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Classes of Shares Offered in this Prospectus:

Class A

Class I

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbols:

EXAXX (Class A)

EVTXX (Class I)

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income exempt from regular federal income tax, as is consistent with preserving capital and providing liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

The Fund invests at least 80% of its assets in municipal securities (including fixed, variable or floating rate general obligation and revenue bonds; tax, bond and revenue anticipation notes; and commercial paper obligations), the interest from which is exempt from federal income tax, other than the alternative minimum tax.

The Fund invests in municipal money market securities determined to present minimal credit risk and issued by any U.S. state, the District of Columbia and their political subdivisions. The Fund also invests in tender option bonds, which are demand obligations that bear interest at the prevailing short-term, tax-exempt rate. In determining which securities to purchase for the portfolio, the portfolio managers focus on the supply and demand of the security in the market place as well as the current interest rate environment.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class I Shares (%)

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
3.16	2.48	2.76	3.76	3.39	3.49	3.40	3.18	4.01	2.67

Best Quarter:	4th Quarter 2000	+ 1.05 %
Worst Quarter:	4th Quarter 2001	+ 0.40 %
Year-to-date total return through 3/31/2002 is +0.28%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 11/2/1988
Class A	1/5/1995	2.37 %	3.04 %	3.02 %	3.70 %
Class I	11/2/1988	2.67 %	3.35 %	3.23 %	3.87 %

1. Historical performance shown for Class A prior to its inception is based on the performance of Class I, the original class offered. These historical returns for Class A have not been adjusted to reflect the effect of the Class' 12b-1 fees. These fees are 0.30% for Class A. Class I does not pay 12b-1 fees. If these fees had been reflected, returns for Class A would have been lower.

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class A	0.42 %	0.30 %	0.14 %	0.86 %
Class I	0.42 %	0.00 %	0.14 %	0.56 %

Example of Fund Expenses

After:	Class A	Class I
1 year	$ 88	$ 57
3 years	$ 274	$ 179
5 years	$ 477	$ 313
10 years	$ 1,061	$ 701

New Jersey Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and New Jersey State Income Taxes

Preservation of Capital

Liquidity

Stability of Principal

Principal Investment:

Municipal Money Market Securities

Classes of Shares Offered in this Prospectus:

Class A

Class I

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbols:

ENJXX (Class A)

EJMXX (Class I)

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income exempt from regular federal income tax and, to the extent possible, from New Jersey gross income tax, as is believed to be consistent with the preservation of capital, maintenance of liquidity and stability of principal.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

The Fund invests at least 80% of its assets in municipal money market securities issued by the State of New Jersey, possessions of the U.S. and their political subdivisions, which are exempt from federal income tax other than the alternative minimum tax and exempt from the New Jersey gross income tax, and which are determined to present minimal credit risk. These municipal money market securities include fixed, variable or floating rate general obligation and revenue bonds; tax, bond and revenue anticipation notes; and commercial paper obligations. The Fund also invests in tender option bonds, which are demand obligations that bear interest at the prevailing short-term, tax-exempt rate.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

The performance of the Fund is influenced by the political, economic and statutory environment within the State of New Jersey. The Fund invests in obligations of New Jersey issuers, which results in the Fund’s performance being subject to risks associated with the most current conditions within the state. Some of these conditions include the state’s slowing growth rate since 1987 and the job losses which have occurred in certain sectors of New Jersey’s economy. These and other factors may cause rating agencies to downgrade the credit ratings on certain issues. For more information on the factors that could affect the ability of the New Jersey municipal security issuers to pay interest and principal on securities acquired by the Fund, see “Additional Information Concerning New Jersey” in the Statement of Additional Information.

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class A Shares (%)

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
							2.54	3.46	2.28

Best Quarter:	4th Quarter 2000	+ 0.91 %
Worst Quarter:	4th Quarter 2001	+ 0.33 %
Year-to-date total return through 3/31/2002 is +0.19%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 10/26/1998
Class A	10/26/1998	2.28 %	N/A	N/A	2.75 %
Class I	4/5/1999	2.58 %	N/A	N/A	3.02 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class A	0.41 %	0.30 %	0.14 %	0.85 %
Class I	0.41 %	0.00 %	0.14 %	0.55 %

Example of Fund Expenses

After:	Class A	Class I
1 year	$ 87	$ 56
3 years	$ 271	$ 176
5 years	$ 471	$ 307
10 years	$ 1,049	$ 689

New York Municipal Money Market Fund

FUND FACTS:

Goals:

High Rate of Current Income Exempt from Federal and New York State and New York City Income Taxes

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Classes of Shares Offered in this Prospectus:

Class A

Class I

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbols:

ENYXX (Class A)

ENIXX (Class I)

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks as high a rate of current income exempt from regular federal income tax and New York State and New York City personal income taxes as is believed to be consistent with preservation of capital and maintenance of liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

The Fund will normally invest at least 80% of its assets in New York tax-exempt securities, which are debt obligations issued by the State of New York, or any of its political subdivisions, agencies, instrumentalities, or other governmental units (such as U.S. territories), the interest from which is exempt from federal income tax other than the alternative minimum tax and exempt from New York State and New York City personal income taxes. The Fund also invests in tender option bonds, which are demand obligations that bear interest at the prevailing short-term, tax-exempt rate.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

The performance of the Fund is influenced by the political, economic and statutory environment within the State of New York. The Fund invests in obligations of New York issuers, which results in the Fund's performance being subject to risks associated with the most current conditions within the state. Some of these conditions may include the valuation of real estate and the performance of the banking industry, as well as other factors which may cause rating agencies to downgrade the credit ratings on certain issues. For more information on the factors that could affect the ability of the New York municipal security issuers to pay interest and principal on securities acquired by the Fund, see “Additional Information Concerning New York” in the Statement of Additional Information.

Distributions of capital gains and other taxable income will be subject to tax under the personal income taxes of New York State, New York City and other New York municipalities. Corporations subject to the New York State corporation franchise tax or the New York City general corporation tax will generally be subject to tax on all distributions of income from the Fund.

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ¹
Class A	0.40 %	0.30 %	0.29 %	0.99 %
Class I	0.40 %	0.00 %	0.29 %	0.69 %

1. From time to time, the Fund’s investment advisor may, at its discretion, reduce or waive its fees or reimburse the Fund for certain of its expenses in order to reduce expense ratios. The Fund’s investment advisor may cease these waivers or reimbursements at any time. The Annual Fund Operating Expenses do not reflect fee waivers. Including fee waivers, Total Fund Operating Expenses were 0.88% for Class A and 0.58% for Class I.

Example of Fund Expenses

After:	Class A	Class I
1 year	$ 101	$ 70
3 years	$ 315	$ 221
5 years	$ 547	$ 384
10 years	$ 1,213	$ 859

Pennsylvania Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and Pennsylvania State Income Taxes

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Classes of Shares Offered in this Prospectus:

Class A

Class I

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbols:

EPPXX (Class A)

EPAXX (Class I)

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to provide investors with as high a level of current income exempt from regular federal income tax and, to the extent possible, from Pennsylvania income tax, as is consistent with preserving capital and providing liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

The Fund invests at least 80% of its assets in municipal money market securities issued by the Commonwealth of Pennsylvania, possessions of the U.S. and their political subdivisions, which are exempt from federal income tax other than the alternative minimum tax and exempt from the Pennsylvania income tax, and are determined to present minimal credit risk. These municipal money market securities include fixed, variable or floating rate general obligation and revenue bonds; tax, bond and revenue anticipation notes; and commercial paper obligations. The Fund also invests in tender option bonds, which are demand obligations that bear interest at the prevailing short-term, tax-exempt rate.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

The performance of the Fund is influenced by the political, economic and statutory environment within the Commonwealth of Pennsylvania. The Fund invests in obligations of Pennsylvania issuers, which results in the Fund’s performance being subject to risks associated with the most current conditions within the Commonwealth. Some of these conditions include adverse changes to the statewide, regional or local economies which affect the creditworthiness of the Commonwealth and certain other non-governmental related issuers and may cause rating agencies to downgrade the credit ratings on certain issues. For more information on the factors that could affect the ability of the Pennsylvania municipal security issuers to pay interest and principal on securities acquired by the Fund, see “Additional Information Concerning Pennsylvania” in the Statement of Additional Information.

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class I Shares (%)

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
2.87	2.12	2.54	3.66	3.07	3.22	3.09	2.96	3.84	2.59

Best Quarter:	4th Quarter 2000	+ 1.01 %
Worst Quarter:	4th Quarter 2001	+ 0.42 %
Year-to-date total return through 3/31/2002 is +0.29%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 8/15/1991
Class A	8/22/1995	2.43 %	3.02 %	2.93 %	2.98 %
Class I	8/15/1991	2.59 %	3.14 %	2.99 %	3.05 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class A	0.36 %	0.30 %	0.12 %	0.78 %²
Class I	0.36 %	0.00 %	0.12 %	0.48 %

2. From time to time, 12b-1 fees for Class A may be voluntarily reduced or waived. The 12b-1 fees and Total Fund Operating Expenses do not reflect any 12b-1 fee waivers. Including current fee waivers, the 12b-1 fees for the current fiscal year are expected to be 0.18% and Total Fund Operating Expenses are expected to be 0.66% for Class A.

Example of Fund Expenses

After:	Class A	Class I
1 year	$ 80	$ 49
3 years	$ 249	$ 154
5 years	$ 433	$ 269
10 years	$ 966	$ 604

Treasury Money Market Fund

FUND FACTS:

Goals:

Stability of Principal

Current Income

Principal Investments:

Short-term U.S. Treasury Obligations

Repurchase Agreements backed by Short-term U.S. Treasury Obligations

Classes of Shares Offered in this Prospectus:

Class A

Class I

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbols:

ETAXX (Class A)

ETYXX (Class I)

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to maintain stability of principal while earning current income.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

The Fund will normally invest at least 80% of its assets in short-term U.S. Treasury obligations (with an average dollar-weighted maturity of 60 days or less) and repurchase agreements backed at least 80% by such obligations. U.S. Treasury securities are guaranteed as to principal and interest, and supported by the full faith and credit of the U.S. government.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class I Shares (%)

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
3.67	3.04	4.06	5.69	5.09	5.22	5.14	4.65	5.91	3.66

Best Quarter:	4th Quarter 2000	+ 1.54 %
Worst Quarter:	4th Quarter 2001	+ 0.52 %
Year-to-date total return through 3/31/2002 is +0.43%.

Average Annual Total Return
(for the period ended 12/31/2001)

	Inception Date of Class	1 year	5 year	10 year	Performance Since 3/6/1991
Class A	3/6/1991	3.35 %	4.60 %	4.30 %	4.38 %
Class I	3/6/1991	3.66 %	4.91 %	4.61 %	4.69 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class A	0.31 %	0.30 %	0.09 %	0.70 %
Class I	0.31 %	0.00 %	0.09 %	0.40 %

Example of Fund Expenses

After:	Class A	Class I
1 year	$ 72	$ 41
3 years	$ 224	$ 128
5 years	$ 390	$ 224
10 years	$ 871	$ 505

U.S. Government Money Market Fund

FUND FACTS:

Goals:

High Current Income

Preservation of Capital

Liquidity

Principal Investment:

Short-term U.S. Government Securities

Classes of Shares Offered in this Prospectus:

Class A

Class B

Class C

Class I

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbols:

EGAXX (Class A)

EGBXX (Class B)

EGCXX (Class C)

EGGXX (Class I)

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income as is consistent with preserving capital and maintaining liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

The Fund will normally invest at least 80% of its assets in high quality, short-term securities issued or guaranteed by the U.S. government, its agencies or instrumentalities and repurchase agreements backed by such securities. In addition, the Fund may invest in obligations of the Inter-american Development Bank and the International Bank for Reconstruction and Development.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

Since the Fund commenced operations on 6/26/2001, total return information is not available for a full calendar year. Financial information for the Fund from 6/26/2001 through 1/31/2002 is available in the "Financial Highlights."

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

Shareholder Fees (fees paid directly from your investment)

Shareholder Transaction Expenses	Class A	Class B	Class C	Class I
Maximum deferred sales charge (as a % of either the redemption amount or initial investment, whichever is lower)	None	5.00 %	2.00 %	None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class A	0.40 %	0.30 %	0.35 %	1.05 %¹
Class B	0.40 %	1.00 %	0.35 %	1.75 %
Class C	0.40 %	1.00 %	0.35 %	1.75 %
Class I	0.40 %	0.00 %	0.35 %	0.75 %

1. From time to time, 12b-1 fees for Class A may be voluntarily reduced or waived. The 12b-1 fees and Total Fund Operating Expenses do not reflect the 12b-1 fee waivers. Including fee waivers, the 12b-1 fees were 0.13% and Total Fund Operating Expenses were 0.88% for Class A.

Example of Fund Expenses

	Assuming Redemption At End of Period				Assuming No Redemption
After:	Class A	Class B	Class C	Class I	Class B	Class C
1 year	$ 107	$ 678	$ 378	$ 77	$ 178	$ 178
3 years	$ 334	$ 851	$ 551	$ 240	$ 551	$ 551
5 years	$ 579	$ 1,149	$ 949	$ 417	$ 949	$ 949
10 years	$ 1,283	$ 1,791	$ 2,062	$ 930	$ 1,791	$ 2,062

THE FUNDS' INVESTMENT ADVISOR

An investment advisor manages a Fund's investments and supervises its daily business affairs. The investment advisor for the Evergreen Funds is a subsidiary of Wachovia Corporation (Wachovia), formerly First Union Corporation, the fourth largest bank holding company in the United States, with over $319.6 billion in consolidated assets as of 4/30/2002. Wachovia is located at 301 South College Street, Charlotte, North Carolina 28288-0013.

Evergreen Investment Management Company, LLC (EIMC) is the investment advisor to the Funds. EIMC has been managing mutual funds and private accounts since 1932 and manages over $106.6 billion in assets for 129 of the Evergreen and Wachovia Funds as of 4/30/2002. EIMC is located at 200 Berkeley Street, Boston, Massachusetts 02116-5034.

For the fiscal year ended 1/31/2002, the aggregate advisory fee paid to the investment advisor by each Fund was as follows:

Fund	% of the Fund's average daily net assets
California Municipal Money Market Fund	0.25 %
Florida Municipal Money Market Fund	0.41 %
Money Market Fund ¹	0.39 %
Municipal Money Market Fund	0.42 %
New Jersey Municipal Money Market Fund	0.41 %
New York Municipal Money Market Fund	0.29 %
Pennsylvania Municipal Money Market Fund	0.36 %
Treasury Money Market Fund ¹	0.31 %
U.S. Government Money Market Fund	0.40 %

1. Effective May 11, 2001, the investment advisory contract for the Fund was transferred to EIMC. There were no changes in advisory fee rates.

CALCULATING THE SHARE PRICE

The value of one share of a Fund, also known as the net asset value, or NAV, is calculated at 4 p.m. Eastern time on each day the New York Stock Exchange is open or as of the time the Exchange closes, if earlier. The Fund calculates the share price for each share by adding up its total assets, subtracting all liabilities, then dividing the result by the total number of shares outstanding. Each class of shares is calculated separately. Each security held by a Fund is valued on an amortized cost basis according to Rule 2a-7 under the Investment Company Act of 1940. Under this method of valuation, a security is initially valued at its acquisition cost, and thereafter a constant straightline amortization of any discount or premium is assumed each day regardless of the impact of fluctuating interest rates on the market value of the security.

The price per share you pay for a Fund purchase or the amount you receive for a Fund redemption is based on the next price calculated after the order is received and all required information is provided. The value of your account at any given time is the latest share price multiplied by the number of shares you own.

Shareholders whose purchase of shares of the Fund is accepted at or before 2 p.m. Eastern time for Money Market Fund, Treasury Money Market Fund and U.S. Government Money Market Fund, and 12:00 Noon Eastern time for California Municipal Money Market Fund, Florida Municipal Money Market Fund, Municipal Money Market Fund, New Jersey Municipal Money Market Fund, New York Municipal Money Market Fund and Pennsylvania Municipal Money Market Fund on any day the market is open, except in those cases where the market closes earlier, will receive the dividend declared by the Fund for that day; shareholders whose purchase of shares is accepted after the times noted above will begin earning dividends on the next business day after the Fund accepts their order.

HOW TO CHOOSE AN EVERGREEN FUND

When choosing an Evergreen Fund, you should:

Most importantly, read the prospectus to see if the Fund is suitable for you.
Consider talking to an investment professional. He or she is qualified to give you investment advice based on your investment goals and financial situation and will be able to answer questions you may have after reading the Fund's prospectus. He or she can also assist you through all phases of opening your account.
Request any additional information you want about the Fund, such as the Statement of Additional Information (SAI), Annual Report or Semi-annual Report by calling 1-800-343-2898. In addition, any of these documents, with the exception of the SAI, may be downloaded off our website at www.evergreeninvestments.com.

HOW TO CHOOSE THE SHARE CLASS THAT BEST SUITS YOU

After choosing a Fund, you select a share class. The Funds offer up to six different share classes. Only Class A, Class B, Class C and Class I shares are offered in this prospectus. To determine which classes of shares are offered by each Fund, see the Fund Facts section next to each Fund’s Risk/Return Summary previously presented. Each class except Class A and Class I has its own sales charge. Pay particularly close attention to the fee structure of each class so you know how much you will be paying before you invest.

Class A

Each Fund offers Class A shares at NAV without a front-end sales charge. However, Class A shares are subject to 12b-1 fees and certain broker-dealers and other financial institutions may impose a fee in connection with purchases of Class A shares of the Funds. When exchanging from Class A shares of a money market fund to a non-money market fund within the Evergreen Funds family, a sales charge will be imposed on the exchange, unless the shares have been subject to a previous sales charge. This sales charge only applies to Class A shares of an Evergreen money market fund.

Class B (Money Market Fund and U.S. Government Money Market Fund Only)

If you select Class B shares, you do not pay a front-end sales charge. However, your shares are subject to 12b-1 fees. In addition, you may pay a deferred sales charge if you redeem your shares within six years after the month of purchase.

The amount of the maximum deferred sales charge depends on the length of time the shares are held, as shown below:

Time Held	Maximum Deferred Sales Charge
Month of Purchase + First 12 Month Period	5.00 %
Month of Purchase + Second 12 Month Period	4.00 %
Month of Purchase + Third 12 Month Period	3.00 %
Month of Purchase + Fourth 12 Month Period	3.00 %
Month of Purchase + Fifth 12 Month Period	2.00 %
Month of Purchase + Sixth 12 Month Period	1.00 %
Thereafter	0.00 %
After 7 years	Converts to Class A
Dealer Allowance	5.00 %

The maximum deferred sales charge and dealer allowance may be reduced for certain investors. For further information on how the deferred sales charge is calculated at the time of redemption see "Calculating the Deferred Sales Charge" below.

Class C (Money Market Fund and U.S. Government Money Market Fund Only)

Like Class B shares, you do not pay a front-end sales charge on Class C shares, and your shares are subject to 12b-1 fees. In addition, you may pay a deferred sales charge if you redeem your shares within two years after the month of purchase. Also, these shares do not convert to Class A shares and so the higher 12b-1 fees paid by the Class C shares continue for the life of the account.

The amount of the maximum deferred sales charge depends on the length of time the shares are held, as shown below:

Time Held	Maximum Deferred Sales Charge
Month of Purchase + First 12 Month Period	2.00 %
Month of Purchase + Second 12 Month Period	1.00 %
Thereafter	0.00 %
Dealer Allowance	2.00 %

Waiver of Class B or Class C Deferred Sales Charges

You will not be assessed a deferred sales charge for Class B or Class C shares if you redeem shares in the following situations:

When the shares were purchased through reinvestment of dividends/capital gains
Death or disability
Lump-sum distribution from a 401(k) plan or other benefit plan qualified under ERISA
Systematic withdrawals of up to 1.00% of the account balance per month
Loan proceeds and financial hardship distributions from a retirement plan
Returns of excess contributions or excess deferral amounts made to a retirement plan participant

For additional information, see "Service Fees and Commissions Paid to Investment Professionals" in part two of the SAI.

Class I

Each Fund offers Class I shares at NAV without a front-end sales charge, deferred sales charge or 12b-1 fees. Class I shares are only offered to investment advisory clients of an investment advisor of an Evergreen Fund (or its advisory affiliates) through special arrangements entered into on behalf of the Evergreen Funds with certain financial services firms, certain institutional investors and persons who owned Class Y shares in registered name in an Evergreen Fund on or before December 31, 1994.

Calculating the Deferred Sales Charge

If imposed, the Fund deducts the deferred sales charge from the redemption proceeds you would otherwise receive. The deferred sales charge is a percentage of the lesser of (i) the NAV of the shares at the time of redemption or (ii) the shareholder's original net cost for such shares. Upon request for redemption, the Fund will first seek to redeem shares not subject to the deferred sales charge and then shares held the longest in an effort to keep the deferred sales charge a shareholder must pay as low as possible. The deferred sales charge on any redemption is, to the extent permitted by the NASD Regulation, Inc., paid to Evergreen Distributor Inc. (EDI) or its predecessor.

HOW TO BUY SHARES

Evergreen Funds make investing easy. Once you decide on an amount and a share class, simply fill out an application and send in your payment, or talk to your investment professional or an Evergreen Funds service representative.

	Minimum Initial Purchase of Class A, B and C Shares	Minimum Initial Purchase of Class I Shares	Minimum Additional Purchases
Regular Accounts	$ 1,000	$ 1,000,000 ¹	None
IRAs	$ 250	N/A ²	None
Systematic Investment Plan	$ 50	N/A ²	$25/monthly (for Classes A, B and C) ²

1. Minimum initial purchase amount does not apply to former Class Y shareholders.

2. Former Class Y shareholders may invest at the Class A, B and C share amounts.

Method	Opening an Account	Adding to an Account
By Mail or through an Investment Professional	Complete and sign the account application. Applications may be downloaded off our website at www.evergreeninvestments.com. Make the check payable to Evergreen Funds. Cash, credit cards, third party checks, credit card checks or money orders will not be accepted. Mail the application and your check to the address below: Postal Service Address: Evergreen Funds P.O. Box 8400 Boston, MA 02266-8400 Overnight Address: Evergreen Funds 66 Brooks Drive, Suite 8400 Braintree, MA 02184-3800 Or deliver them to your investment professional (provided he or she has a broker-dealer arrangement with EDI).	Make your check payable to Evergreen Funds. Write a note specifying: the Fund name share class your account number the name(s) in which the account is registered Mail to the address to the left or deliver to your investment professional (provided he or she has a broker-dealer arrangement with EDI).
By Phone	Call 1-800-343-2898 to set up an account number and get wiring instructions. Instruct your bank to wire or transfer your purchase (they may charge a wiring fee). Complete the account application and mail to: Postal Service Address: Evergreen Funds P.O. Box 8400 Boston, MA 02266-8400 Overnight Address: Evergreen Funds 66 Brooks Drive, Suite 8400 Braintree, MA 02184-3800 Trades accepted after 2 p.m. Eastern time for Money Market Fund, Treasury Money Market Fund and U.S. Government Money Market Fund and 12 Noon Eastern time for California Municipal Money Market Fund, Florida Municipal Money Market Fund, Municipal Money Market Fund, New Jersey Municipal Mone Market Fund, New York Municipal Money Market Fund and Pennsylvania Municipal Money Market Fund on market trading days will receive dividends starting on the next market trading day. ³	Call the Evergreen Express Line at 1-800-346-3858 24 hours a day or to speak with an Evergreen Funds service representative call 1-800-343-2898 between 8 a.m. and 6 p.m. Eastern time, on any business day. If your bank account is set up on file, you can request either: Federal Funds Wire (offers immediate access to funds) or Electronic transfer through the Automated Clearing House which avoids wiring fees.
By Exchange	You can make an additional investment by exchange from an existing Evergreen Funds account by contacting your investment professional or an Evergreen Funds service representative, calling the Evergreen Express Line at 1-800-346-3858 or by visiting our website at www.evergreeninvestments.com. ⁴ You can only exchange shares from your account within the same class and under the same registration. There is no sales charge or redemption fee when exchanging funds within the Evergreen Funds family. ⁵ Orders placed before 4 p.m. Eastern time on market trading days will be processed at that day's closing share price. Orders placed after 4 p.m. Eastern time will be processed at the next market trading day's closing price. ³ Exchanges are limited to three per calendar quarter, but in no event more than five per calendar year. Exchanges between accounts which do not have identical ownership must be made in writing with a signature guarantee. (See "Exceptions: Redemption Requests That Require A Signature Guarantee" on the next page.)
Systematic Investment Plan (SIP)	You can transfer money automatically from your bank account into your Fund account on a monthly or quarterly basis. Initial investment minimum is $50 if you invest at least $25 per month with this service. To enroll, check off the box on the account application and provide: your bank account information the amount and date of your monthly or quarterly investment.	To establish automatic investing for an existing account, call 1-800-343-2898 for an application. The minimum is $25 per month or $75 per quarter. You can also establish an investing program through direct deposit from your paycheck. Call 1-800-343-2898 for details.

3. The Fund's shares may be made available through financial service firms which are also investment dealers and which have a service agreement with EDI. The Fund has approved the acceptance of purchase and repurchase request orders effective as of the time of their receipt by certain authorized financial intermediaries or their designees. The Evergreen Funds reserve the right to adjust the closing time to coincide with an earlier closing of the New York Stock Exchange or due to other unusual circumstances.

4. Once you have authorized either the telephone exchange or redemption service, anyone with a Personal Identification Number (PIN) and the required account information (including your investment professional) can request a telephone transaction in your account. All calls are recorded and may be monitored for verification, recordkeeping and quality-assurance purposes. The Evergreen Funds reserve the right to terminate the exchange privilege of any shareholder who exceeds the listed maximum number of exchanges, as well as to reject any large dollar exchange or purchase if placing it would, in the judgment of the portfolio manager, adversely affect the price of the Fund.

5. This does not apply to exchanges from Class A shares of an Evergreen money market fund, unless the account has been subject to a previous sales charge.

HOW TO REDEEM SHARES

We offer you several convenient ways to redeem your shares in any of the Evergreen Funds:

Methods	Requirements
Call Us	Call the Evergreen Express Line at 1-800-346-3858 24 hours a day or to speak with an Evergreen Funds service representative call 1-800-343-2898 between 8 a.m. and 6 p.m. Eastern time, on any business day. This service must be authorized ahead of time, and is only available for regular accounts. ¹ All authorized requests made before 4 p.m. Eastern time on market trading days will be processed at that day's closing price. Requests made after 4 p.m. Eastern time will be processed the next market trading day. ² We can either: wire the proceeds into your bank account (service charges may apply) electronically transmit the proceeds into your bank account via the Automated Clearing House service mail you a check. All telephone calls are recorded and may be monitored for your protection. We are not responsible for acting on telephone orders we believe are genuine. See "Exceptions: Redemption Requests That Require a Signature Guarantee" below for requests that must be made in writing with your signature guaranteed.
Write Us	You can mail a redemption request to: Postal Service Address: Evergreen Funds P.O. Box 8400 Boston, MA 02266-8400 Overnight Address: Evergreen Funds 66 Brooks Drive, Suite 8400 Braintree, MA 02184-3800 Your letter of instructions must: list the Fund name and the account number indicate the number of shares or dollar value you wish to redeem be signed by the registered owner(s) See "Exceptions: Redemption Requests That Require A Signature Guarantee" below for requests that must be signature guaranteed. To redeem from an IRA or other retirement account, call 1-800-343-2898 for special instructions.
Redeem Your Shares in Person	You may also redeem your shares by contacting your investment professional or an Evergreen Funds service representative. A fee may be charged for this service.
Systematic Withdrawal Plan (SWP)	You can transfer money automatically from your Fund account on a monthly or quarterly basis - without redemption fees. The withdrawal can be mailed to you, or deposited directly into your bank account. The minimum is $75 per month. The maximum is 1.00% of your account per month or 3.00% per quarter. To enroll, call 1-800-343-2898 for instructions.

1. Once you have authorized either the telephone exchange or redemption service, anyone with a Personal Identification Number (PIN) and the required account information (including your investment professional) can request a telephone transaction in your account. All calls are recorded and may be monitored for verification, recordkeeping and quality-assurance purposes. The Evergreen Funds reserve the right to terminate the exchange privilege of any shareholder who exceeds the listed maximum number of exchanges, as well as to reject any large dollar exchange or purchase if placing it would, in the judgment of the portfolio manager, adversely affect the price of the Fund.

2. The Fund's shares may be made available through financial service firms which are also investment dealers and which have a service agreement with EDI. The Fund has approved the acceptance of purchase and repurchase request orders effective as of the time of their receipt by certain authorized financial intermediaries or their designees. The Evergreen Funds reserve the right to adjust the closing time to coincide with an earlier closing of the New York Stock Exchange or due to other unusual circumstances.

Timing of Proceeds

Normally, we will send your redemption proceeds on the next business day after we receive your request; however, we reserve the right to wait up to seven business days to redeem any investments made by check and ten business days for investments made by Automated Clearing House transfer. We also reserve the right to redeem in kind, under certain circumstances, by paying you the proceeds of a redemption in securities rather than in cash, and to redeem the remaining amount in the account if your redemption brings the account balance below the initial minimum amount.

Exceptions: Redemption Requests That Require A Signature Guarantee

To protect you and the Evergreen Funds against fraud, certain redemption requests must be made in writing with your signature guaranteed. A signature guarantee can be obtained at most banks and securities dealers. A notary public is not authorized to provide a signature guarantee. The following circumstances require signature guarantees:

You are redeeming more than $50,000.
You want the proceeds transmitted into a bank account not listed on the account.
You want the proceeds payable to anyone other than the registered owner(s) of the account.
Either your address or the address of your bank account has been changed within 30 days.
The account is registered in the name of a fiduciary corporation or any other organization.
In these cases, additional documentation is required:
corporate accounts: certified copy of corporate resolution
fiduciary accounts: copy of the power of attorney or other governing document

Who Can Provide A Signature Guarantee:

Commercial Bank
Trust Company
Savings Association
Credit Union
Member of a U.S. stock exchange

OTHER SERVICES

Evergreen Express Line
1-800-346-3858

Use our automated, 24-hour service to check the value of your investment in a Fund; purchase, redeem or exchange Fund shares; find a Fund’s price, yield or total return; order a statement or duplicate tax form; or hear market commentary from Evergreen Funds portfolio managers.

Automatic Reinvestment of Distributions

For the convenience of investors, all dividends and capital gains distributions are automatically reinvested, unless you request otherwise. Distributions can be made by check or electronic transfer through the Automated Clearing House to your bank account. The details of your dividends and other distributions will be included on your statement.

Payroll Deduction (Class A, Class B and Class C only)

If you want to invest automatically through your paycheck, call us to find out how you can set up direct payroll deductions. The amounts deducted will be invested in your Fund account using the Electronic Funds Transfer System. We will provide the Fund account number. Your payroll department will let you know the date of the pay period when your investment begins. Visit our website at www.evergreeninvestments.com for more information.

Telephone Investment Plan

You may make additional investments electronically in an existing Fund account at amounts of not less than $100 or more than $10,000 per investment. Telephone requests received by 4 p.m. Eastern time will be invested the day the request is received.

Dividend Exchange

You may elect on the application to reinvest capital gains and/or dividends earned in one Evergreen Fund into an existing account in another Evergreen Fund in the same share class and same registration — automatically. Please indicate on the application the Evergreen Fund(s) into which you want to invest the distributions.

Reinstatement Privileges

Within 90 days of redemption, you may re-establish your investment at the current NAV by reinvesting some, or all, of your redemption proceeds into the same share class of any Evergreen Fund. If a deferred sales charge was deducted from your redemption proceeds, the full amount of the deferred sales charge will be credited to your account at the NAV on the date of reinstatement and your deferred sales charge schedule will resume from the time of the original redemption.

THE TAX CONSEQUENCES OF INVESTING
IN THE FUNDS

You may be taxed in two ways:

On Fund distributions (dividends and capital gains).
On any profit you make when you sell any or all of your shares.

Fund Distributions

A mutual fund passes along to all of its shareholders the net income or profits it receives from its investments. The shareholders of the fund then pay any taxes due, whether they receive these distributions in cash or elect to have them reinvested. California Municipal Money Market Fund, Florida Municipal Money Market Fund, Municipal Money Market Fund, New Jersey Municipal Money Market Fund, New York Municipal Money Market Fund and Pennsylvania Municipal Money Market Fund expect that substantially all of their regular dividends will be exempt from federal income tax other than the alternative minimum tax. Otherwise, the Funds will distribute two types of taxable income to you:

Dividends. To the extent that regular dividends are derived from investment income that is not tax-exempt, or from short-term capital gains, you will have to include them in your federal taxable income. Each Fund pays a monthly dividend from the dividends, interest and other income on the securities in which it invests.
Capital Gains. When a mutual fund sells a security it owns for a profit, the result is a capital gain. The Funds generally distribute capital gains, if any, at least once a year, near the end of the calendar year. Short-term capital gains reflect securities held by the Funds for a year or less and are considered ordinary income just like dividends. Profits on securities held longer than 12 months are considered long-term capital gains and are taxed at a special tax rate (20% for most taxpayers). It is not anticipated that any significant capital gains will be realized by the Funds.

Dividend and Capital Gain Reinvestment

Unless you choose otherwise on the account application, all dividends will be reinvested. Distribution checks that are returned and distribution checks that are uncashed when the shareholder has failed to respond to mailings from the shareholder servicing agent will automatically be reinvested. No interest will accrue on amounts represented by uncashed distribution or redemption checks. We will send you a statement each January with the federal tax status of dividends and distributions paid by the Fund during the previous calendar year.

Profits You Realize When You Redeem Shares

When you sell shares in a mutual fund, whether by redeeming or exchanging, you have created a taxable event. You must report any gain or loss on your tax return unless the transaction was entered into by a tax-deferred retirement plan. Investments in money market funds typically do not generate capital gains. It is your responsibility to keep accurate records of your mutual fund transactions. You will need this information when you file your income tax return, since you must report any capital gain or loss you incur when you sell shares. Remember, an exchange is a purchase and a sale for tax purposes.

Tax Reporting

Evergreen Service Company, LLC provides you and the IRS with a tax statement of your dividend and capital gains distributions for each calendar year on Form 1099 DIV. Proceeds from a sale are reported on Form 1099B. You must report these on your tax return. You could pay a penalty if you neglect to report them.

Evergreen Service Company, LLC will send you a tax information guide each year during tax season, which may include a cost basis statement detailing the gain or loss on taxable transactions you had during the year. Please consult your own tax advisor for further information regarding the federal, state and local tax consequences of an investment in the Funds.

Retirement Plans

You may invest in an Evergreen Fund through various retirement plans, including IRAs, 401(k) plans, Simplified Employee Plans (SEPs), 403(b) plans, 457 plans and others. For special rules concerning these plans, including applications, restrictions, tax advantages, and potential sales charge waivers, contact your investment professional. To determine if a retirement plan may be appropriate for you, consult your tax advisor.

FEES AND EXPENSES OF THE FUNDS

Every mutual fund has fees and expenses that are assessed either directly or indirectly. This section describes each of those fees.

Management Fee

The management fee pays for the normal expenses of managing the Fund, including portfolio manager salaries, research costs, corporate overhead expenses and related expenses.

12b-1 Fees

The Trustees of the Evergreen Funds have approved a policy to assess annual 12b-1 fees of up to 0.75% of the average daily net assets of Class A shares and up to 1.00% of the average daily net assets of Class B and Class C shares. However, currently the 12b-1 fees for Class A shares are limited to 0.30% of the average daily net assets of the class and all or a portion of these fees may be voluntarily waived from time to time. These fees increase the cost of your investment. The purpose of the 12b-1 fees is to promote the sale of more shares of the Fund to the public. The Fund may use 12b-1 fees for advertising and marketing and as a "service fee" to broker-dealers, banks and other financial institutions for additional shareholder services and/or the maintenance of accounts.

Other Expenses

Other expenses include miscellaneous fees from affiliated and outside service providers. These may include legal, audit, custodial and safekeeping fees, the printing and mailing of reports and statements, automatic reinvestment of distributions and other conveniences for which the shareholder pays no transaction fees.

Total Fund Operating Expenses

The total cost of running the Fund is called the expense ratio. As a shareholder, you are not charged these fees directly; instead they are taken out before the Fund’s NAV is calculated, and are expressed as a percentage of the Fund’s average daily net assets. The effect of these fees is reflected in the performance results for that share class. Because these fees are “invisible,” investors should examine them closely in the prospectus, especially when comparing one fund with another fund in the same investment category. There are three things to remember about expense ratios: (i) your total return in the Fund is reduced in direct proportion to the fees; (ii) expense ratios can vary greatly between funds and fund families, from under 0.25% to over 3.00%; and (iii) the Fund’s investment advisor may waive a portion of the Fund’s expenses for a period of time, reducing its expense ratio.

FINANCIAL HIGHLIGHTS

This section looks in detail at the results for one share in each share class of the Funds - how much income it earned, how much of this income was passed along as a distribution and how much the return was reduced by expenses. The following tables have been derived from financial information audited by KPMG LLP, the Funds' independent auditors. For the fiscal years or periods ended prior to January 31, 2000, the tables for Money Market Fund and Municipal Money Market Fund were derived from financial information audited by other accountants. For a more complete picture of the Funds' financial statements, please see the Funds' Annual Report as well as the SAI.

California Municipal Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS A
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0 ^††

Distributions to shareholders from
Net investment income	0 ^††

Net asset value, end of period	$ 1.00
Total return	0.40 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 117,217
Ratios to average net assets
Expenses‡	0.89 %^†
Net investment income	1.12 %^†

	Year Ended
	January 31, 2002 (a)
CLASS I
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0.01

Distributions to shareholders from
Net investment income	- 0.01

Net asset value, end of period	$ 1.00
Total return	0.59 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 168
Ratios to average net assets
Expenses‡	0.58 %^†
Net investment income	1.42 %^†
^(a) For the period from September 24, 2001(commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Represents an amount less than $0.005 per share.

Florida Municipal Money Market Fund

	Year Ended January 31,
	2002	2001	2000	1999 (a)
CLASS A
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.02	0.03	0.03	0.01

Distributions to shareholders from
Net investment income	- 0.02	- 0.03	- 0.03	- 0.01

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	2.03 %	3.48 %	2.69 %	0.69 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 60,484	$ 27,519	$ 140,403	$ 84,343
Ratios to average net assets
Expenses‡	0.86 %	0.85 %	0.84 %	0.93 %^†
Net investment income	1.89 %	3.39 %	2.77 %	2.66 %^†

	Year Ended January 31,
	2002	2001	2000	1999 (b)
CLASS I †††
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.02	0.04	0.03	0 ^††

Distributions to shareholders from
Net investment income	- 0.02	- 0.04	- 0.03	0 ^††

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	2.34 %	3.79 %	3.01 %	0.26 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 260	$ 71	$ 105	$ 1
Ratios to average net assets
Expenses‡	0.51 %	0.55 %	0.54 %	0.65 %^†
Net investment income	2.20 %	3.69 %	3.07 %	2.98 %^†
^(a) For the period from October 26, 1998 (commencement of class operations) to January 31, 1999.
^(b) For the period from December 29, 1998 (commencement of class operations) to January 31, 1999.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Represents an amount less than $0.005 per share.
^††† Effective at the close of business on May 11, 2001, Class Y shares of the Fund were renamed as Institutional shares (Class I).

Money Market Fund

						Year Ended
	Year Ended January 31,					August 31,
	2002	2001	2000	1999	1998 (a)	1997
CLASS A
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Net investment income	0.03	0.06	0.05	0.05	0.02	0.05

Distributions to shareholders from
Net investment income	- 0.03	- 0.06	- 0.05	- 0.05	- 0.02	- 0.05

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	3.20 %	5.84 %	4.68 %	4.90 %	2.08 %	4.95 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 9,605	$ 2,302	$ 8,931	$ 5,210	$ 2,910	$ 2,803
Ratios to average net assets
Expenses‡	0.88 %	0.84 %	0.83 %	0.85 %	0.89 %^†	0.79 %
Net investment income	2.42 %	5.54 %	4.63 %	4.78 %	4.91 %^†	4.87 %

						Year Ended
	Year Ended January 31,					August 31,
	2002	2001	2000	1999	1998 (a)	1997
CLASS B
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Net investment income	0.02	0.05	0.04	0.04	0.02	0.04

Distributions to shareholders from
Net investment income	- 0.02	- 0.05	- 0.04	- 0.04	- 0.02	- 0.04

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return*	2.48 %	5.11 %	3.95 %	4.18 %	1.78 %	4.22 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 92	$ 52	$ 67	$ 65	$ 25	$ 23
Ratios to average net assets
Expenses‡	1.57 %	1.54 %	1.53 %	1.55 %	1.59 %^†	1.49 %
Net investment income	2.25 %	4.95 %	3.89 %	4.09 %	4.22 %^†	4.16 %
^(a) For the five months ended January 31, 1998. The Fund changed its fiscal year end from August 31 to January 31, effective January 31, 1998.
^* Excluding applicable sales charges.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

	Year Ended January 31,					Year Ended
	2002	2001	2000	1999	1998 (a)	August 31, 1997 (b)
CLASS C
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Net investment income	0.02	0.05	0.04	0.04	0.02	0 ^††

Distributions to shareholders from
Net investment income	- 0.02	- 0.05	- 0.04	- 0.04	- 0.02	0 ^††

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return*	2.48 %	5.11 %	3.95 %	4.18 %	1.78 %	0.37 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 15	$ 9	$ 6	$ 5	$ 2	$ 5
Ratios to average net assets
Expenses‡	1.57 %	1.55 %	1.54 %	1.55 %	1.59 %^†	1.67 %^†
Net investment income	2.24 %	4.99 %	3.95 %	4.09 %	4.20 %^†	4.42 %^†

						Year Ended
	Year Ended January 31,					August 31,
	2002	2001	2000	1999	1998 (a)	1997
CLASS I †††
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Net investment income	0.03	0.06	0.05	0.05	0.02	0.05

Distributions to shareholders from
Net investment income	- 0.03	- 0.06	- 0.05	- 0.05	- 0.02	- 0.05

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	3.50 %	6.15 %	4.99 %	5.21 %	2.21 %	5.27 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 2,685	$ 1,964	$ 1,908	$ 1,745	$ 610	$ 635
Ratios to average net assets
Expenses‡	0.56 %	0.54 %	0.53 %	0.55 %	0.59 %^†	0.48 %
Net investment income	3.43 %	5.97 %	4.89 %	5.07 %	5.22 %^†	5.13 %
^(a) For the five months ended January 31, 1998. The Fund changed its fiscal year end from August 31 to January 31, effective January 31, 1998.
^(b) For the period from August 1, 1997 (commencement of class operations) to August 31, 1997.
^* Excluding applicable sales charges.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Represents an amount less than $0.005 per shares.
^††† Effective at the close of businees on May 11, 2001, Class Y shares of the Fund were renamed as Institutional shares (Class I).

Municipal Money Market Fund

						Year Ended
	Year Ended January 31,					August 31,
	2002	2001	2000	1999	1998 (a)	1997
CLASS A
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Net investment income	0.02	0.04	0.03	0.03	0.01	0.03

Distributions to shareholders from
Net investment income	- 0.02	- 0.04	- 0.03	- 0.03	- 0.01	- 0.03

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	2.18 %	3.69 %	2.90 %	3.07 %	1.34 %	3.13 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 953	$ 126	$ 708	$ 737	$ 672	$ 667
Ratios to average net assets
Expenses‡	0.88 %	0.86 %	0.86 %	0.87 %	0.88 %^†	0.83 %
Net investment income	1.47 %	3.59 %	2.84 %	3.02 %	3.18 %^†	3.09 %

						Year Ended
	Year Ended January 31					August 31,
	2002	2001	2000	1999	1998 (a)	1997
CLASS I ††
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Net investment income	0.02	0.04	0.03	0.03	0.01	0.03

Distributions to shareholders from
Net investment income	- 0.02	- 0.04	- 0.03	- 0.03	- 0.01	- 0.03

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	2.49 %	4.00 %	3.21 %	3.38 %	1.47 %	3.44 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 489	$ 512	$ 591	$ 540	$ 386	$ 378
Ratios to average net assets
Expenses‡	0.56 %	0.56 %	0.56 %	0.57 %	0.58 %^†	0.53 %
Net investment income	2.46 %	3.89 %	3.15 %	3.30 %	3.46 %^†	3.37 %
^(a) For the five months ended January 31, 1998. The Fund changed its fiscal year end from August 31 to January 31, effective January 31, 1998.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Effective at the close of businees on May 11, 2001, Class Y shares of the Fund were renamed as Institutional shares (Class I).

New Jersey Municipal Money Market Fund

	Year Ended January 31,
	2002	2001	2000	1999 (a)
CLASS A
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.02	0.03	0.03	0.01

Distributions to shareholders from
Net investment income	- 0.02	- 0.03	- 0.03	- 0.01

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	2.11 %	3.45 %	2.59 %	0.66 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 37	$ 34	$ 111	$ 95
Ratios to average net assets
Expenses‡	0.85 %	0.82 %	0.84 %	0.85 %^†
Net investment income	2.01 %	3.38 %	2.57 %	2.46 %^†

	Year Ended January 31,
	2002	2001	2000 (b)
CLASS I ††
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.02	0.04	0.02

Distributions to shareholders from
Net investment income	- 0.02	- 0.04	- 0.02

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00
Total return	2.42 %	3.76 %	2.47 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 6	$ 2	$ 2
Ratios to average net assets
Expenses‡	0.55 %	0.53 %	0.52 %^†
Net investment income	2.32 %	3.69 %	3.06 %^†
^(a) For the period from October 26, 1998 (commencement of class operations) to January 31, 1999.
^(b) For the period April 5, 1999 (commencement of class operations) to January 31, 2000.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Effective at the close of businees on May 11, 2001, Class Y shares of the Fund were renamed as Institutional shares (Class I).

New York Municipal Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS A
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0 ^††

Distributions to shareholders from
Net investment income	0 ^††

Net asset value, end of period	$ 1.00
Total return	0.33 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 94,200
Ratios to average net assets
Expenses‡	0.88 %^†
Net investment income	0.92 %^†

	Year Ended
	January 31, 2002 (a)
CLASS I
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0 ^††

Distributions to shareholders from
Net investment income	0 ^††

Net asset value, end of period	$ 1.00
Total return	0.44 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 3,710
Ratios to average net assets
Expenses‡	0.59 %^†
Net investment income	1.15 %^†
^(a) For the period from September 24, 2001 (commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Represents an amount less than $0.005 per share.

Pennsylvania Municipal Money Market Fund

						Year Ended
	Year Ended January 31,					August 31,
	2002	2001	2000	1999	1998 (a)	1997
CLASS A
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.02	0.04	0.03	0.03	0.01	0.03

Distributions to shareholders from
Net investment income	- 0.02	- 0.04	- 0.03	- 0.03	- 0.01	- 0.03

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	2.27 %	3.66 %	2.90 %	2.96 %	1.34 %	3.05 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 28	$ 19	$ 125	$ 96	$ 37	$ 36
Ratios to average net assets
Expenses‡	0.64 %	0.65 %	0.60 %	0.61 %	0.61 %^†	0.60 %
Net investment income	2.17 %	3.59 %	2.87 %	2.90 %	3.15 %^†	3.01 %

						Year Ended
	Year Ended January 31,					August 31,
	2002	2001	2000	1999	1998 (a)	1997
CLASS I ††
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Net investment income	0.02	0.04	0.03	0.03	0.01	0.03

Distributions to shareholders from
Net investment income	- 0.02	- 0.04	- 0.03	- 0.03	- 0.01	- 0.03

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	2.43 %	3.82 %	3.00 %	3.07 %	1.38 %	3.15 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 80	$ 71	$ 62	$ 40	$ 33	$ 32
Ratios to average net assets
Expenses‡	0.48 %	0.49 %	0.50 %	0.52 %	0.51 %^†	0.50 %
Net investment income	2.31 %	3.73 %	2.98 %	3.02 %	3.26 %^†	3.10 %
^(a) For the five months ended January 31, 1998. The Fund changed its fiscal year end from August 31 to January 31, effective January 31, 1998.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Effective at the close of business on May 31, 2001, Class Y shares of the Fund were renamed as Institutional shares (Class I).

Treasury Money Market Fund

						Year Ended
	Year Ended January 31,					August 31,
	2002	2001	2000	1999	1998 (a)	1997
CLASS A
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.03	0.06	0.04	0.05	0.02	0.05

Distributions to shareholders from
Net investment income	- 0.03	- 0.06	- 0.04	- 0.05	- 0.02	- 0.05

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	3.00 %	5.65 %	4.38 %	4.75 %	2.07 %	4.82 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 752	$ 743	$ 2,828	$ 3,366	$ 2,616	$ 2,485
Ratios to average net assets
Expenses‡	0.70 %	0.73 %	0.74 %	0.73 %	0.73 %^†	0.72 %
Net investment income	2.98 %	5.27 %	4.28 %	4.63 %	4.89 %^†	4.73 %

						Year Ended
	Year Ended January 31,					August 31,
	2002	2001	2000	1999	1998 (a)	1997
CLASS I ††
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.03	0.06	0.05	0.05	0.02	0.05

Distributions to shareholders from
Net investment income	- 0.03	- 0.06	- 0.05	- 0.05	- 0.02	- 0.05

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	3.31 %	5.97 %	4.69 %	5.07 %	2.20 %	5.14 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 1,005	$ 1,032	$ 1,034	$ 1,045	$ 572	$ 547
Ratios to average net assets
Expenses‡	0.40 %	0.43 %	0.44 %	0.43 %	0.43 %^†	0.42 %
Net investment income	3.21 %	5.78 %	4.58 %	4.89 %	5.19 %^†	5.02 %
^(a) For the five months ended January 31, 1998. The Fund changed its fiscal year end from August 31 to January 31, effective January 31, 1998.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Effective at the close of business on May 11, 2001, Class Y shares were renamed as Institutional shares (Class I).

U.S. Government Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS A
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0.01

Distributions to shareholders from
Net investment income	- 0.01

Net asset value, end of period	$ 1.00
Total return	1.33 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 3,774,155
Ratios to average net assets
Expenses‡	0.88 %^†
Net investment income	1.57 %^†

	Year Ended
	January 31, 2002 (a)
CLASS B
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0.01

Distributions to shareholders from
Net investment income	- 0.01

Net asset value, end of period	$ 1.00
Total return*	0.84 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 64
Ratios to average net assets
Expenses‡	1.75 %^†
Net investment income	0.63 %^†
^(a) For the period from June 26, 2001 (commencement of class operations) to January 31, 2002.
^* Excluding applicable sales charges.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

	Year Ended
	January 31, 2002 (a)
CLASS C
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0.01

Distributions to shareholders from
Net investment income	- 0.01

Net asset value, end of period	$ 1.00
Total return*	0.84 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 29
Ratios to average net assets
Expenses‡	1.77 %^†
Net investment income	0.63 %^†

	Year Ended
	January 31, 2002 (a)
CLASS I
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0.01

Distributions to shareholders from
Net investment income	- 0.01

Net asset value, end of period	$ 1.00
Total return	1.45 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 3
Ratios to average net assets
Expenses‡	0.68 %^†
Net investment income	1.69 %^†
^(a) For the period from June 26, 2001 (commencement of class operations) to January 31, 2002.
^* Excluding applicable sales charges.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

OTHER FUND PRACTICES

Taxable securities in which California Municipal Money Market Fund, Florida Municipal Money Market Fund, Municipal Money Market Fund, New Jersey Municipal Money Market Fund, New York Municipal Money Market Fund and Pennsylvania Municipal Money Market Fund may invest on a short-term basis include obligations of the U.S. government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest rating categories by any nationally recognized statistical ratings organization; commercial paper rated in the highest grade by Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services; and certificates of deposit issued by U.S. branches of U.S. banks with assets of $1 billion or more.

California Municipal Money Market Fund, Florida Municipal Money Market Fund, New Jersey Municipal Money Market Fund, New York Municipal Money Market Fund and Pennsylvania Municipal Money Market Fund do not intend to concentrate their investments in any one industry. However, from time to time, a Fund may invest 25% or more of its assets in municipal securities which are related in such a way that an economic, business or political development or change affecting one such obligation would also affect the others. Two examples of obligations related in this way are (i) an obligation, the interest on which is paid from revenues of similar type projects and (ii) obligations whose issuers are located in the same state.

Please consult the SAI for more information regarding these and other investment practices used by the Funds, including risks.

Evergreen Funds

Institutional Money Market Funds

Institutional Money Market Fund

Institutional Municipal Money Market Fund

Institutional Treasury Money Market Fund

Institutional U.S. Government Money Market Fund

Institutional 100% Treasury Money Market Fund

Cash Management Money Market Fund

Prime Cash Management Money Market Fund

Money Market Funds

California Municipal Money Market Fund

Florida Municipal Money Market Fund

Money Market Fund

Municipal Money Market Fund

New Jersey Municipal Money Market Fund

New York Municipal Money Market Fund

Pennsylvania Municipal Money Market Fund

Treasury Money Market Fund

U.S. Government Money Market Fund

State Municipal Bond Funds

Connecticut Municipal Bond Fund

Florida High Income Municipal Bond Fund

Florida Municipal Bond Fund

Georgia Municipal Bond Fund

Maryland Municipal Bond Fund

New Jersey Municipal Bond Fund

North Carolina Municipal Bond Fund

Pennsylvania Municipal Bond Fund

South Carolina Municipal Bond Fund

Virginia Municipal Bond Fund

National Municipal Bond Funds

High Grade Municipal Bond Fund

High Income Municipal Bond Fund

Intermediate Term Municipal Bond Fund

Municipal Bond Fund

Short-Intermediate Municipal Bond Fund

Short and Intermediate Term Bond Funds

Adjustable Rate Fund

Fixed Income Fund

Intermediate Term Bond Fund

Limited Duration Fund

Short-Duration Income Fund

Intermediate and Long Term Bond Funds

Core Bond Fund

Diversified Bond Fund

Fixed Income Fund II

High Yield Bond Fund

Income Plus Fund

Quality Income Fund

Select High Yield Bond Fund

Strategic Income Fund

U.S. Government Fund

Balanced Funds

Balanced Fund

Foundation Fund

Select Balanced Fund

Tax Strategic Foundation Fund

Growth and Income Funds

Blue Chip Fund

Equity Income Fund

Equity Index Fund

Growth and Income Fund

Small Cap Value Fund

Strategic Value Fund

Value Fund

Domestic Growth Funds

Aggressive Growth Fund

Capital Growth Fund

Core Equity Fund

Evergreen Fund

Growth Fund

Large Company Growth Fund

Masters Fund

Omega Fund

Premier 20 Fund

Secular Growth Fund

Select Small Cap Growth Fund

Select Strategic Growth Fund

Small Company Growth Fund

Special Equity Fund

Special Values Fund

Stock Selector Fund

Tax Strategic Equity Fund

Sector Funds

Health Care Fund

Technology Fund

Utility and Telecommunications Fund

Global and International Funds

Emerging Markets Growth Fund

Global Leaders Fund

Global Opportunities Fund

International Bond Fund

International Growth Fund

Latin America Fund

Precious Metals Fund

Evergreen Express Line

Call 1-800-346-3858

24 hours a day to

check your account
order a statement
get a Fund’s current price, yield and total return
buy, redeem or exchange Fund shares

Shareholder Services

Call 1-800-343-2898

Monday-Friday, 8 a.m. to 6 p.m. Eastern time to

buy, redeem or exchange shares
order applications
get assistance with your account

Information Line for Hearing and Speech Impaired (TTY/TDD)

Call 1-800-343-2888

Monday-Friday, 8 a.m. to 6 p.m. Eastern time

Write us a letter

Evergreen Funds

P.O. Box 8400

Boston, MA 02266-8400

to buy, redeem or exchange shares
to change the registration on your account
for general correspondence

For express, registered or certified mail

Evergreen Funds

66 Brooks Drive, Suite 8400

Braintree, MA 02184-3800

Visit us on-line

www.evergreeninvestments.com

Regular communications you will receive
Account Statements — You will receive quarterly statements for each Fund you invest in. Please review and promptly notify Evergreen Funds of any inaccuracies.

Confirmation Notices — A confirmation of your transaction, other than SIP and SWP, is sent within five days. Please review and promptly notify Evergreen Funds of any inaccuracies.

Annual and Semi-annual reports — You will receive a detailed financial report on each Fund you invest in twice a year.

Tax Forms — Each January you will receive any Fund tax information you need to complete your tax returns as well as the Evergreen Tax Information Guide.

For More Information About the Evergreen Money Market Funds, Ask for:

The Funds’ most recent Annual or Semi-annual Report, which contains a complete financial accounting for each Fund and a complete list of the Funds' portfolio holdings as of a specific date, as well as commentary from each Fund’s portfolio managers. This report discusses the market conditions and investment strategies that significantly affected the Funds' performance during the most recent fiscal year or period.

The Statement of Additional Information (SAI), which contains more detailed information about the policies and procedures of the Funds. The SAI has been filed with the Securities and Exchange Commission (SEC) and its contents are legally considered to be part of this prospectus.

For questions, other information, or to request a copy, without charge, of any of the documents, call 1-800-343-2898 or ask your investment professional. We will mail material within three business days. In addition, any of these documents, with the exception of the SAI, may be downloaded off our website at www.evergreeninvestments.com.

Information about these Funds (including the SAI) is also available on the SEC’s Internet website at http://www.sec.gov. Copies of this material may be obtained, for a duplication fee, by writing the SEC Public Reference Section, Washington D.C. 20549-6009, or by electronic request at the following e-mail address: publicinfo@sec.gov. This material can also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. For more information about the operation of the Public Reference Room, call the SEC at 1-202-942-8090.

Evergreen Distributor, Inc.

90 Park Avenue

New York, New York 10016

SEC File No.: 811-08555
536120 RV10 (6/02)

Evergreen Investments

200 Berkeley Street

Boston, MA 02116-5034

EX-2 4 emmta.htm EVERGREEN MONEY MARKET TRUST - A PROSPECTUS

Prospectus, June 1, 2002

Evergreen
Money Market Funds

Evergreen California Municipal Money Market Fund
Evergreen Money Market Fund
Evergreen Municipal Money Market Fund
Evergreen New York Municipal Money Market Fund
Evergreen U.S. Government Money Market Fund

Class A

FUND RISK/RETURN SUMMARIES:

Overview of Fund Risks
Evergreen California Municipal Money Market Fund
Evergreen Money Market Fund
Evergreen Municipal Money Market Fund
Evergreen New York Municipal Money Market Fund
Evergreen U.S. Government Money Market Fund

GENERAL INFORMATION:

In general,

the Funds included in this prospectus provide investors with a selection of investment alternatives which seek a high rate of current income consistent with stability of principal and liquidity. Evergreen Municipal Money Market Fund also seeks current income which is exempt from regular federal income tax and Evergreen California Municipal Money Market Fund and Evergreen New York Municipal Money Market Fund also seek current income which is exempt from regular federal income tax and applicable state taxes.

Fund Summaries Key

Each Fund's summary is organized around the following basic topics and questions:

INVESTMENT GOAL

INVESTMENT STRATEGY

RISK FACTORS

What are the specific risks for an investor in the Fund?

PERFORMANCE

How well has the Fund performed in the past year? The past five years? The past ten years?

EXPENSES

How much does it cost to invest in the Fund?

Overview of Fund Risks

Money Market Funds

typically rely on a combination of the following strategies:

maintaining $1.00 per share net asset value;
investing in high quality, short-term money market instruments, including U.S. government securities;
investing in compliance with industry-standard requirements for money market funds for the quality, maturity and diversification of investments; and
selling a portfolio investment: i) when the issuer's investment fundamentals begin to deteriorate; ii) to take advantage of more attractive yield opportunities; iii) when the investment no longer appears to meet the Fund's investment objective; iv) when the Fund must meet redemptions; or v) for other investment reasons which the portfolio managers deem necessary.

may be appropriate for investors who:

are seeking a conservative investment which invests in relatively safe securities;
are seeking a fund for short-term investment; and
are seeking liquidity.

Following this overview, you will find information on each Fund's specific investment strategies and risks.

Risk Factors For All Mutual Funds

Please remember that an investment in a mutual fund is:

not guaranteed to achieve its investment goal
not a deposit with a bank
not insured, endorsed or guaranteed by the FDIC or any government agency
subject to investment risks, including possible loss of your original investment

Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds.

The following are some of the most important factors that may affect the value of your investment. Other factors may be described in the discussion following this overview:

Interest Rate Risk

Credit Risk

Concentration Risk

Non-Diversification Risk

California Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and California State Income Taxes

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class A

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbol:

ECMXX

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ¹
Class A	0.45 %	0.30 %	0.33 %	1.08 %

Example of Fund Expenses

After:
1 year	$ 110
3 years	$ 343
5 years	$ 595
10 years	$ 1,317

Money Market Fund

FUND FACTS:

Goals:

High Current Income

Preservation of Capital

Liquidity

Principal Investments:

Money Market Instruments

Short-term Corporate Debt Securities

Class of Shares Offered in this Prospectus:

Class A

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbol:

EMAXX

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income as is consistent with preserving capital and providing liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

The table below shows the percentage gain or loss for the Class A shares of the Fund in each of the last ten calendar years. It should give you a general idea of the risks of investing in the Fund by showing how the Fund’s return has varied from year-to-year. This table includes the effects of Fund expenses.

Year-by-Year Total Return for Class A Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
3.88	3.22	3.98	5.37	4.90	4.99	4.95	4.62	5.80	3.58

Best Quarter:	3rd Quarter 2000	+ 1.49 %
Worst Quarter:	4th Quarter 2001	+ 0.45 %
Year-to-date total return through 3/31/2002 is +0.32%.

The next table lists the Fund’s average annual total return for the Class A shares over the past one, five and ten years and since inception. This table is intended to provide you with some indication of the risks of investing in the Fund.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 11/2/1987
Class A	1/4/1995	3.58 %	4.79 %	4.53 %	5.50 %

1. Historical performance shown for Class A prior to its inception is based on the performance of Class I, the original class offered. Class I is not offered in this prospectus. These historical returns for Class A have not been adjusted to reflect the effect of the Class' 12b-1 fees. These fees are 0.30% for Class A. Class I does not pay 12b-1 fees. If these fees had been reflected, returns for Class A would have been lower.

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ²
Class A	0.39 %	0.30 %	0.17 %	0.86 %

Example of Fund Expenses

After:
1 year	$ 88
3 years	$ 274
5 years	$ 477
10 years	$ 1,061

Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal Income Tax

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class A

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbol:

EXAXX

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income exempt from regular federal income tax, as is consistent with preserving capital and providing liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class A Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
3.16	2.48	2.76	3.48	3.08	3.18	3.10	2.87	3.70	2.37

Best Quarter:	4th Quarter 2000	+ 0.97 %
Worst Quarter:	4th Quarter 2001	+ 0.32 %
Year-to-date total return through 3/31/2002 is +0.21%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 11/2/1988
Class A	1/5/1995	2.37 %	3.04 %	3.02 %	3.70 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class A	0.42 %	0.30 %	0.14 %	0.86 %

Example of Fund Expenses

After:
1 year	$ 88
3 years	$ 274
5 years	$ 477
10 years	$ 1,061

New York Municipal Money Market Fund

FUND FACTS:

Goals:

High Rate of Current Income Exempt from Federal and New York State and New York City Income Taxes

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class A

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbol:

ENYXX

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ¹
Class A	0.40 %	0.30 %	0.29 %	0.99 %

Example of Fund Expenses

After:
1 year	$ 101
3 years	$ 315
5 years	$ 547
10 years	$ 1,213

U.S. Government Money Market Fund

FUND FACTS:

Goals:

High Current Income

Preservation of Capital

Liquidity

Principal Investment:

Short-term U.S. Government Securities

Class of Shares Offered in this Prospectus:

Class A

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

NASDAQ Symbol:

EGAXX

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income as is consistent with preserving capital and maintaining liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ¹
Class A	0.40 %	0.30 %	0.35 %	1.05 %

Example of Fund Expenses

After:
1 year	$ 107
3 years	$ 334
5 years	$ 579
10 years	$ 1,283

THE FUNDS' INVESTMENT ADVISOR

For the fiscal year ended 1/31/2002, the aggregate advisory fee paid to the investment advisor by each Fund was as follows:

Fund	% of the Fund's average daily net assets
California Municipal Money Market Fund	0.25 %
Money Market Fund ¹	0.39 %
Municipal Money Market Fund	0.42 %
New York Municipal Money Market Fund	0.29 %
U.S. Government Money Market Fund	0.40 %

1. Effective May 11, 2001, the investment advisory contract for the Fund was transferred to EIMC. There were no changes in advisory fee rates.

CALCULATING THE SHARE PRICE

Shareholders whose purchase of shares of the Fund is accepted at or before 2 p.m. Eastern time for Money Market Fund and U.S. Government Money Market Fund, and 12:00 Noon Eastern time for California Municipal Money Market Fund, Municipal Money Market Fund and New York Municipal Money Market Fund on any day the market is open, except in those cases where the market closes earlier, will receive the dividend declared by the Fund for that day; shareholders whose purchase of shares is accepted after the times noted above will begin earning dividends on the next business day after the Fund accepts their order.

HOW TO CHOOSE AN EVERGREEN FUND

When choosing an Evergreen Fund, you should:

Most importantly, read the prospectus to see if the Fund is suitable for you.
Consider talking to an investment professional. He or she is qualified to give you investment advice based on your investment goals and financial situation and will be able to answer questions you may have after reading the Fund's prospectus. He or she can also assist you through all phases of opening your account.
Request any additional information you want about the Fund, such as the Statement of Additional Information (SAI), Annual Report or Semi-annual Report by calling 1-800-343-2898. In addition, any of these documents, with the exception of the SAI, may be downloaded off our website at www.evergreeninvestments.com.

HOW TO CHOOSE THE SHARE CLASS THAT BEST SUITS YOU

After choosing a Fund, you select a share class. The Funds offer up to six different share classes. Only Class A shares are offered in this prospectus.

Class A

HOW TO BUY SHARES

	Minimum Initial Purchase of Class A Shares	Minimum Additional Purchases
Regular Accounts	$ 1,000	None
IRAs	$ 250	None
Systematic Investment Plan	$ 50	$25/monthly

Method	Opening an Account	Adding to an Account
By Mail or through an Investment Professional	Complete and sign the account application. Applications may be downloaded off our website at www.evergreeninvestments.com. Make the check payable to Evergreen Funds. Cash, credit cards, third party checks, credit card checks or money orders will not be accepted. Mail the application and your check to the address below: Postal Service Address: Evergreen Funds P.O. Box 8400 Boston, MA 02266-8400 Overnight Address: Evergreen Funds 66 Brooks Drive, Suite 8400 Braintree, MA 02184-3800 Or deliver them to your investment professional (provided he or she has a broker-dealer arrangement with EDI).	Make your check payable to Evergreen Funds. Write a note specifying: the Fund name share class your account number the name(s) in which the account is registered Mail to the address to the left or deliver to your investment professional (provided he or she has a broker-dealer arrangement with EDI).
By Phone	Call 1-800-343-2898 to set up an account number and get wiring instructions. Instruct your bank to wire or transfer your purchase (they may charge a wiring fee). Complete the account application and mail to: Postal Service Address: Evergreen Funds P.O. Box 8400 Boston, MA 02266-8400 Overnight Address: Evergreen Funds 66 Brooks Drive, Suite 8400 Braintree, MA 02184-3800 Trades accepted after 2 p.m. Eastern time for Money Market Fund and U.S. Government Money Market Fund and 12 Noon Eastern time for California Municipal Money Market Fund, Municipal Money Market Fund and New York Municipal Money Market Fund on market trading days will receive dividends starting on the next market trading day. ¹	Call the Evergreen Express Line at 1-800-346-3858 24 hours a day or to speak with an Evergreen Funds service representative call 1-800-343-2898 between 8 a.m. and 6 p.m. Eastern time, on any business day. If your bank account is set up on file, you can request either: Federal Funds Wire (offers immediate access to funds) or Electronic transfer through the Automated Clearing House which avoids wiring fees.
By Exchange	You can make an additional investment by exchange from an existing Evergreen Funds account by contacting your investment professional or an Evergreen Funds service representative, calling the Evergreen Express Line at 1-800-346-3858 or by visiting our website at www.evergreeninvestments.com. ² You can only exchange shares from your account within the same class and under the same registration. There is no sales charge or redemption fee when exchanging funds within the Evergreen Funds family. ³ Orders placed before 4 p.m. Eastern time on market trading days will be processed at that day's closing share price. Orders placed after 4 p.m. Eastern time will be processed at the next market trading day's closing price. ¹ Exchanges are limited to three per calendar quarter, but in no event more than five per calendar year. Exchanges between accounts which do not have identical ownership must be made in writing with a signature guarantee. (See "Exceptions: Redemption Requests That Require A Signature Guarantee" on the next page.)
Systematic Investment Plan (SIP)	You can transfer money automatically from your bank account into your Fund account on a monthly or quarterly basis. Initial investment minimum is $50 if you invest at least $25 per month with this service. To enroll, check off the box on the account application and provide: your bank account information the amount and date of your monthly or quarterly investment.	To establish automatic investing for an existing account, call 1-800-343-2898 for an application. The minimum is $25 per month or $75 per quarter. You can also establish an investing program through direct deposit from your paycheck. Call 1-800-343-2898 for details.

1. The Fund's shares may be made available through financial service firms which are also investment dealers and which have a service agreement with EDI. The Fund has approved the acceptance of purchase and repurchase request orders effective as of the time of their receipt by certain authorized financial intermediaries or their designees. The Evergreen Funds reserve the right to adjust the closing time to coincide with an earlier closing of the New York Stock Exchange or due to other unusual circumstances.

2. Once you have authorized either the telephone exchange or redemption service, anyone with a Personal Identification Number (PIN) and the required account information (including your investment professional) can request a telephone transaction in your account. All calls are recorded and may be monitored for verification, recordkeeping and quality-assurance purposes. The Evergreen Funds reserve the right to terminate the exchange privilege of any shareholder who exceeds the listed maximum number of exchanges, as well as to reject any large dollar exchange or purchase if placing it would, in the judgment of the portfolio manager, adversely affect the price of the Fund.

3. This does not apply to exchanges from Class A shares of an Evergreen money market fund, unless the account has been subject to a previous sales charge.

HOW TO REDEEM SHARES

We offer you several convenient ways to redeem your shares in any of the Evergreen Funds:

Methods	Requirements
Call Us	Call the Evergreen Express Line at 1-800-346-3858 24 hours a day or to speak with an Evergreen Funds service representative call 1-800-343-2898 between 8 a.m. and 6 p.m. Eastern time, on any business day. This service must be authorized ahead of time, and is only available for regular accounts. ¹ All authorized requests made before 4 p.m. Eastern time on market trading days will be processed at that day's closing price. Requests made after 4 p.m. Eastern time will be processed the next market trading day. ² We can either: wire the proceeds into your bank account (service charges may apply) electronically transmit the proceeds into your bank account via the Automated Clearing House service mail you a check. All telephone calls are recorded and may be monitored for your protection. We are not responsible for acting on telephone orders we believe are genuine. See "Exceptions: Redemption Requests That Require a Signature Guarantee" below for requests that must be made in writing with your signature guaranteed.
Write Us	You can mail a redemption request to: Postal Service Address: Evergreen Funds P.O. Box 8400 Boston, MA 02266-8400 Overnight Address: Evergreen Funds 66 Brooks Drive, Suite 8400 Braintree, MA 02184-3800 Your letter of instructions must: list the Fund name and the account number indicate the number of shares or dollar value you wish to redeem be signed by the registered owner(s) See "Exceptions: Redemption Requests That Require A Signature Guarantee" below for requests that must be signature guaranteed. To redeem from an IRA or other retirement account, call 1-800-343-2898 for special instructions.
Redeem Your Shares in Person	You may also redeem your shares by contacting your investment professional or an Evergreen Funds service representative. A fee may be charged for this service.
Systematic Withdrawal Plan (SWP)	You can transfer money automatically from your Fund account on a monthly or quarterly basis - without redemption fees. The withdrawal can be mailed to you, or deposited directly into your bank account. The minimum is $75 per month. The maximum is 1.00% of your account per month or 3.00% per quarter. To enroll, call 1-800-343-2898 for instructions.

Timing of Proceeds

Exceptions: Redemption Requests That Require A Signature Guarantee

You are redeeming more than $50,000.
You want the proceeds transmitted into a bank account not listed on the account.
You want the proceeds payable to anyone other than the registered owner(s) of the account.
Either your address or the address of your bank account has been changed within 30 days.
The account is registered in the name of a fiduciary corporation or any other organization.
In these cases, additional documentation is required:
corporate accounts: certified copy of corporate resolution
fiduciary accounts: copy of the power of attorney or other governing document

Who Can Provide A Signature Guarantee:

Commercial Bank
Trust Company
Savings Association
Credit Union
Member of a U.S. stock exchange

OTHER SERVICES

Evergreen Express Line
1-800-346-3858

Automatic Reinvestment of Distributions

Payroll Deduction

Telephone Investment Plan

Dividend Exchange

Reinstatement Privileges

THE TAX CONSEQUENCES OF INVESTING
IN THE FUNDS

You may be taxed in two ways:

On Fund distributions (dividends and capital gains).
On any profit you make when you sell any or all of your shares.

Fund Distributions

A mutual fund passes along to all of its shareholders the net income or profits it receives from its investments. The shareholders of the fund then pay any taxes due, whether they receive these distributions in cash or elect to have them reinvested. California Municipal Money Market Fund, Municipal Money Market Fund and New York Municipal Money Market Fund expect that substantially all of their regular dividends will be exempt from federal income tax other than the alternative minimum tax. Otherwise, the Funds will distribute two types of taxable income to you:

Dividends. To the extent that regular dividends are derived from investment income that is not tax-exempt, or from short-term capital gains, you will have to include them in your federal taxable income. Each Fund pays a monthly dividend from the dividends, interest and other income on the securities in which it invests.
Capital Gains. When a mutual fund sells a security it owns for a profit, the result is a capital gain. The Funds generally distribute capital gains, if any, at least once a year, near the end of the calendar year. Short-term capital gains reflect securities held by the Funds for a year or less and are considered ordinary income just like dividends. Profits on securities held longer than 12 months are considered long-term capital gains and are taxed at a special tax rate (20% for most taxpayers). It is not anticipated that any significant capital gains will be realized by the Funds.

Dividend and Capital Gain Reinvestment

Profits You Realize When You Redeem Shares

Tax Reporting

Retirement Plans

FEES AND EXPENSES OF THE FUNDS

Every mutual fund has fees and expenses that are assessed either directly or indirectly. This section describes each of those fees.

Management Fee

The management fee pays for the normal expenses of managing the Fund, including portfolio manager salaries, research costs, corporate overhead expenses and related expenses.

12b-1 Fees

The Trustees of the Evergreen Funds have approved a policy to assess annual 12b-1 fees of up to 0.75% of the average daily net assets of Class A shares. However, currently the 12b-1 fees for Class A shares are limited to 0.30% of the average daily net assets of the class and all or a portion of these fees may be voluntarily waived from time to time. These fees increase the cost of your investment. The purpose of the 12b-1 fees is to promote the sale of more shares of the Fund to the public. The Fund may use 12b-1 fees for advertising and marketing and as a "service fee" to broker-dealers, banks and other financial institutions for additional shareholder services and/or the maintenance of accounts.

Other Expenses

Total Fund Operating Expenses

FINANCIAL HIGHLIGHTS

This section looks in detail at the results for one share in Class A of the Funds - how much income it earned, how much of this income was passed along as a distribution and how much the return was reduced by expenses. The following tables have been derived from financial information audited by KPMG LLP, the Funds' independent auditors. For the fiscal years or periods ended prior to January 31, 2000, the tables for Money Market Fund and Municipal Money Market Fund were derived from financial information audited by other accountants. For a more complete picture of the Funds' financial statements, please see the Funds' Annual Report as well as the SAI.

California Municipal Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS A
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0 ^††

Distributions to shareholders from
Net investment income	0 ^††

Net asset value, end of period	$ 1.00
Total return	0.40 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 117,217
Ratios to average net assets
Expenses‡	0.89 %^†
Net investment income	1.12 %^†
^(a) For the period from September 24, 2001 (commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net asets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Represents an amount less than $0.005 per share.

Money Market Fund

						Year Ended
	Year Ended January 31,					August 31,
	2002	2001	2000	1999	1998 (a)	1997
CLASS A
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Net investment income	0.03	0.06	0.05	0.05	0.02	0.05

Distributions to shareholders from
Net investment income	- 0.03	- 0.06	- 0.05	- 0.05	- 0.02	- 0.05

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	3.20 %	5.84 %	4.68 %	4.90 %	2.08 %	4.95 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 9,605	$ 2,302	$ 8,931	$ 5,210	$ 2,910	$ 2,803
Ratios to average net assets
Expenses‡	0.88 %	0.84 %	0.83 %	0.85 %	0.89 %^†	0.79 %
Net investment income	2.42 %	5.54 %	4.63 %	4.78 %	4.91 %^†	4.87 %
^(a) For the five months ended January 31, 1998. The Fund changed its fiscal year end from August 31 to January 31, effective January 31, 1998.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

Municipal Money Market Fund

						Year Ended
	Year Ended January 31,					August 31,
	2002	2001	2000	1999	1998 (a)	1997
CLASS A
Net asset value, beginning of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Net investment income	0.02	0.04	0.03	0.03	0.01	0.03

Distributions to shareholders from
Net investment income	- 0.02	- 0.04	- 0.03	- 0.03	- 0.01	- 0.03

Net asset value, end of period	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00	$ 1.00
Total return	2.18 %	3.69 %	2.90 %	3.07 %	1.34 %	3.13 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 953	$ 126	$ 708	$ 737	$ 672	$ 667
Ratios to average net assets
Expenses‡	0.88 %	0.86 %	0.86 %	0.87 %	0.88 %^†	0.83 %
Net investment income	1.47 %	3.59 %	2.84 %	3.02 %	3.18 %^†	3.09 %
^(a) For the five months ended January 31, 1998. The Fund changed its fiscal year end form August 31 to January 31, effective January 31, 1998.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

New York Municipal Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS A
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0 ^††

Distributions to shareholders from
Net investment income	0 ^††

Net asset value, end of period	$ 1.00
Total return	0.33 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 94,200
Ratios to average net assets
Expenses‡	0.88 %^†
Net investment income	0.92 %^†
^(a) For the period form September 24, 2001 (commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Represents an amount less than $0.005 per share.

U.S. Government Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS A
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0.01

Distributions to shareholders from
Net investment income	- 0.01

Net asset value, end of period	$ 1.00
Total return	1.33 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 3,774,155
Ratios to average net assets
Expenses‡	0.88 %^†
Net investment income	1.57 %^†
^(a) For the period from June 26, 2001 (commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

OTHER FUND PRACTICES

Taxable securities in which California Municipal Money Market Fund, Municipal Money Market Fund and New York Municipal Money Market Fund may invest on a short-term basis include obligations of the U.S. government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest rating categories by any nationally recognized statistical ratings organization; commercial paper rated in the highest grade by Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services; and certificates of deposit issued by U.S. branches of U.S. banks with assets of $1 billion or more.

California Municipal Money Market Fund and New York Municipal Money Market Fund do not intend to concentrate their investments in any one industry. However, from time to time, a Fund may invest 25% or more of its assets in municipal securities which are related in such a way that an economic, business or political development or change affecting one such obligation would also affect the others. Two examples of obligations related in this way are (i) an obligation, the interest on which is paid from revenues of similar type projects and (ii) obligations whose issuers are located in the same state.

Please consult the SAI for more information regarding these and other investment practices used by the Funds, including risks.

Evergreen Funds

Institutional Money Market Funds

Institutional Money Market Fund

Institutional Municipal Money Market Fund

Institutional Treasury Money Market Fund

Institutional U.S. Government Money Market Fund

Institutional 100% Treasury Money Market Fund

Cash Management Money Market Fund

Prime Cash Management Money Market Fund

Money Market Funds

California Municipal Money Market Fund

Florida Municipal Money Market Fund

Money Market Fund

Municipal Money Market Fund

New Jersey Municipal Money Market Fund

New York Municipal Money Market Fund

Pennsylvania Municipal Money Market Fund

Treasury Money Market Fund

U.S. Government Money Market Fund

State Municipal Bond Funds

Connecticut Municipal Bond Fund

Florida High Income Municipal Bond Fund

Florida Municipal Bond Fund

Georgia Municipal Bond Fund

Maryland Municipal Bond Fund

New Jersey Municipal Bond Fund

North Carolina Municipal Bond Fund

Pennsylvania Municipal Bond Fund

South Carolina Municipal Bond Fund

Virginia Municipal Bond Fund

National Municipal Bond Funds

High Grade Municipal Bond Fund

High Income Municipal Bond Fund

Intermediate Term Municipal Bond Fund

Municipal Bond Fund

Short-Intermediate Municipal Bond Fund

Short and Intermediate Term Bond Funds

Adjustable Rate Fund

Fixed Income Fund

Intermediate Term Bond Fund

Limited Duration Fund

Short-Duration Income Fund

Intermediate and Long Term Bond Funds

Core Bond Fund

Diversified Bond Fund

Fixed Income Fund II

High Yield Bond Fund

Income Plus Fund

Quality Income Fund

Select High Yield Bond Fund

Strategic Income Fund

U.S. Government Fund

Balanced Funds

Balanced Fund

Foundation Fund

Select Balanced Fund

Tax Strategic Foundation Fund

Growth and Income Funds

Blue Chip Fund

Equity Income Fund

Equity Index Fund

Growth and Income Fund

Small Cap Value Fund

Strategic Value Fund

Value Fund

Domestic Growth Funds

Aggressive Growth Fund

Capital Growth Fund

Core Equity Fund

Evergreen Fund

Growth Fund

Large Company Growth Fund

Masters Fund

Omega Fund

Premier 20 Fund

Secular Growth Fund

Select Small Cap Growth Fund

Select Strategic Growth Fund

Small Company Growth Fund

Special Equity Fund

Special Values Fund

Stock Selector Fund

Tax Strategic Equity Fund

Sector Funds

Health Care Fund

Technology Fund

Utility and Telecommunications Fund

Global and International Funds

Emerging Markets Growth Fund

Global Leaders Fund

Global Opportunities Fund

International Bond Fund

International Growth Fund

Latin America Fund

Precious Metals Fund

Evergreen Express Line

Call 1-800-346-3858

24 hours a day to

check your account
order a statement
get a Fund’s current price, yield and total return
buy, redeem or exchange Fund shares

Shareholder Services

Call 1-800-343-2898

Monday-Friday, 8 a.m. to 6 p.m. Eastern time to

buy, redeem or exchange shares
order applications
get assistance with your account

Information Line for Hearing and Speech Impaired (TTY/TDD)

Call 1-800-343-2888

Monday-Friday, 8 a.m. to 6 p.m. Eastern time

Write us a letter

Evergreen Funds

P.O. Box 8400

Boston, MA 02266-8400

to buy, redeem or exchange shares
to change the registration on your account
for general correspondence

For express, registered or certified mail

Evergreen Funds

66 Brooks Drive, Suite 8400

Braintree, MA 02184-3800

Visit us on-line

www.evergreeninvestments.com

Confirmation Notices — A confirmation of your transaction, other than SIP and SWP, is sent within five days. Please review and promptly notify Evergreen Funds of any inaccuracies.

Annual and Semi-annual reports — You will receive a detailed financial report on each Fund you invest in twice a year.

Tax Forms — Each January you will receive any Fund tax information you need to complete your tax returns as well as the Evergreen Tax Information Guide.

For More Information About the Evergreen Money Market Funds, Ask for:

Evergreen Distributor, Inc.

90 Park Avenue

New York, New York 10016

SEC File No.: 811-08555
559021 RV1 (6/02)

Evergreen Investments

200 Berkeley Street

Boston, MA 02116-5034

EX-3 5 emmts.htm EVERGREEN MONEY MARKET TRUST - S PROSPECTUS

Prospectus, June 1, 2002

Evergreen
Money Market Funds

Evergreen California Municipal Money Market Fund
Evergreen Florida Municipal Money Market Fund
Evergreen Money Market Fund
Evergreen Municipal Money Market Fund
Evergreen New Jersey Municipal Money Market Fund
Evergreen New York Municipal Money Market Fund
Evergreen Pennsylvania Municipal Money Market Fund
Evergreen Treasury Money Market Fund
Evergreen U.S. Government Money Market Fund

Class S

FUND RISK/RETURN SUMMARIES:

GENERAL INFORMATION:

The Funds' Investment Advisor
Calculating the Share Price
How to Choose an Evergreen Fund
How to Choose the Share Class That Best Suits You
How to Buy and Redeem Shares
Other Services
The Tax Consequences of Investing in the Funds
Fees and Expenses of the Funds
Financial Highlights
Other Fund Practices

In general,

Fund Summaries Key

Each Fund's summary is organized around the following basic topics and questions:

INVESTMENT GOAL

INVESTMENT STRATEGY

RISK FACTORS

What are the specific risks for an investor in the Fund?

PERFORMANCE

How well has the Fund performed in the past year? The past five years? The past ten years?

EXPENSES

How much does it cost to invest in the Fund?

Overview of Fund Risks

Money Market Funds

typically rely on a combination of the following strategies:

maintaining $1.00 per share net asset value;
investing in high quality, short-term money market instruments, including U.S. government securities;
investing in compliance with industry-standard requirements for money market funds for the quality, maturity and diversification of investments; and
selling a portfolio investment: i) when the issuer's investment fundamentals begin to deteriorate; ii) to take advantage of more attractive yield opportunities; iii) when the investment no longer appears to meet the Fund's investment objective; iv) when the Fund must meet redemptions; or v) for other investment reasons which the portfolio managers deem necessary.

may be appropriate for investors who:

are seeking a conservative investment which invests in relatively safe securities;
are seeking a fund for short-term investment; and
are seeking liquidity.

Following this overview, you will find information on each Fund's specific investment strategies and risks.

Risk Factors For All Mutual Funds

Please remember that an investment in a mutual fund is:

not guaranteed to achieve its investment goal
not a deposit with a bank
not insured, endorsed or guaranteed by the FDIC or any government agency
subject to investment risks, including possible loss of your original investment

Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds.

The following are some of the most important factors that may affect the value of your investment. Other factors may be described in the discussion following this overview:

Interest Rate Risk

Credit Risk

Concentration Risk

Non-Diversification Risk

California Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and California State Income Taxes

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ¹
Class S	0.45 %	0.60 %	0.33 %	1.38 %

Example of Fund Expenses

After:
1 year	$ 141
3 years	$ 437
5 years	$ 755
10 years	$ 1,657

Florida Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and Florida State Taxes

Preservation of Capital

Liquidity

Stability of Principal

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

The table below shows the percentage gain or loss for the Class S shares of the Fund in each calendar year since 10/26/1998. It should give you a general idea of the risks of investing in the Fund by showing how the Fund’s return has varied from year-to-year. This table includes the effects of Fund expenses.

Year-by-Year Total Return for Class S Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
							2.66	3.33	1.90

Best Quarter:	2nd Quarter 2000	+ 0.90 %¹
Worst Quarter:	4th Quarter 2001	+ 0.23 %
Year-to-date total return through 3/31/2002 is +0.11%.

The next table lists the Fund’s average annual total return for the Class S shares over the past year and since inception. This table is intended to provide you with some indication of the risks of investing in the Fund.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 10/26/1998
Class S	6/30/2000	1.90 %	N/A	N/A	2.63 %

1. Historical performance shown for Class S prior to its inception is based on the performance of Class A, the original class offered. Class A is not offered in this prospectus. These historical returns for Class S have not been adjusted to reflect the effect of the Class' 12b-1 fees. These fees are 0.60% for Class S and 0.30% for Class A. If these fees had been reflected, returns for Class S would have been lower.

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class S	0.41 %	0.60 %	0.14 %	1.15 %

Example of Fund Expenses

After:
1 year	$ 117
3 years	$ 365
5 years	$ 633
10 years	$ 1,398

Money Market Fund

FUND FACTS:

Goals:

High Current Income

Preservation of Capital

Liquidity

Principal Investments:

Money Market Instruments

Short-term Corporate Debt Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income as is consistent with preserving capital and providing liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

The table below shows the percentage gain or loss for the Class S shares of the Fund in each of the last ten calendar years. It should give you a general idea of the risks of investing in the Fund by showing how the Fund’s return has varied from year-to-year. This table includes the effects of Fund expenses.

Year-by-Year Total Return for Class S Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
3.88	3.22	3.98	5.66	5.22	5.31	5.26	4.93	5.80	3.27

Best Quarter:	2nd Quarter 2000	+ 1.47 %¹
Worst Quarter:	4th Quarter 2001	+ 0.37 %
Year-to-date total return through 3/31/2002 is +0.25%.

The next table lists the Fund’s average annual total return for the Class S shares over the past one, five and ten years and since inception. This table is intended to provide you with some indication of the risks of investing in the Fund.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 11/2/1987
Class S	6/30/2000	3.27 %	4.91 %	4.65 %	5.59 %

1. Historical performance shown for Class S prior to its inception is based on the performance of Class I, the original class offered. Class I is not offered in this prospectus. These historical returns for Class S have not been adjusted to reflect the effect of the Class' 12b-1 fees. These fees are 0.60% for Class S. Class I does not pay 12b-1 fees. If these fees had been reflected, returns for Class S would have been lower.

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class S	0.39 %	0.60 %	0.17 %	1.16 %

Example of Fund Expenses

After:
1 year	$ 118
3 years	$ 368
5 years	$ 638
10 years	$ 1,409

Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal Income Tax

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income exempt from regular federal income tax, as is consistent with preserving capital and providing liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class S Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
3.16	2.48	2.76	3.76	3.39	3.49	3.40	3.18	3.70	2.06

Best Quarter:	2nd Quarter 2000	+ 1.04 %¹
Worst Quarter:	4th Quarter 2001	+ 0.25 %
Year-to-date total return through 3/31/2002 is +0.14%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 11/2/1988
Class S	6/30/2000	2.06 %	3.16 %	3.14 %	3.80 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class S	0.42 %	0.60 %	0.14 %	1.16 %

Example of Fund Expenses

After:
1 year	$ 118
3 years	$ 368
5 years	$ 638
10 years	$ 1,409

New Jersey Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and New Jersey State Income Taxes

Preservation of Capital

Liquidity

Stability of Principal

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class S Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
							2.54	3.31	1.97

Best Quarter:	2nd Quarter 2000	+ 0.90 %¹
Worst Quarter:	4th Quarter 2001	+ 0.25 %
Year-to-date total return through 3/31/2002 is +0.12%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 10/26/1998
Class S	6/30/2000	1.97 %	N/A	N/A	2.61 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class S	0.41 %	0.60 %	0.14 %	1.15 %

Example of Fund Expenses

After:
1 year	$ 117
3 years	$ 365
5 years	$ 633
10 years	$ 1,398

New York Municipal Money Market Fund

FUND FACTS:

Goals:

High Rate of Current Income Exempt from Federal and New York State and New York City Income Taxes

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ¹
Class S	0.40 %	0.60 %	0.29 %	1.29 %

Example of Fund Expenses

After:
1 year	$ 131
3 years	$ 409
5 years	$ 708
10 years	$ 1,556

Pennsylvania Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and Pennsylvania State Income Taxes

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

The table below shows the percentage gain or loss for the Class S shares of the Fund in each calendar year since 8/15/1991. It should give you a general idea of the risks of investing in the Fund by showing how the Fund’s return has varied from year-to-year. This table includes the effects of Fund expenses.

Year-by-Year Total Return for Class S Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
2.87	2.12	2.54	3.66	3.07	3.22	3.09	2.96	3.53	1.98

Best Quarter:	2nd Quarter 1995	+ 0.99 %¹
Worst Quarter:	4th Quarter 2001	+ 0.27 %
Year-to-date total return through 3/31/2002 is +0.14%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 8/15/1991
Class S	6/30/2000	1.98 %	2.95 %	2.90 %	2.96 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class S	0.36 %	0.60 %	0.12 %	1.08 %

Example of Fund Expenses

After:
1 year	$ 110
3 years	$ 343
5 years	$ 595
10 years	$ 1,317

Treasury Money Market Fund

FUND FACTS:

Goals:

Stability of Principal

Current Income

Principal Investments:

Short-term U.S. Treasury Obligations

Repurchase Agreements backed by Short-term U.S. Treasury Obligations

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to maintain stability of principal while earning current income.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

The table below shows the percentage gain or loss for the Class S shares of the Fund in each calendar year since 3/6/1991. It should give you a general idea of the risks of investing in the Fund by showing how the Fund’s return has varied from year-to-year. This table includes the effects of Fund expenses.

Year-by-Year Total Return for Class S Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
3.36	2.73	3.75	5.38	4.78	4.91	4.83	4.33	5.43	3.04

Best Quarter:	4th Quarter 2000	+ 1.39 %
Worst Quarter:	4th Quarter 2001	+ 0.37 %
Year-to-date total return through 3/31/2002 is +0.29%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 3/6/1991
Class S	6/30/2000	3.04 %	4.50 %	4.25 %	4.34 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class S	0.31 %	0.60 %	0.09 %	1.00 %

Example of Fund Expenses

After:
1 year	$ 102
3 years	$ 318
5 years	$ 552
10 years	$ 1,225

U.S. Government Money Market Fund

FUND FACTS:

Goals:

High Current Income

Preservation of Capital

Liquidity

Principal Investment:

Short-term U.S. Government Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income as is consistent with preserving capital and maintaining liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class S	0.40 %	0.60 %	0.35 %	1.35 %

Example of Fund Expenses

After:
1 year	$ 137
3 years	$ 428
5 years	$ 739
10 years	$ 1,624

THE FUNDS' INVESTMENT ADVISOR

For the fiscal year ended 1/31/2002, the aggregate advisory fee paid to the investment advisor by each Fund was as follows:

Fund	% of the Fund's average daily net assets
California Municipal Money Market Fund	0.25 %
Florida Municipal Money Market Fund	0.41 %
Money Market Fund ¹	0.39 %
Municipal Money Market Fund	0.42 %
New Jersey Municipal Money Market Fund	0.41 %
New York Municipal Money Market Fund	0.29 %
Pennsylvania Municipal Money Market Fund	0.36 %
Treasury Money Market Fund ¹	0.31 %
U.S. Government Money Market Fund	0.40 %

1. Effective May 11, 2001, the investment advisory contract for the Fund was transferred to EIMC. There were no changes in advisory fee rates.

CALCULATING THE SHARE PRICE

HOW TO CHOOSE AN EVERGREEN FUND

When choosing an Evergreen Fund, you should:

Most importantly, read the prospectus to see if the Fund is suitable for you.
Consider talking to an investment professional. He or she is qualified to give you investment advice based on your investment goals and financial situation and will be able to answer questions you may have after reading the Fund's prospectus. He or she can also assist you through all phases of opening your account.
Request any additional information you want about the Fund, such as the Statement of Additional Information (SAI), Annual Report or Semi-annual Report by calling 1-800-343-2898. In addition, any of these documents, with the exception of the SAI, may be downloaded off our website at www.evergreeninvestments.com.

HOW TO CHOOSE THE SHARE CLASS THAT BEST SUITS YOU

After choosing a Fund, you select a share class. The Funds offer up to six different share classes. Only Class S shares are offered in this prospectus.

Class S

Each Fund offers Class S shares at NAV without a front-end sales charge or deferred sales charge. However, Class S shares are subject to 12b-1 fees and certain broker-dealers and other financial institutions may impose a fee in connection with purchases of Class S shares of the Funds.

HOW TO BUY AND REDEEM SHARES

Class S shares are sold through certain broker-dealers and financial institutions which have selling agreements with Evergreen Distributors Inc. (EDI). You can also redeem your Class S shares of the Funds at NAV through certain broker-dealers and financial institutions which have selling agreements with EDI on any day the New York Stock Exchange is open pursuant to the Funds' procedures. Investors should refer to their broker-dealer or financial institution as appropriate for instruction and further information.

OTHER SERVICES

Automatic Reinvestment of Distributions

THE TAX CONSEQUENCES OF INVESTING
IN THE FUNDS

You may be taxed in two ways:

On Fund distributions (dividends and capital gains).
On any profit you make when you sell any or all of your shares.

Fund Distributions

Dividends. To the extent that regular dividends are derived from investment income that is not tax-exempt, or from short-term capital gains, you will have to include them in your federal taxable income. Each Fund pays a monthly dividend from the dividends, interest and other income on the securities in which it invests.
Capital Gains. When a mutual fund sells a security it owns for a profit, the result is a capital gain. The Funds generally distribute capital gains, if any, at least once a year, near the end of the calendar year. Short-term capital gains reflect securities held by the Funds for a year or less and are considered ordinary income just like dividends. Profits on securities held longer than 12 months are considered long-term capital gains and are taxed at a special tax rate (20% for most taxpayers). It is not anticipated that any significant capital gains will be realized by the Funds.

Dividend and Capital Gain Reinvestment

Profits You Realize When You Redeem Shares

Tax Reporting

Your broker-dealer or financial institution provides you and the IRS with a tax statement of your dividend and capital gains distributions for each calendar year on Form 1099 DIV. Proceeds from a sale are reported on Form 1099B. You must report these on your tax return. You could pay a penalty if you neglect to report them.

FEES AND EXPENSES OF THE FUNDS

Every mutual fund has fees and expenses that are assessed either directly or indirectly. This section describes each of those fees.

Management Fee

The management fee pays for the normal expenses of managing the Fund, including portfolio manager salaries, research costs, corporate overhead expenses and related expenses.

12b-1 Fees

The Trustees of the Evergreen Funds have approved a policy to assess annual 12b-1 fees of up to 1.00% of the average daily net assets of Class S shares. However, currently the 12b-1 fees for Class S shares are limited to 0.60% of the average daily net assets of the class. These fees increase the cost of your investment. The purpose of the 12b-1 fees is to promote the sale of more shares of the Fund to the public. The Fund may use the 12b-1 fees for advertising and marketing and as a “service fee” to broker-dealers, banks and other financial institutions for additional shareholder services and/or the maintenance of accounts.

Other Expenses

Total Fund Operating Expenses

FINANCIAL HIGHLIGHTS

This section looks in detail at the results for one share in Class S of the Funds -- how much income it earned, how much of this income was passed along as a distribution and how much the return was reduced by expenses. The following tables have been derived from financial information audited by KPMG LLP, the Funds' independent auditors. For a more complete picture of the Funds' financial statements, please see the Funds' Annual Report as well as the SAI.

California Municipal Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS S
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0 ^††

Distributions to shareholders from
Net investment income	0 ^††

Net asset value, end of period	$ 1.00
Total return	0.29 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 41,972
Ratios to average net assets
Expenses‡	0.83 %^†
Net investment income	0.63 %^†
^(a) For the period from September 24, 2001(commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Represents an amount less than $0.005 per share.

Florida Municipal Money Market Fund

	Year Ended January 31,
	2002	2001 (a)
CLASS S
Net asset value, beginning of period	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.02	0.02

Distributions to shareholders from
Net investment income	- 0.02	- 0.02

Net asset value, end of period	$ 1.00	$ 1.00
Total return	1.73 %	1.87 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 206,592	$ 163,045
Ratios to average net assets
Expenses‡	1.15 %	1.16 %^†
Net investment income	1.58 %	3.08 %^†
^(a) For the period from June 30, 2000 (commencement of class operations) to January 31, 2001.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

Money Market Fund

	Year Ended January 31,
	2002	2001 (a)
CLASS S
Net asset value, beginning of period	$ 1.00	$ 1.00
Net investment income	0.03	0.03

Distributions to shareholders from
Net investment income	- 0.03	- 0.03

Net asset value, end of period	$ 1.00	$ 1.00
Total return	2.89 %	3.33 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 9,954	$ 10,771
Ratios to average net assets
Expenses‡	1.16 %	1.15 %^†
Net investment income	2.89 %	5.56 %^†
^(a) For the period from June 30, 2000 (commencement of class operations) to January 31, 2001.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

Municipal Money Market Fund

	Year Ended January 31,
	2002	2001 (a)
CLASS S
Net asset value, beginning of period	$ 1.00	$ 1.00
Net investment income	0.02	0.02

Distributions to shareholders from
Net investment income	- 0.02	- 0.02

Net asset value, end of period	$ 1.00	$ 1.00
Total return	1.88 %	1.99 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 638	$ 574
Ratios to average net assets
Expenses‡	1.16 %	1.16 %^†
Net investment income	1.82 %	3.31 %^†
^(a) For the period from June 30, 2000 (commencement of class operations) to January 31, 2001.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

New Jersey Municipal Money Market Fund

	Year Ended January 31,
	2002	2001 (a)
CLASS S
Net asset value, beginning of period	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.02	0.02

Distributions to shareholders from
Net investment income	- 0.02	- 0.02

Net asset value, end of period	$ 1.00	$ 1.00
Total return	1.81 %	1.84 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 136	$ 98
Ratios to average net assets
Expenses‡	1.15 %	1.14 %^†
Net investment income	1.71 %	3.07 %^†
^(a) For the period from June 30, 2000 (commencement of class operations) to January 31, 2001.
^‡ The ratio of expenses to average net assets excludes expese reductions but includes fee waivers.
^† Annualized.

New York Municipal Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS S
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0 ^††

Distributions to shareholders from
Net investment income	0 ^††

Net asset value, end of period	$ 1.00
Total return	0.22 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 24,092
Ratios to average net assets
Expenses‡	1.18 %^†
Net investment income	0.54 %^†
^(a) For the period from September 24, 2001 (commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Represents an amount less than $0.005 per share.

Pennsylvania Municipal Money Market Fund

	Year Ended January 31,
	2002	2001 (a)
CLASS S
Net asset value, beginning of period	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.02	0.02

Distributions to shareholders from
Net investment income	- 0.02	- 0.02

Net asset value, end of period	$ 1.00	$ 1.00
Total return	1.82 %	1.89 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 155	$ 140
Ratios to average net assets
Expenses‡	1.08 %	1.09 %^†
Net investment income	1.79 %	3.17 %^†
^(a) For the period from June 30, 2000 (commencement of class operations) to January 31, 2001.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

Treasury Money Market Fund

	Year Ended January 31,
	2002	2001 (a)
CLASS S
Net asset value, beginning of period	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.03	0.03

Distributions to shareholders from
Net investment income	- 0.03	- 0.03

Net asset value, end of period	$ 1.00	$ 1.00
Total return	2.70 %	3.24 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 1,826	$ 2,135
Ratios to average net assets
Expenses‡	1.00 %	1.04 %^†
Net investment income	2.71 %	5.50 %^†
^(a) For period from June 30, 2000 (commencement of class operations) to January 31, 2001.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

U.S. Government Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS S
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0.01

Distributions to shareholders from
Net investment income	- 0.01

Net asset value, end of period	$ 1.00
Total return	1.08 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 1
Ratios to average net assets
Expenses‡	1.38 %^†
Net investment income	1.15 %^†
^(a) For the period from June 26, 2001 (commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

OTHER FUND PRACTICES

Please consult the SAI for more information regarding these and other investment practices used by the Funds, including risks.

Evergreen Funds

Institutional Money Market Funds

Institutional Money Market Fund

Institutional Municipal Money Market Fund

Institutional Treasury Money Market Fund

Institutional U.S. Government Money Market Fund

Institutional 100% Treasury Money Market Fund

Cash Management Money Market Fund

Prime Cash Management Money Market Fund

Money Market Funds

California Municipal Money Market Fund

Florida Municipal Money Market Fund

Money Market Fund

Municipal Money Market Fund

New Jersey Municipal Money Market Fund

New York Municipal Money Market Fund

Pennsylvania Municipal Money Market Fund

Treasury Money Market Fund

U.S. Government Money Market Fund

State Municipal Bond Funds

Connecticut Municipal Bond Fund

Florida High Income Municipal Bond Fund

Florida Municipal Bond Fund

Georgia Municipal Bond Fund

Maryland Municipal Bond Fund

New Jersey Municipal Bond Fund

North Carolina Municipal Bond Fund

Pennsylvania Municipal Bond Fund

South Carolina Municipal Bond Fund

Virginia Municipal Bond Fund

National Municipal Bond Funds

High Grade Municipal Bond Fund

High Income Municipal Bond Fund

Intermediate Term Municipal Bond Fund

Municipal Bond Fund

Short-Intermediate Municipal Bond Fund

Short and Intermediate Term Bond Funds

Adjustable Rate Fund

Fixed Income Fund

Intermediate Term Bond Fund

Limited Duration Fund

Short-Duration Income Fund

Intermediate and Long Term Bond Funds

Core Bond Fund

Diversified Bond Fund

Fixed Income Fund II

High Yield Bond Fund

Income Plus Fund

Quality Income Fund

Select High Yield Bond Fund

Strategic Income Fund

U.S. Government Fund

Balanced Funds

Balanced Fund

Foundation Fund

Select Balanced Fund

Tax Strategic Foundation Fund

Growth and Income Funds

Blue Chip Fund

Equity Income Fund

Equity Index Fund

Growth and Income Fund

Small Cap Value Fund

Strategic Value Fund

Value Fund

Domestic Growth Funds

Aggressive Growth Fund

Capital Growth Fund

Core Equity Fund

Evergreen Fund

Growth Fund

Large Company Growth Fund

Masters Fund

Omega Fund

Premier 20 Fund

Secular Growth Fund

Select Small Cap Growth Fund

Select Strategic Growth Fund

Small Company Growth Fund

Special Equity Fund

Special Values Fund

Stock Selector Fund

Tax Strategic Equity Fund

Sector Funds

Health Care Fund

Technology Fund

Utility and Telecommunications Fund

Global and International Funds

Emerging Markets Growth Fund

Global Leaders Fund

Global Opportunities Fund

International Bond Fund

International Growth Fund

Latin America Fund

Precious Metals Fund

For More Information About the Evergreen Money Market Funds, Ask for:

Evergreen Distributor, Inc.

90 Park Avenue

New York, New York 10016

SEC File No.: 811-08555
554285 RV3 (6/02)

Evergreen Investments

200 Berkeley Street

Boston, MA 02116-5034

EX-4 6 emmtss1.htm EVERGREEN MONEY MARKET TRUST - S/S1 PROSPECTUS

Prospectus, June 1, 2002

Evergreen
Money Market Funds

Evergreen California Municipal Money Market Fund
Evergreen Florida Municipal Money Market Fund
Evergreen Money Market Fund
Evergreen Municipal Money Market Fund
Evergreen New Jersey Municipal Money Market Fund
Evergreen New York Municipal Money Market Fund
Evergreen Pennsylvania Municipal Money Market Fund
Evergreen Treasury Money Market Fund
Evergreen U.S. Government Money Market Fund

Class S
Class S1

FUND RISK/RETURN SUMMARIES:

GENERAL INFORMATION:

In general,

Fund Summaries Key

Each Fund's summary is organized around the following basic topics and questions:

INVESTMENT GOAL

INVESTMENT STRATEGY

RISK FACTORS

What are the specific risks for an investor in the Fund?

PERFORMANCE

How well has the Fund performed in the past year? The past five years? The past ten years?

EXPENSES

How much does it cost to invest in the Fund?

Overview of Fund Risks

Money Market Funds

typically rely on a combination of the following strategies:

maintaining $1.00 per share net asset value;
investing in high quality, short-term money market instruments, including U.S. government securities;
investing in compliance with industry-standard requirements for money market funds for the quality, maturity and diversification of investments; and
selling a portfolio investment: i) when the issuer's investment fundamentals begin to deteriorate; ii) to take advantage of more attractive yield opportunities; iii) when the investment no longer appears to meet the Fund's investment objective; iv) when the Fund must meet redemptions; or v) for other investment reasons which the portfolio managers deem necessary.

may be appropriate for investors who:

are seeking a conservative investment which invests in relatively safe securities;
are seeking a fund for short-term investment; and
are seeking liquidity.

Following this overview, you will find information on each Fund's specific investment strategies and risks.

Risk Factors For All Mutual Funds

Please remember that an investment in a mutual fund is:

not guaranteed to achieve its investment goal
not a deposit with a bank
not insured, endorsed or guaranteed by the FDIC or any government agency
subject to investment risks, including possible loss of your original investment

Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds.

The following are some of the most important factors that may affect the value of your investment. Other factors may be described in the discussion following this overview:

Interest Rate Risk

Credit Risk

Concentration Risk

Non-Diversification Risk

California Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and California State Income Taxes

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ¹
Class S	0.45 %	0.60 %	0.33 %	1.38 %

Example of Fund Expenses

After:
1 year	$ 141
3 years	$ 437
5 years	$ 755
10 years	$ 1,657

Florida Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and Florida State Taxes

Preservation of Capital

Liquidity

Stability of Principal

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class S Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
							2.66	3.33	1.90

Best Quarter:	2nd Quarter 2000	+ 0.90 %¹
Worst Quarter:	4th Quarter 2001	+ 0.23 %
Year-to-date total return through 3/31/2002 is +0.11%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 10/26/1998
Class S	6/30/2000	1.90 %	N/A	N/A	2.63 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class S	0.41 %	0.60 %	0.14 %	1.15 %

Example of Fund Expenses

After:
1 year	$ 117
3 years	$ 365
5 years	$ 633
10 years	$ 1,398

Money Market Fund

FUND FACTS:

Goals:

High Current Income

Preservation of Capital

Liquidity

Principal Investments:

Money Market Instruments

Short-term Corporate Debt Securities

Class of Shares Offered in this Prospectus:

Class S1

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income as is consistent with preserving capital and providing liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

The table below shows the percentage gain or loss for the Class I shares of the Fund since 11/2/1987. It should give you a general idea of the risks of investing in the Fund by showing how the Fund's return has varied from year-to-year. This table includes the effects of Fund expenses.

Year-by-Year Total Return for Class I Shares (%)

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
3.88	3.22	3.98	5.66	5.22	5.31	5.26	4.93	6.11	3.89

Best Quarter:	4th Quarter 2000	+ 1.57 %
Worst Quarter:	4th Quarter 2001	+ 0.53 %
Year-to-date total return through 3/31/2002 is +0.40%.

The next table lists the Fund’s average annual total return for the Class S1 shares over the past one, five and ten years and since inception. This table is intended to provide you with some indication of the risks of investing in the Fund.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 11/2/1987
Class S1	6/26/2001	3.70 %	5.06 %	4.72 %	5.64 %

1. Historical performance shown for Class S1 prior to its inception is based on the performance of Class I, the original class offered. Class I is not offered in this prospectus. These historical returns for Class S1 have not been adjusted to reflect the effect of the Class' 12b-1 fees. These fees are 0.60% for Class S1. Class I does not pay 12b-1 fees. If these fees had been reflected, returns for Class S1 would have been lower.

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ²
Class S1	0.39 %	0.60 %	0.17 %	1.16 %

2. From time to time, 12b-1 fees for Class S1 may be voluntarily reduced or waived. The 12b-1 fees and Total Fund Operating Expenses do not reflect the 12b-1 fee waivers. Including fee waivers, the 12b-1 fees were 0.25% and Total Fund Operating Expenses were 0.81% for Class S1.

Example of Fund Expenses

After:
1 year	$ 118
3 years	$ 368
5 years	$ 638
10 years	$ 1,409

Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal Income Tax

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S1

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income exempt from regular federal income tax, as is consistent with preserving capital and providing liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class I Shares (%)

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
3.16	2.48	2.76	3.76	3.39	3.49	3.40	3.18	4.01	2.67

Best Quarter:	4th Quarter 2000	+ 1.05 %
Worst Quarter:	4th Quarter 2001	+ 0.40 %
Year-to-date total return through 3/31/2002 is +0.28%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 11/2/1988
Class S1	6/26/2001	2.36 %	3.29 %	3.20 %	3.84 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ²
Class S1	0.42 %	0.60 %	0.14 %	1.16 %

2. From time to time, 12b-1 fees for Class S1 may be voluntarily reduced or waived. The 12b-1 fees and Total Fund Operating Expenses do not reflect the 12b-1 fee waivers. Including fee waivers, the 12b-1 fees were 0.50% and Total Fund Operating Expenses were 1.06% for Class S1.

Example of Fund Expenses

After:
1 year	$ 118
3 years	$ 368
5 years	$ 638
10 years	$ 1,409

New Jersey Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and New Jersey State Income Taxes

Preservation of Capital

Liquidity

Stability of Principal

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class S Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
							2.54	3.31	1.97

Best Quarter:	2nd Quarter 2000	+ 0.90 %¹
Worst Quarter:	4th Quarter 2001	+ 0.25 %
Year-to-date total return through 3/31/2002 is +0.12%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 10/26/1998
Class S	6/30/2000	1.97 %	N/A	N/A	2.61 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class S	0.41 %	0.60 %	0.14 %	1.15 %

Example of Fund Expenses

After:
1 year	$ 117
3 years	$ 365
5 years	$ 633
10 years	$ 1,398

New York Municipal Money Market Fund

FUND FACTS:

Goals:

High Rate of Current Income Exempt from Federal and New York State and New York City Income Taxes

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ¹
Class S	0.40 %	0.60 %	0.29 %	1.29 %

Example of Fund Expenses

After:
1 year	$ 131
3 years	$ 409
5 years	$ 708
10 years	$ 1,556

Pennsylvania Municipal Money Market Fund

FUND FACTS:

Goals:

High Current Income Exempt from Federal and Pennsylvania State Income Taxes

Preservation of Capital

Liquidity

Principal Investment:

Municipal Money Market Securities

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk
Concentration Risk
Non-Diversification Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class S Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
2.87	2.12	2.54	3.66	3.07	3.22	3.09	2.96	3.53	1.98

Best Quarter:	2nd Quarter 1995	+ 0.99 %¹
Worst Quarter:	4th Quarter 2001	+ 0.27 %
Year-to-date total return through 3/31/2002 is +0.14%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 8/15/1991
Class S	6/30/2000	1.98 %	2.95 %	2.90 %	2.96 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class S	0.36 %	0.60 %	0.12 %	1.08 %

Example of Fund Expenses

After:
1 year	$ 110
3 years	$ 343
5 years	$ 595
10 years	$ 1,317

Treasury Money Market Fund

FUND FACTS:

Goals:

Stability of Principal

Current Income

Principal Investments:

Short-term U.S. Treasury Obligations

Repurchase Agreements backed by Short-term U.S. Treasury Obligations

Class of Shares Offered in this Prospectus:

Class S

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to maintain stability of principal while earning current income.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

The following tables show how the Fund has performed in the past. Past performance is not an indication of future results.

Year-by-Year Total Return for Class S Shares (%) ¹

1992	1993	1994	1995	1996	1997	1998	1999	2000	2001
3.36	2.73	3.75	5.38	4.78	4.91	4.83	4.33	5.43	3.04

Best Quarter:	4th Quarter 2000	+ 1.39 %
Worst Quarter:	4th Quarter 2001	+ 0.37 %
Year-to-date total return through 3/31/2002 is +0.29%.

Average Annual Total Return
(for the period ended 12/31/2001) ¹

	Inception Date of Class	1 year	5 year	10 year	Performance Since 3/6/1991
Class S	6/30/2000	3.04 %	4.50 %	4.25 %	4.34 %

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses
Class S	0.31 %	0.60 %	0.09 %	1.00 %

Example of Fund Expenses

After:
1 year	$ 102
3 years	$ 318
5 years	$ 552
10 years	$ 1,225

U.S. Government Money Market Fund

FUND FACTS:

Goals:

High Current Income

Preservation of Capital

Liquidity

Principal Investment:

Short-term U.S. Government Securities

Class of Shares Offered in this Prospectus:

Class S1

Investment Advisor:

Evergreen
Investment
Management
Company, LLC

Dividend Payment Schedule:

Monthly

INVESTMENT GOAL

The Fund seeks to achieve as high a level of current income as is consistent with preserving capital and maintaining liquidity.

INVESTMENT STRATEGY

The following supplements the investment strategies discussed in the ''Overview of Fund Risks'' on page 1.

RISK FACTORS

Your investment in the Fund is subject to the risks discussed in the ''Overview of Fund Risks'' on page 1 under the headings:

Interest Rate Risk
Credit Risk

For further information regarding the Fund's investment strategy and risk factors, see "Other Fund Practices."

PERFORMANCE

To obtain current yield information call 1-800-343-2898.

EXPENSES

This section describes the fees and expenses you would pay if you bought and held shares of the Fund. Annual Fund Operating Expenses are based on the Fund’s fiscal year ended 1/31/2002.

You pay no shareholder transaction fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Management Fees	12b-1 Fees	Other Expenses	Total Fund Operating Expenses ¹
Class S1	0.40 %	0.60 %	0.35 %	1.35 %

1. From time to time, 12b-1 fees for Class S1 may be voluntarily reduced or waived. The 12b-1 fees and Total Fund Operating Expenses do not reflect the 12b-1 fee waivers. Including fee waivers, the 12b-1 fees were 0.14% and Total Fund Operating Expenses were 0.89% for Class S1.

Example of Fund Expenses

After:
1 year	$ 137
3 years	$ 428
5 years	$ 739
10 years	$ 1,624

THE FUNDS' INVESTMENT ADVISOR

For the fiscal year ended 1/31/2002, the aggregate advisory fee paid to the investment advisor by each Fund was as follows:

Fund	% of the Fund's average daily net assets
California Municipal Money Market Fund	0.25 %
Florida Municipal Money Market Fund	0.41 %
Money Market Fund ¹	0.39 %
Municipal Money Market Fund	0.42 %
New Jersey Municipal Money Market Fund	0.41 %
New York Municipal Money Market Fund	0.29 %
Pennsylvania Municipal Money Market Fund	0.36 %
Treasury Money Market Fund ¹	0.31 %
U.S. Government Money Market Fund	0.40 %

1. Effective May 11, 2001, the investment advisory contract for the Fund was transferred to EIMC. There were no changes in advisory fee rates.

CALCULATING THE SHARE PRICE

HOW TO CHOOSE AN EVERGREEN FUND

When choosing an Evergreen Fund, you should:

Most importantly, read the prospectus to see if the Fund is suitable for you.
Consider talking to an investment professional. He or she is qualified to give you investment advice based on your investment goals and financial situation and will be able to answer questions you may have after reading the Fund's prospectus. He or she can also assist you through all phases of opening your account.
Request any additional information you want about the Fund, such as the Statement of Additional Information (SAI), Annual Report or Semi-annual Report by calling 1-800-343-2898. In addition, any of these documents, with the exception of the SAI, may be downloaded off our website at www.evergreeninvestments.com.

HOW TO CHOOSE THE SHARE CLASS THAT BEST SUITS YOU

After choosing a Fund, you select a share class. The Funds offer up to six different share classes. Only Class S shares of California Municipal Money Market Fund, Florida Municipal Money Market Fund, New Jersey Municipal Money Market Fund, New York Municipal Money Market Fund, Pennsylvania Municipal Money Market Fund and Treasury Money Market Fund and Class S1 shares of Money Market Fund, Municipal Money Market Fund and U.S. Government Money Market Fund are offered in this prospectus.

Class S and Class S1

Each Fund offers Class S and Class S1 shares at NAV without a front-end sales charge or deferred sales charge. However, both Class S and Class S1 shares are subject to 12b-1 fees and certain broker-dealers and other financial institutions may impose a fee in connection with purchases of Class S and Class S1 shares of the Funds. A portion of Class S1 shares' 12b-1 fees may be voluntarily waived.

HOW TO BUY AND REDEEM SHARES

Class S and Class S1 shares are sold through certain broker-dealers and financial institutions which have selling agreements with Evergreen Distributors Inc. (EDI). You can also redeem your Class S and Class S1 shares of the Funds at NAV through certain broker-dealers and financial institutions which have selling agreements with EDI on any day the New York Stock Exchange is open pursuant to the Fund’s procedures. Investors should refer to their broker-dealer or financial institution as appropriate for instruction and further information.

OTHER SERVICES

Automatic Reinvestment of Distributions

THE TAX CONSEQUENCES OF INVESTING
IN THE FUNDS

You may be taxed in two ways:

On Fund distributions (dividends and capital gains).
On any profit you make when you sell any or all of your shares.

Fund Distributions

Dividends. To the extent that regular dividends are derived from investment income that is not tax-exempt, or from short-term capital gains, you will have to include them in your federal taxable income. Each Fund pays a monthly dividend from the dividends, interest and other income on the securities in which it invests.
Capital Gains. When a mutual fund sells a security it owns for a profit, the result is a capital gain. The Funds generally distribute capital gains, if any, at least once a year, near the end of the calendar year. Short-term capital gains reflect securities held by the Funds for a year or less and are considered ordinary income just like dividends. Profits on securities held longer than 12 months are considered long-term capital gains and are taxed at a special tax rate (20% for most taxpayers). It is not anticipated that any significant capital gains will be realized by the Funds.

Dividend and Capital Gain Reinvestment

Profits You Realize When You Redeem Shares

Tax Reporting

FEES AND EXPENSES OF THE FUNDS

Every mutual fund has fees and expenses that are assessed either directly or indirectly. This section describes each of those fees.

Management Fee

The management fee pays for the normal expenses of managing the Fund, including portfolio manager salaries, research costs, corporate overhead expenses and related expenses.

12b-1 Fees

The Trustees of the Evergreen Funds have approved a policy to assess annual 12b-1 fees of up to 1.00% of the average daily net assets of Class S shares and up to 0.60% of the average daily net assets of Class S1 shares. However, currently the 12b-1 fees for Class S shares are limited to 0.60% of the average daily net assets of the class. In addition, all or a portion of the 12b-1 fees for Class S1 shares may be voluntarily waived from time to time. These fees increase the cost of your investment. The purpose of the 12b-1 fees is to promote the sale of more shares of the Fund to the public. The Fund may use the 12b-1 fees for advertising and marketing and as a “service fee” to broker-dealers, banks and other financial institutions for additional shareholder services and/or the maintenance of accounts.

Other Expenses

Total Fund Operating Expenses

FINANCIAL HIGHLIGHTS

This section looks in detail at the results for one share in each share class of the Funds - how much income it earned, how much of this income was passed along as a distribution and how much the return was reduced by expenses. The following tables have been derived from financial information audited by KPMG LLP, the Funds' independent auditors. For a more complete picture of the Funds' financial statements, please see the Funds' Annual Report as well as the SAI.

California Municipal Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS S
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0 ^††

Distributions to shareholders from
Net investment income	0 ^††

Net asset value, end of period	$ 1.00
Total return	0.29 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 41,972
Ratios to average net assets
Expenses‡	0.83 %^†
Net investment income	0.63 %^†
^(a) For the period from September 24, 2001(commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Represents an amount less than $0.005 per share.

Florida Municipal Money Market Fund

	Year Ended January 31,
	2002	2001 (a)
CLASS S
Net asset value, beginning of period	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.02	0.02

Distributions to shareholders from
Net investment income	- 0.02	- 0.02

Net asset value, end of period	$ 1.00	$ 1.00
Total return	1.73 %	1.87 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 206,592	$ 163,045
Ratios to average net assets
Expenses‡	1.15 %	1.16 %^†
Net investment income	1.58 %	3.08 %^†
^(a) For the period from June 30, 2000 (commencement of class operations) to January 31, 2001.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS S1
Net asset value, beginning of period	$ 1.00
Net investment income	0.01

Distributions to shareholders from
Net investment income	- 0.01

Net asset value, end of period	$ 1.00
Total return	1.38 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 1,300
Ratios to average net assets
Expenses‡	0.86 %^†
Net investment income	1.72 %^†
^(a) For the period from June 26, 2001 (commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

Municipal Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS S1
Net asset value, beginning of period	$ 1.00
Net investment income	0.01

Distributions to shareholders from
Net investment income	- 0.01

Net asset value, end of period	$ 1.00
Total return	0.77 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 257
Ratios to average net assets
Expenses‡	1.10 %^†
Net investment income	0.96 %^†
^(a) For the period from June 26, 2001 (commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

New Jersey Municipal Money Market Fund

	Year Ended January 31,
	2002	2001 (a)
CLASS S
Net asset value, beginning of period	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.02	0.02

Distributions to shareholders from
Net investment income	- 0.02	- 0.02

Net asset value, end of period	$ 1.00	$ 1.00
Total return	1.81 %	1.84 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 136	$ 98
Ratios to average net assets
Expenses‡	1.15 %	1.14 %^†
Net investment income	1.71 %	3.07 %^†
^(a) For the period from June 30, 2000 (commencement of class operations) to January 31, 2001.
^‡ The ratio of expenses to average net assets excludes expese reductions but includes fee waivers.
^† Annualized.

New York Municipal Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS S
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0 ^††

Distributions to shareholders from
Net investment income	0 ^††

Net asset value, end of period	$ 1.00
Total return	0.22 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 24,092
Ratios to average net assets
Expenses‡	1.18 %^†
Net investment income	0.54 %^†
^(a) For the period from September 24, 2001 (commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.
^†† Represents an amount less than $0.005 per share.

Pennsylvania Municipal Money Market Fund

	Year Ended January 31,
	2002	2001 (a)
CLASS S
Net asset value, beginning of period	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.02	0.02

Distributions to shareholders from
Net investment income	- 0.02	- 0.02

Net asset value, end of period	$ 1.00	$ 1.00
Total return	1.82 %	1.89 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 155	$ 140
Ratios to average net assets
Expenses‡	1.08 %	1.09 %^†
Net investment income	1.79 %	3.17 %^†
^(a) For the period from June 30, 2000 (commencement of class operations) to January 31, 2001.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

Treasury Money Market Fund

	Year Ended January 31,
	2002	2001 (a)
CLASS S
Net asset value, beginning of period	$ 1.00	$ 1.00
Income from investment operations
Net investment income	0.03	0.03

Distributions to shareholders from
Net investment income	- 0.03	- 0.03

Net asset value, end of period	$ 1.00	$ 1.00
Total return	2.70 %	3.24 %
Ratios and supplemental data
Net assets, end of period (millions)	$ 1,826	$ 2,135
Ratios to average net assets
Expenses‡	1.00 %	1.04 %^†
Net investment income	2.71 %	5.50 %^†
^(a) For period from June 30, 2000 (commencement of class operations) to January 31, 2001.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

U.S. Government Money Market Fund

	Year Ended
	January 31, 2002 (a)
CLASS S1
Net asset value, beginning of period	$ 1.00
Income from investment operations
Net investment income	0.01

Distributions to shareholders from
Net investment income	- 0.01

Net asset value, end of period	$ 1.00
Total return	1.24 %
Ratios and supplemental data
Net assets, end of period (thousands)	$ 390,392
Ratios to average net assets
Expenses‡	0.90 %^†
Net investment income	1.56 %^†
^(a) For the period from June 26, 2001 (commencement of class operations) to January 31, 2002.
^‡ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers.
^† Annualized.

OTHER FUND PRACTICES

Please consult the SAI for more information regarding these and other investment practices used by the Funds, including risks.

Evergreen Funds

Institutional Money Market Funds

Institutional Money Market Fund

Institutional Municipal Money Market Fund

Institutional Treasury Money Market Fund

Institutional U.S. Government Money Market Fund

Institutional 100% Treasury Money Market Fund

Cash Management Money Market Fund

Prime Cash Management Money Market Fund

Money Market Funds

California Municipal Money Market Fund

Florida Municipal Money Market Fund

Money Market Fund

Municipal Money Market Fund

New Jersey Municipal Money Market Fund

New York Municipal Money Market Fund

Pennsylvania Municipal Money Market Fund

Treasury Money Market Fund

U.S. Government Money Market Fund

State Municipal Bond Funds

Connecticut Municipal Bond Fund

Florida High Income Municipal Bond Fund

Florida Municipal Bond Fund

Georgia Municipal Bond Fund

Maryland Municipal Bond Fund

New Jersey Municipal Bond Fund

North Carolina Municipal Bond Fund

Pennsylvania Municipal Bond Fund

South Carolina Municipal Bond Fund

Virginia Municipal Bond Fund

National Municipal Bond Funds

High Grade Municipal Bond Fund

High Income Municipal Bond Fund

Intermediate Term Municipal Bond Fund

Municipal Bond Fund

Short-Intermediate Municipal Bond Fund

Short and Intermediate Term Bond Funds

Adjustable Rate Fund

Fixed Income Fund

Intermediate Term Bond Fund

Limited Duration Fund

Short-Duration Income Fund

Intermediate and Long Term Bond Funds

Core Bond Fund

Diversified Bond Fund

Fixed Income Fund II

High Yield Bond Fund

Income Plus Fund

Quality Income Fund

Select High Yield Bond Fund

Strategic Income Fund

U.S. Government Fund

Balanced Funds

Balanced Fund

Foundation Fund

Select Balanced Fund

Tax Strategic Foundation Fund

Growth and Income Funds

Blue Chip Fund

Equity Income Fund

Equity Index Fund

Growth and Income Fund

Small Cap Value Fund

Strategic Value Fund

Value Fund

Domestic Growth Funds

Aggressive Growth Fund

Capital Growth Fund

Core Equity Fund

Evergreen Fund

Growth Fund

Large Company Growth Fund

Masters Fund

Omega Fund

Premier 20 Fund

Secular Growth Fund

Select Small Cap Growth Fund

Select Strategic Growth Fund

Small Company Growth Fund

Special Equity Fund

Special Values Fund

Stock Selector Fund

Tax Strategic Equity Fund

Sector Funds

Health Care Fund

Technology Fund

Utility and Telecommunications Fund

Global and International Funds

Emerging Markets Growth Fund

Global Leaders Fund

Global Opportunities Fund

International Bond Fund

International Growth Fund

Latin America Fund

Precious Metals Fund

For More Information About the Evergreen Money Market Funds, Ask for:

Evergreen Distributor, Inc.

90 Park Avenue

New York, New York 10016

SEC File No.: 811-08555
558704 RV2 (6/02)

Evergreen Investments

200 Berkeley Street

Boston, MA 02116-5034

EX-5 7 masterag.txt ADMINISTRATION AGREEMENT MASTER ADMINISTRATIVE SERVICES AGREEMENT This Administrative Services Agreement is made as of this 2nd day of January, 2002 between the Evergreen Trusts listed on SCHEDULE A, each a Delaware business trust (herein called individually the "Trust" and together the "Trusts"), and Evergreen Investment Services, Inc., a Delaware corporation (herein called "EIS"). W I T N E S S E T H: WHEREAS, each Trust is a Delaware business trust consisting of one or more series which operates as an open-end management investment company and is so registered under the Investment Company Act of 1940; and WHEREAS, each Trust desires to retain EIS as its Administrator to provide it with administrative services and EIS is willing to render such services. NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties hereto agree as follows: 1. APPOINTMENT OF ADMINISTRATOR. Each Trust hereby appoints EIS as Administrator of the Trust and each of its series listed on SCHEDULE A attached hereto on the terms and conditions set forth in this Agreement; and EIS hereby accepts such appointment and agrees to perform the services and duties set forth in Section 2 of this Agreement in consideration of the compensation provided for in Section 4 hereof. 2. SERVICES AND DUTIES. As Administrator, and subject to the supervision and control of the Trustees of each Trust, EIS will hereafter provide facilities, equipment and personnel to carry out the following administrative services for operation of the business and affairs of each Trust and each of its series: (a) Prepare, file and maintain each Trust's governing documents, including the Declaration of Trust (which has previously been prepared and filed), the By laws, minutes of meetings of Trustees and shareholders, and proxy statements for meetings of shareholders; (b) Prepare and file with the Securities and Exchange Commission and the appropriate state securities authorities the registration statements for each Trust and each Trust's shares and all amendments thereto, reports to regulatory authorities and shareholders, prospectuses, proxy statements, and such other documents as may be necessary or convenient to enable the Trust to make a continuous offering of its shares; (c) Prepare, negotiate and administer contracts on behalf of each Trust with, among others, each Trust's distributor, and custodian and transfer agent; (d) Supervise each Trust's fund accounting agent in the maintenance of each Trust's general ledger and in the preparation of each Trust's financial statements, including oversight of expense accruals and payments and the determination of the net asset value of each Trust's assets and of each Trust's shares, and of the declaration and payment of dividends and other distributions to shareholders; (e) Calculate performance data of each Trust for dissemination to information services covering the investment company industry; (f) Prepare and file each Trust's tax returns; (g) Examine and review the operations of each Trust's custodian and transfer agent: (h) Coordinate the layout and printing of publicly disseminated prospectuses and reports; (i) Prepare various shareholder reports; (j) Assist with the design, development and operation of new series of each Trust; (k) Coordinate shareholder meetings; (l) Provide general compliance services; and (m) Advise each Trust and its Trustees on matters concerning the Trust and its affairs. The foregoing, along with any additional services that EIS shall agree in writing to perform for each Trust hereunder, shall hereafter be referred to as "Administrative Services." Administrative Services shall not include any duties, functions, or services to be performed for each Trust by such Trust's investment adviser, distributor, custodian or transfer agent pursuant to their agreements with such Trust. 3. EXPENSES. EIS shall be responsible for expenses incurred in providing office space, equipment and personnel as may be necessary or convenient to provide the Administrative Services to each Trust. Each Trust shall be responsible for all other expenses incurred by EIS on behalf of such Trust, including without limitation postage and courier expenses, printing expenses, registration fees, filing fees, fees of outside counsel and independent auditors, insurance premiums, fees payable to Trustees who are not EIS employees, and trade association dues. 4. COMPENSATION. As compensation for the Administrative Services provided to the Trusts with respect to their series, the Trusts hereby agree to pay and EIS hereby agrees to accept as full compensation for its services rendered hereunder an administrative fee, calculated daily and payable monthly, at an annual rate determined in accordance with SCHEDULE B attached hereto. 5. RESPONSIBILITY OF ADMINISTRATOR. EIS shall not be liable for any error of judgment or mistake of law or for any loss suffered by any Trust in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or negligence on its part in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. EIS shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Trusts) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. Any person, even though also an officer, director, partner, employee or agent of EIS, who may be or become an officer, trustee, employee or agent of the Trusts, shall be deemed, when rendering services to the Trusts or acting on any business of the Trusts (other than services or business in connection with the duties of EIS hereunder) to be rendering such services to or acting solely for the Trusts and not as an officer, director, partner, employee or agent or one under the control or direction of EIS even though paid by EIS. 6. DURATION AND TERMINATION. (a) This Agreement shall be in effect until December 31, 2002, and shall continue in effect from year to year thereafter, provided it is approved, at least annually, by a vote of a majority of Trustees of the Trusts including a majority of the disinterested Trustees. (b) This Agreement may be terminated at any time, without payment of any penalty, on sixty (60) day's prior written notice by a vote of a majority of any Trust's Trustees or by EIS. 7. AMENDMENT. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which an enforcement of the change, waiver, discharge or termination is sought. 8. NOTICES. Notices of any kind to be given to any Trust hereunder by EIS shall be in writing and shall be duly given if delivered to such Trust at: 200 Berkeley Street, Boston, MA 02116, Attention: Secretary. Notices of any kind to be given to EIS hereunder by any Trust shall be in writing and shall be duly given if delivered to EIS at 200 Berkeley Street, Boston, Massachusetts 02116. Attention: Chief Administrative Officer. 9. LIMITATION OF LIABILITY. EIS is hereby expressly put on notice of the limitation of liability as set forth in each Trust's Declaration of Trust and agrees that the obligations pursuant to this Agreement of a particular series and of each Trust with respect to that particular series be limited solely to the assets of that particular series, and EIS shall not seek satisfaction of any such obligation from the assets of any other series, the shareholders of any series, the Trustees, officers, employees or agents of the Trust, or any of them. 10. MISCELLANEOUS. The captions in this Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court or regulatory agency decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. Subject to the provisions of Section 5 hereof, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by Delaware law; provided, however, that nothing herein shall be construed in a manner inconsistent with the Investment Company Act of 1940 or any rule or regulation promulgated by the Securities and Exchange Commission thereunder. IN WITNESS WHEREOF, the parties hereto have caused this Master Administrative Services Agreement to be executed by their officers designated below as of the day and year first above written. EVERGREEN EQUITY TRUST EVERGREEN FIXED INCOME TRUST EVERGREEN MUNICIPAL TRUST EVERGREEN INTERNATIONAL TRUST EVERGREEN MONEY MARKET TRUST EVERGREEN SELECT EQUITY TRUST EVERGREEN SELECT FIXED INCOME TRUST EVERGREEN SELECT MONEY MARKET TRUST EVERGREEN VARIABLE ANNUITY TRUST By: /s/ Michael H. Koonce __________________________ Name: Michael H. Koonce Title: Secretary EVERGREEN INVESTMENT SERVICES, INC. By: /s/ Carol A. Kosel __________________________ Name: Carol A. Kosel Title: Senior Vice President SCHEDULE A (As of January 2, 2002) EVERGREEN SELECT FIXED INCOME TRUST Evergreen Adjustable Rate Fund Evergreen Core Bond Fund Evergreen Fixed Income Fund Evergreen Fixed Income Fund II Evergreen Select High Yield Bond Fund Evergreen Income Plus Fund Evergreen Intermediate Term Municipal Bond Fund Evergreen International Bond Fund Evergreen Limited Duration Fund EVERGREEN SELECT EQUITY TRUST Evergreen Select Balanced Fund Evergreen Core Equity Fund Evergreen Equity Index Fund Evergreen Secular Growth Fund Evergreen Select Small Cap Growth Fund Evergreen Special Equity Fund Evergreen Strategic Value Fund EVERGREEN SELECT MONEY MARKET TRUST Evergreen Institutional Money Market Fund Evergreen Institutional Municipal Money Market Fund Evergreen Institutional Treasury Money Market Fund Evergreen Institutional 100% Treasury Money Market Fund Evergreen Institutional U.S. Government Money Market Fund Evergreen Cash Management Money Market Fund Evergreen Cash Management Municipal Money Market Fund Evergreen Cash Management Treasury Money Market Fund SNAP Fund EVERGREEN MUNICIPAL TRUST State Municipal Bond Funds Evergreen Connecticut Municipal Bond Fund Evergreen New Jersey Municipal Bond Fund Evergreen Pennsylvania Municipal Bond Fund Southern State Municipal Bond Funds Evergreen Florida High Income Municipal Bond Fund Evergreen Florida Municipal Bond Fund Evergreen Georgia Municipal Bond Fund Evergreen Maryland Municipal Bond Fund Evergreen North Carolina Municipal Bond Fund Evergreen South Carolina Municipal Bond Fund Evergreen Virginia Municipal Bond Fund National Municipal Bond Funds Evergreen High Grade Municipal Bond Fund Evergreen Municipal Bond Fund Evergreen Short-Intermediate Municipal Bond Fund Evergreen High Income Municipal Bond Fund EVERGREEN EQUITY TRUST > Balanced Funds Evergreen Balanced Fund Evergreen Foundation Fund Evergreen Tax Strategic Foundation Fund Growth and Income Funds Evergreen Blue Chip Fund Evergreen Growth and Income Fund Evergreen Equity Income Fund Evergreen Small Cap Value Fund Evergreen Value Fund Domestic Growth Funds Evergreen Aggressive Growth Fund Evergreen Capital Growth Fund Evergreen Fund Evergreen Growth Fund Evergreen Masters Fund Evergreen Omega Fund Evergreen Small Company Growth Fund Evergreen Stock Selector Fund Evergreen Large Company Growth Fund Evergreen Premier 20 Fund Evergreen Tax Strategic Equity Fund Sector Funds Evergreen Health Care Fund Evergreen Technology Fund Evergreen Utility and Telecommunications Fund EVERGREEN FIXED INCOME TRUST Intermediate and Long Term Bond Funds Evergreen Diversified Bond Fund Evergreen High Yield Bond Fund Evergreen Quality Income Fund Evergreen Strategic Income Fund Evergreen U.S. Government Fund Short and Intermediate Term Bond Funds Evergreen Intermediate Term Bond Fund Evergreen Short-Duration Income Fund EVERGREEN INTERNATIONAL TRUST Evergreen Emerging Markets Growth Fund Evergreen Global Leaders Fund Evergreen Global Opportunities Fund Evergreen International Growth Fund Evergreen Latin America Fund Evergreen Precious Metals Fund EVERGREEN MONEY MARKET TRUST Evergreen California Municipal Money Market Fund Evergreen Florida Municipal Money Market Fund Evergreen Money Market Fund Evergreen Municipal Money Market Fund Evergreen New Jersey Municipal Money Market Fund Evergreen New York Municipal Money Market Fund Evergreen Pennsylvania Municipal Money Market Fund Evergreen Treasury Money Market Fund Evergreen U.S. Government Money Market Fund EVERGREEN VARIABLE ANNUITY TRUST Evergreen VA Blue Chip Fund Evergreen VA Capital Growth Evergreen VA Equity Index Fund Evergreen VA Foundation Fund Evergreen VA Fund Evergreen VA Global Leaders Fund Evergreen VA Growth and Income Fund Evergreen VA Growth Fund Evergreen VA High Income Fund Evergreen VA International Growth Fund Evergreen VA Masters Fund Evergreen VA Omega Fund Evergreen VA Small Cap Value Fund Evergreen VA Special Equity Fund Evergreen VA Strategic Income Fund SCHEDULE B (As of January 2, 2002) FEE SCHEDULE FOR THE FOLLOWING FLUCTUATING FUNDS (the " Fluctuating Funds")*: EVERGREEN SELECT FIXED INCOME TRUST Evergreen Adjustable Rate Fund Evergreen Core Bond Fund Evergreen Fixed Income Fund Evergreen Fixed Income Fund II Evergreen Select High Yield Bond Fund Evergreen Income Plus Fund Evergreen Intermediate Term Municipal Bond Fund Evergreen International Bond Fund Evergreen Limited Duration Fund EVERGREEN SELECT EQUITY TRUST Evergreen Select Balanced Fund Evergreen Core Equity Fund Evergreen Equity Index Fund Evergreen Secular Growth Fund Evergreen Select Small Cap Growth Fund Evergreen Special Equity Fund Evergreen Strategic Value Fund EVERGREEN MUNICIPAL TRUST State Municipal Bond Funds Evergreen Connecticut Municipal Bond Fund Evergreen New Jersey Municipal Bond Fund Evergreen Pennsylvania Municipal Bond Fund Southern State Municipal Bond Funds Evergreen Florida High Income Municipal Bond Fund Evergreen Florida Municipal Bond Fund Evergreen Georgia Municipal Bond Fund Evergreen Maryland Municipal Bond Fund Evergreen North Carolina Municipal Bond Fund Evergreen South Carolina Municipal Bond Fund Evergreen Virginia Municipal Bond Fund National Municipal Bond Funds Evergreen High Grade Municipal Bond Fund Evergreen Municipal Bond Fund Evergreen Short-Intermediate Municipal Bond Fund Evergreen High Income Municipal Bond Fund EVERGREEN EQUITY TRUST Balanced Funds Evergreen Balanced Fund Evergreen Foundation Fund Evergreen Tax Strategic Foundation Fund Growth and Income Funds Evergreen Blue Chip Fund Evergreen Growth and Income Fund Evergreen Equity Income Fund Evergreen Small Cap Value Fund Evergreen Value Fund Domestic Growth Funds Evergreen Aggressive Growth Fund Evergreen Capital Growth Fund Evergreen Fund Evergreen Growth Fund Evergreen Masters Fund Evergreen Omega Fund Evergreen Small Company Growth Fund Evergreen Stock Selector Fund Evergreen Large Company Growth Fund Evergreen Premier 20 Fund Evergreen Tax Strategic Equity Fund Sector Funds Evergreen Health Care Fund Evergreen Technology Fund Evergreen Utility and Telecommunications Fund EVERGREEN FIXED INCOME TRUST Intermediate and Long Term Bond Funds Evergreen Diversified Bond Fund Evergreen High Yield Bond Fund Evergreen Quality Income Fund Evergreen Strategic Income Fund Evergreen U.S. Government Fund Short and Intermediate Term Bond Funds Evergreen Intermediate Term Bond Fund Evergreen Short-Duration Income Fund EVERGREEN INTERNATIONAL TRUST Evergreen Emerging Markets Growth Fund Evergreen Global Leaders Fund Evergreen Global Opportunities Fund Evergreen International Growth Fund Evergreen Latin America Fund Evergreen Precious Metals Fund EVERGREEN VARIABLE ANNUITY TRUST Evergreen VA Blue Chip Fund Evergreen VA Capital Growth Fund Evergreen VA Equity Index Fund Evergreen VA Foundation Fund Evergreen VA Fund Evergreen VA Global Leaders Fund Evergreen VA Growth and Income Fund Evergreen VA Growth Fund Evergreen VA High Income Fund Evergreen VA International Growth Fund Evergreen VA Masters Fund Evergreen VA Omega Fund Evergreen VA Small Cap Value Fund Evergreen VA Special Equity Fund Evergreen VA Strategic Income Fund - - 0.100% on first $50 billion in Fluctuating Fund assets; - - 0.090% on next $25 billion; - - 0.080% on next $25 billion; - - 0.075% on next $25 billion; - - 0.050% on assets over $125 billion; * Minimum fee of $50,000 which will be waived to the extent that it causes any Fund to exceed a contractual expense cap. SCHEDULE B (as of January 2, 2002) FEE SCHEDULE FOR THE FOLLOWING MONEY MARKET FUNDS (the "Money Market Funds")*: EVERGREEN SELECT MONEY MARKET TRUST Evergreen Institutional Money Market Fund Evergreen Institutional Municipal Money Market Fund Evergreen Institutional Treasury Money Market Fund Evergreen Institutional 100% Treasury Money Market Fund Evergreen Institutional U.S. Government Money Market Fund Evergreen Cash Management Money Market Fund Evergreen Cash Management Municipal Money Market Fund SNAP Fund** EVERGREEN MONEY MARKET TRUST Evergreen California Municipal Money Market Fund Evergreen Florida Municipal Money Market Fund Evergreen Money Market Fund Evergreen Municipal Money Market Fund Evergreen New Jersey Municipal Money Market Fund Evergreen New York Municipal Money Market Fund Evergreen Pennsylvania Municipal Money Market Fund Evergreen Treasury Money Market Fund Evergreen U.S. Government Money Market Fund - - 0.060% on first $60 billion in Money Market assets; - - 0.055% on next $40 billion; - - 0.050% on next $25 billion; - - 0.040% on assets over $125 billion; * Minimum fee of $50,000 which will be waived to the extent that it causes any Fund to exceed a contractual expense cap. ** SNAP Fund does not pay an administrative services fee. EX-6 8 taagmt.txt TRANSFER AGENT AGREEMENT MASTER TRANSFER AND RECORDKEEPING AGREEMENT AGREEMENT made as of the 18th day of September, 1997 by and between each of the parties listed on Exhibit A which is attached hereto and made a part hereof (each a "Fund" or "Funds"), each for itself and not jointly, each having its principal place of business at 200 Berkeley Street, Boston, Massachusetts 02116, and Evergreen Service Company ("ESC"), having its principal place of business at 200 Berkeley Street, Boston, Massachusetts 02116. W I T N E S S E T H T H A T WHEREAS, each Fund desires ESC to perform certain services for the Fund, and ESC is willing to perform such services. NOW, THEREFORE, in consideration of the mutual covenants herein set forth, each party, for itself and not jointly, agrees as follows: 1. ADDITIONAL PARTIES - Any other registered investment company for which Keystone Investment Management Company (KIMCO), Evergreen Asset Management Corp. ("Evergreen Asset"), First Union National Bank or one of its affiliates serves as investment adviser, trustee or manager may become a Fund party to this Agreement, for itself and not jointly, by giving written notice to ESC that it has elected to become a Fund party hereto, to which election ESC has given its written consent. 2. SERVICES - ESC shall perform for each Fund the services set forth on Exhibit B which is attached hereto and made a part hereof. ESC shall also perform for each Fund, without additional charge, any services which it customarily performs in the ordinary course of business without additional charge for the investment companies for which ESC acts as transfer agent, dividend disbursing agent, or shareholder servicing and recordkeeping agent. ESC shall perform such other services in addition to those set forth on Exhibit B hereto as a Fund shall request in writing. Any of the services to be performed hereunder, and the manner in which such services are to be performed, shall be changed only pursuant to a written agreement signed by the parties hereto. ESC will undertake no activity which, in its judgment, will adversely effect the performance of its obligations to a Fund under this Agreement. 3. FEES - Each Fund shall pay ESC for the services to be performed pursuant to this Agreement in accordance with and in the manner set forth with respect to such Fund on Exhibit C attached hereto and made a part hereof. 4. EFFECTIVE DATE - This Agreement shall become effective as of the date set forth above and shall become effective as to each Fund which gives written notice to ESC pursuant to Paragraph 1 hereof that it elects to become a party hereto as of the date of such notice. 5. TERM - This Agreement shall be in effect until terminated in accordance with Section 17 hereof. 6. USE OF ESC'S NAME - The Funds will not use ESC's name in any sales literature or other material in a manner not approved by ESC in writing before such use, unless a similar use was previously approved. Notwithstanding the foregoing, ESC hereby consents to all uses of ESC's name which merely refer in accurate terms to ESC's appointments hereunder or which are required by the Securities and Exchange Commission or a state securities commission, and provided, further, that in no case will such approval be unreasonably withheld or delayed. 7. STANDARD OF CARE - ESC shall at all times use its best efforts and act in good faith and in a non-negligent manner in performing all services pursuant to this Agreement. 8. UNCONTROLLABLE EVENTS - ESC shall not be liable for damage, loss of data, delays or errors occurring by reason of circumstances beyond its control, including, but not limited to, acts of civil or military authority, national emergencies, fire, flood or catastrophe, acts of God, insurrection, war, riots, or failure of transportation, communication or power supply. However, ESC shall keep in a separate and safe place additional copies of all records required to be maintained pursuant to this Agreement or additional tapes or discs necessary to reproduce all such records. Furthermore, at all times during this Agreement, ESC shall maintain an arrangement whereby ESC will have a backup computer facility available for its use in providing the services required hereunder in the event circumstances beyond ESC's control result in ESC not being able to process the necessary work at its principal computer facility. ESC shall, from time to time, upon request from any Fund provide written evidence and details of its arrangement for obtaining the use of such a backup computer facility. ESC shall use reasonable care to minimize the likelihood of all damage, loss of data, delays and errors resulting from an uncontrollable event. Should such damage, loss of data, delays or errors occur, ESC shall use its best efforts to mitigate the effects of such occurrence. Representatives of each Fund shall be entitled to inspect the ESC premises and operating capabilities within reasonable business hours and upon reasonable notice to ESC. 9. INDEMNIFICATION - Each Fund shall indemnify and hold ESC, its employees and agents harmless against any losses, claims, damages, judgments, liabilities or expenses (including reasonable counsel fees and expenses) resulting from (1) transactions which occurred prior to the date ESC began serving as Transfer Agent to the Fund; (2) action taken or permitted by ESC in good faith with due care and without negligence in reliance upon instructions received from such Fund in accordance with Section 10 hereof or with respect to a Fund upon the opinion of counsel for the Fund, as to anything arising in connection with its performance under this Agreement; or (3) any act done or suffered by ESC with respect to a Fund in good faith with due care and without negligence in connection with its performance under this Agreement in reliance upon any instruction, order, stock certificate or other instrument reasonably believed by it to be genuine and to bear the genuine signature of any person or persons authorized to sign, countersign, or execute same, and which complies with all applicable requirements of the Fund's current prospectus(es) and statement of additional information, this Agreement and instructions and other governing documents provided to ESC by the Fund. For purposes of this indemnification, it is specifically agreed that if any instruction received by ESC in accordance with Section 10 hereof differs from the requirements set forth in the Fund's current prospectus(es) or statement of additional information then, with regard to that difference, the instruction, order, stock certificate or other instrument relied upon by ESC, ESC need only comply with such instruction (and not the current prospectus(es) or statement of additional information). In the event that ESC requests any Fund to indemnify or hold it harmless hereunder, ESC shall use its best efforts to inform the Fund of the relevant facts concerning the matter in question. ESC shall use reasonable care to identify and promptly notify a Fund concerning any matter which ESC believes may result in a claim for indemnification against such Fund, and shall notify the Fund within seven days of notice to ESC of the filing of any suit or other legal action or the institution by a government agency of any administrative action or investigation against ESC which involves its duties under this Agreement. Each Fund shall have the election of defending ESC against any claim with respect to such Fund which may be the subject of indemnification or holding it harmless hereunder. In the event a Fund so elects, it will so notify ESC. Thereupon the Fund shall take over defense of the claim, and, if so requested by a Fund, ESC shall incur no further legal or other expenses related thereto for which it shall be entitled to indemnity or holding harmless hereunder; provided, however, that nothing herein shall prevent ESC from retaining counsel to defend any claim at ESC's own expense. Except with the prior written consent of a Fund, ESC shall in no event confess any claim or make any compromise in any matter in which such Fund will be asked to indemnify or hold ESC harmless hereunder. ESC shall be without liability to a Fund with respect to anything done or omitted to be done in accordance with the terms of this Agreement or instructions properly received pursuant hereto if done in good faith and without negligence or willful or wanton misconduct. In no event shall ESC be liable for consequential damages, lost profits, or other special damages, even if ESC has been informed of the possibility of such damage or loss by the Fund or by third parties. Notwithstanding the foregoing, ESC shall be liable to each Fund for any damage or losses suffered by such Fund as a result of a delay or negligence on the part of ESC in processing a purchase or liquidation transaction or in making payment to a shareholder of such Fund; it being agreed that, without in any way limiting ESC's liability for other transactions hereunder, that such damages shall not be deemed to be consequential or special. 10. INSTRUCTIONS - ESC shall comply with all instructions issued by a Fund in the form prescribed below which are permitted or required under Exhibit B attached hereto. Whenever ESC takes action hereunder pursuant to instructions from a Fund, ESC shall be entitled to rely upon such instructions only when such instructions are signed by the President or Treasurer of the Fund or by an individual designated in writing by the President or Treasurer as a person authorized to give instructions hereunder. A Fund may waive the requirement that all instructions be in writing, if such waiver defines the occurrences not requiring written instruction, indicates the persons authorized to give such non-written instructions, and is signed by one of the persons pursuant to the immediately preceding sentence of this Section 10. In the event ESC obtains a Fund's written waiver, it may rely on non-written instructions received pursuant thereto. 11. CONFIDENTIALITY - ESC agrees to treat as confidential all records and other information relative to a Fund and the Fund's shareholders. ESC, on behalf of itself and its employees, agrees to keep confidential all such information, except, after prior notification to and approval by a Fund (which approval shall not be unreasonably withheld and may not be withheld where ESC may be exposed to civil or criminal contempt proceedings) when requested to divulge such information by duly constituted authorities or when requested by a shareholder of a Fund seeking information about his own or an appropriately related account. 12. REPORTS - ESC will furnish to each Fund and to properly authorized auditors, examiners, investment companies, dealers, salesmen, insurance companies, transfer agents, registrars, investors, and others designated by each Fund in writing, such reports at such times as are prescribed for each service in Exhibit B. 13. RIGHT OF OWNERSHIP - ESC agrees that all records and other data received, computed, developed, used and/or stored pursuant to this Agreement are the exclusive property of each respective Fund and that all such records and other data will be furnished without additional charge to a Fund in available machine readable data form immediately upon termination of this Agreement with respect to such Fund for any reason whatsoever. Furthermore, upon a Fund's request at any time or times while this Agreement is in effect, ESC shall deliver to such Fund, at the Fund's expense, any or all of the data and records held by ESC pursuant to this Agreement, in the form as requested by the Fund. On the effective date of termination of this Agreement with respect to a Fund or, if later, on the date a Fund ceases to use ESC's services, ESC will promptly return to the Fund any and all records and other data belonging to the Fund free of any claim or retention of rights by ESC. 14. REDEMPTION OF SHARES - The parties hereto agree that ESC shall process liquidations, redemptions or repurchases of shares of each Fund, as the agent for such Fund, in the manner described in the then current prospectus(es) and statement of additional information for the Fund. Notwithstanding the foregoing, ESC shall be liable for any losses, damages, claims or expenses resulting from ESC's failure to obtain the appropriate signature guarantee with regard to any redemption or transfer processed by ESC even if the current prospectus(es) or statement of additional information authorizes ESC to waive the requirement of a signature guarantee unless ESC is authorized in writing by an appropriate party to waive such a requirement. 15. SUBCONTRACTING - Each Fund may require that ESC, or ESC may, with the prior written consent of such Fund, subcontract with one or more of its affiliated or other persons to perform all or part of its obligations hereunder, provided, however, that, notwithstanding any such subcontract, ESC shall be fully responsible to each Fund hereunder. 16. ASSIGNMENT - This Agreement and the rights and duties hereunder shall not be assignable by ESC or any of the Fund parties hereto except by the specific written consent of the other party. 17. TERMINATION - This Agreement may be terminated with respect to a Fund on such date on which ESC has given such Fund not less than 180 days prior written notice or on which such Fund has given ESC not less than 90 days prior written notice. Upon such termination, ESC will use its best efforts to cooperate and assist in accomplishing a timely, efficient and accurate conversion to the person or firm which will provide the services described hereunder. This Agreement may be terminated by any Fund without the payment of any penalty, forfeiture, compulsory buyout amount or performance of any other obligation which could deter termination; provided, however, that for the purpose of this Section 17 any amount due under Section 3 of this Agreement which is undisputed is not considered a penalty, forfeiture, compulsory buyout amount or performance of any other obligation which could deter termination. This Agreement may be terminated with respect to a Fund after written notice to ESC by the Fund if there is a material breach or violation of this Agreement or if ESC fails to perform any of its obligations under this Agreement and the failure continues for more than 30 days after the Fund gives notice of the failure to ESC or bankruptcy or insolvency proceedings of any nature are instituted by or against ESC. 18. INSURANCE - ESC shall maintain throughout the term of this Agreement a fidelity bond(s) in an amount in excess of the minimum amount required to be obtained by the Funds which are parties hereto pursuant to Rule 17g-1 under the Investment Company Act of 1940 (the "1940 Act") covering the acts of its officers, employees or agents in performing any and all of the services required to be performed hereunder. ESC agrees to promptly notify each Fund in writing of any material amendment or cancellation of such bond(s). ESC shall at such times as the Fund may request, but at least once each year, notify each Fund of any claims made pursuant to such bond(s). 19. AMENDMENT - This Agreement may be amended at any time by an instrument in writing executed by both ESC and any Fund which is a party hereto, or each of their respective successors, provided that any such amendment will conform to the requirements set forth in the 1940 Act and the rules and regulations thereunder. 20. NOTICE - Any notice shall be sufficiently given when sent by registered or certified mail to any party at the address of such party set forth above or at such other address as such party may from time to time specify in writing to the other party. 21. SECTION HEADINGS - Section headings are included for convenience only and are not to be used to construe or interpret this Agreement. 22. INTERPRETIVE PROVISIONS - In connection with the operation of this Agreement, ESC and one or more of the Funds may agree with respect to such Funds and ESC from time to time on such provisions interpretive of or in addition to the provisions of this Agreement as may in their combined opinion be consistent with the general tenor of this Agreement. Furthermore, ESC and such Fund(s) may agree to add to, delete from or change the services set forth with respect to such Fund(s) in Exhibit B of the Agreement. Each such interpretive or additional provision, and each addition, deletion or change is to be signed by all parties affected and annexed hereto, and no such provision, addition, deletion or change shall contravene any applicable federal or state law or regulation and no such provision, addition, deletion or change shall be deemed to be an amendment of any provision of this Agreement with the exception of Exhibit B hereto. 23. GOVERNING LAW - This Agreement shall be governed by and its provisions shall be construed in accordance with the laws of The Commonwealth of Massachusetts. 24. DELAWARE BUSINESS TRUST - Each of the Funds listed on Exhibit A attached hereto is a Delaware business trust established under a Declaration of Trust. The obligations of such Funds are not personally binding upon, nor shall recourse be had against the private property of, any of the Trustees, shareholders, officers, employees or agents of the Funds, but only the property of such Funds shall be bound. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written. EVERGREEN SERVICE COMPANY By: /s/ Edward J. Falvey ___________________________________ Edward J. Falvey President EvergreenSelect Fixed Income Trust, a Delaware Business Trust consisting of the following series: Evergreen Select Limited Duration Fund Evergreen Select Fixed Income Fund Evergreen Select Income Plus Fund Evergreen Select Intermediate Tax Exempt Bond Fund Evergreen Select Core Bond Fund Evergreen Select Intermediate Bond Fund Evergreen Select Adjustable Rate Fund Evergreen Select Equity Trust, a Delaware Business Trust consisting of the following series: Evergreen Select Strategic Value Fund Evergreen Select Large Cap Blend Fund Evergreen Select Strategic Growth Fund Evergreen Select Social Principles Fund Evergreen Select Equity Income Fund Evergreen Select Small Company Value Fund Evergreen Select Common Stock Fund Evergreen Select Small Cap Growth Fund Evergreen Select Balanced Fund Evergreen Select Diversified Value Fund Evergreen Select Money Market Trust, a Delaware Business Trust consisting of the following series: Evergreen Select 100% Treasury Money Market Fund Evergreen Institutional Money Market Fund Evergreen Institutional Tax Exempt Money Market Fund Evergreen Institutional Treasury Money Market Fund Evergreen Municipal Trust, a Delaware Business Trust consisting of the following series: Evergreen California Tax Free Fund Evergreen Connecticut Municipal Bond Fund Evergreen Florida High Income Municipal Bond Fund Evergreen Florida Municipal Bond Fund Evergreen Georgia Municipal Bond Fund Evergreen Maryland Municipal Bond Fund Evergreen Massachusetts Tax Free Fund Evergreen Missouri Tax Free Fund Evergreen New Jersey Tax Free Income Fund Evergreen New York Tax Free Fund Evergreen North Carolina Municipal Bond Fund Evergreen Pennsylvania Tax Free Fund Evergreen South Carolina Municipal Bond Fund Evergreen Virginia Municipal Bond Fund Evergreen High Grade Tax Free Fund Evergreen Short-Intermediate Municipal Fund Evergreen Tax Free Fund Evergreen Equity Trust, a Delaware Business Trust consisting of the following series: Evergreen Aggressive Growth Fund Evergreen Fund Evergreen Micro Cap Fund Evergreen Omega Fund Evergreen Small Company Growth Fund Keystone Strategic Growth Fund (K-2) Evergreen American Retirement Fund Evergreen Foundation Fund Evergreen Tax Strategic Foundation Fund Evergreen Balanced Fund Evergreen Fund for Total Return Evergreen Growth & Income Fund Evergreen Income & Growth Fund Evergreen Small Cap Equity Income Fund Evergreen Value Fund Evergreen Utility Fund Keystone Growth and Income Fund (S-1) Evergreen Fixed Income Trust, a Delaware Business Trust consisting of the following series: Evergreen U.S. Government Fund Evergreen Strategic Income Fund Evergreen Diversified Bond Fund Keystone High Income Bond Fund (B-4) Evergreen Capital Preservation and Income Fund Evergreen Intermediate Term Bond Fund Evergreen Intermediate-Term Government Securities Fund Evergreen Short-Intermediate Bond Fund Evergreen International Trust, a Delaware Business Trust consisting of the following series: Evergreen Emerging Markets Growth Fund Evergreen Global Leaders Fund Evergreen Global Opportunities Fund Evergreen International Equity Fund Evergreen Latin America Fund Evergreen Natural Resources Fund Keystone Precious Metals Holdings Keystone International Fund Evergreen Money Market Trust, a Delaware Business Trust consisting of the following series: Evergreen Money Market Fund Evergreen Pennsylvania Tax Free Money Market Fund Evergreen Tax Exempt Money Market Fund Evergreen Treasury Money Market Fund By: /s/ John Pileggi _____________________________ John Pileggi President and Treasurer of each Delaware Business Trust listed above Updated as of Janaury 2,2002 EXHIBIT A Evergreen Select Fixed Income Trust, a Delaware Business Trust consisting of the following series: Evergreen Adjustable Rate Fund Evergreen Core Bond Fund Evergreen Fixed Income Fund Evergreen Fixed Income Fund II Evergreen Select High Yield Bond Fund Evergreen Income Plus Fund Evergreen Intermediate Term Municipal Bond Fund Evergreen International Bond Fund Evergreen Limited Duration Fund Evergreen Select Equity Trust, a Delaware Business Trust consisting of the following series: Evergreen Select Balanced Fund Evergreen Core Equity Fund Evergreen Equity Index Fund Evergreen Secular Growth Fund Evergreen Select Small Cap Growth Fund Evergreen Select Strategic Growth Fund Evergreen Special Equity Fund Evergreen Strategic Value Fund Evergreen Select Money Market Trust, a Delaware Business Trust consisting of the following series: Evergreen Institutional Money Market Fund Evergreen Institutional Municipal Money Market Fund Evergreen Institutional Treasury Money Market Fund Evergreen Institutional U.S. Government Money Market Fund Evergreen Institutional 100% Treasury Money Market Fund Evergreen Cash Management Money Market Fund Evergreen Prime Cash Management Money Market Fund Evergreen Municipal Trust, a Delaware Business Trust consisting of the following series: Evergreen Connecticut Municipal Bond Fund Evergreen Florida High Income Municipal Bond Fund Evergreen Florida Municipal Bond Fund Evergreen Georgia Municipal Bond Fund Evergreen Maryland Municipal Bond Fund Evergreen New Jersey Municipal Bond Fund Evergreen North Carolina Municipal Bond Fund Evergreen Pennsylvania Municipal Bond Fund Evergreen South Carolina Municipal Bond Fund Evergreen Virginia Municipal Bond Fund Evergreen High Grade Municipal Bond Fund Evergreen High Income Municipal Bond Fund Evergreen Intermediate Term Municipal Bond Fund Evergreen Municipal Bond Fund Evergreen Short-Intermediate Municipal Bond Fund Evergreen Equity Trust, a Delaware Business Trust consisting of the following series: Evergreen Balanced Fund Evergreen Foundation Fund Evergreen Select Balanced Fund Evergreen Tax Strategic Foundation Fund Evergreen Blue Chip Fund Evergreen Equity Income Fund Evergreen Growth and Income Fund Evergreen Small Cap Value Fund Evergreen Value Fund Evergreen Aggressive Growth Fund Evergreen Capital Growth Fund Evergreen Fund Evergreen Growth Fund Evergreen Large Company Growth Fund Evergreen Masters Fund Evergreen Omega Fund Evergreen Premier 20 Fund Evergreen Small Company Growth Fund Evergreen Stock Selector Fund Evergreen Tax Strategic Equity Fund Evergreen Health Care Fund Evergreen Technology Fund Evergreen Utility and Telecommunications Fund Evergreen Special Values Fund Evergreen Fixed Income Trust, a Delaware Business Trust consisting of the following series: Evergreen Diversified Bond Fund Evergreen Short-Duration Income Fund Evergreen Intermediate Term Bond Fund Evergreen High Yield Bond Fund Evergreen Quality Income Fund Evergreen Strategic Income Fund Evergreen U.S. Government Fund Evergreen International Trust, a Delaware Business Trust consisting of the following series: Evergreen Emerging Markets Growth Fund Evergreen Global Leaders Fund Evergreen Global Opportunities Fund Evergreen International Growth Fund Evergreen Latin America Fund Evergreen Precious Metals Fund Evergreen Money Market Trust, a Delaware Business Trust consisting of the following series: Evergreen California Municipal Money Market Fund Evergreen Florida Municipal Money Market Fund Evergreen Money Market Fund Evergreen Municipal Money Market Fund Evergreen New Jersey Municipal Money Market Fund Evergreen New York Municipal Money Market Fund Evergreen Pennsylvania Municipal Money Market Fund Evergreen Treasury Money Market Fund Evergreen U.S. Government Money Market Fund EXHIBIT B The services provided for in this Agreement shall be performed by ESC, or any agent appointed by ESC pursuant to Section 15 of this Agreement, under the name of Evergreen Service Company (ESC) and this name or any similar name or logo will not be used by ESC or its agents for any purposes other than those related to this Agreement or to any other agreement which ESC may enter into with any of the Fund (s) or with companies affiliated with the Fund (s). The offices of ESC shall be open to perform the services pursuant to this Agreement on all days when the Fund is open to transact business. ESC will perform all services normally provided to investment companies such as the Fund(s), and the quality of such services shall be equal to or better than that provided to the other investment companies serviced by ESC. With respect to each Fund, by way of illustration, but not limitation, these services will include: 1. Establishing, maintaining, safeguarding and reporting on shareholder account information and account histories, (including registration, name and address recorded in generally accepted form, dealer, representative, branch, and territory information, mailing address, distribution address, various codes and specific information relating to (if applicable); withdrawal plans, letters of intent, systematic investing, insured redemptions plans, account groupings for rights of accumulation discount processing, and for account group reporting for plan accounts and other accounts grouped for master sub-account reporting.) 2. Recording and controlling shares outstanding in certificate ("issued") and non- certificate ("unissued") form. 3. Maintaining a record for each certificate issued to include certificate number, account number, issued date, number of shares, canceled date or stop date, where appropriate. 4. Reconciling the number of outstanding shares of each Fund on a daily basis with the Fund and the Fund's custodian, promptly correcting any differences noted. 5. Establishing and maintaining a trade file on behalf of each Fund based on trade information furnished to the transfer agent by the Fund or its distributors. 6. Accepting and processing direct cash investments however received and investing such investments promptly in shareholder accounts. 7. Passing upon the adequacy of documents properly endorsed and guaranteed submitted by or on behalf of a shareholder to transfer ownership or redeem shares. 8. Transferring ownership of shares upon the books of each Fund. 9. Redeeming shares and preparing and mailing redemption checks or wire proceeds as instructed. 10. Preparing and promptly mailing account statements to the shareholder or such other authorized address and, when appropriate, as instructed by a Fund, to the dealer or dealer branch, whenever transaction activity effecting share balances are posted to a Fund account that is of the type that should receive such statement. 11. Checking surrendered certificates for stop transfer instructions. 12. Canceling certificates surrendered. 13. Issuing certificates as replacements for those canceled, or as an original issue of additional shares or upon the reduction of an equal number of unissued shares. 14. Maintaining and updating a stop transfer file, promptly placing stop transfer codes upon notification of possible loss, destruction or disappearance of a certificate. Upon receipt of proper documentation obtaining necessary insurance forms and issuing replacement certificates. 15. Balancing outstanding shares of record with the custodian prior to each distribution and calculating and paying or reinvesting distributions to shareholders of record and to open trade receivables and free stock. 16. Processing exchanges of shares of one Fund or Portfolio for another, calculating proper sales charges and collecting fees as required. 17. Processing withdrawal plan liquidations according to plan instructions. 18. Reporting to each Fund and its custodian daily the capital stock activities and dollar amounts of transactions. 19. Promptly answering inquiries from shareholders, dealers, Fund personnel, and others as requested in accordance with the terms of this Agreement as to account matters, referring policy or investment matters to the Fund. 20. Mailing reports and special mailings, as directed by a Fund, to all shareholders or selected holders or dealers. 21. Providing services with regard to the annual or special meetings of a Fund, including preparation and timely mailing of proxy material to shareholders of record and others as directed by the Fund, and receiving, examining and recording all properly executed proxies and performing such follow-up as required by the Fund. 22. Providing periodic listings and tallies of shareholder votes and certifying the final tally. 23. Providing an inspector of elections at the annual or any special meetings of a Fund. 24. Maintaining tax information for each account, deducting amounts where required and furnishing to a Fund, its shareholders, dealers and, when appropriate, regulatory bodies, the necessary tax information, all in compliance with the various applicable laws. 25. Maintaining records of account and distribution information for checks and confirmations returned as undeliverable by the Post Office. 26. Maintaining records and reporting sales information for Blue Sky reporting purposes. 27. Calculating and processing Fund mergers or stock dividends, as directed by a Fund. 28. Maintaining all Fund records as outlined in the record and tape retention schedule delivered by a Fund. 29. Reconciling all investment, distribution and redemption accounts. 30. Providing for the replacement of uncashed distribution or redemption checks. 31. Maintaining and safeguarding an inventory of unissued blank stock certificates, checks and other Fund records. 32. Making available to a Fund and its distributors at their locations devices which will provide immediate electronic access to computerized records maintained for a Fund. 33. Providing space and such technical expertise as may be required to enable a Fund and its properly authorized auditors, examiners and others designated by the Fund in writing to properly understand and examine all books, records, computer files, microfilm and other items maintained pursuant to this Agreement, and to assist as required in such examination. 34. Assigning a single account number to each shareholder regardless of the number of Funds or Portfolios owned for which Keystone Investment Management Company, Evergreen Asset Management Corp., First Union National Bank or one of its affiliates is the trustee, investment adviser or manager (except as instructed otherwise.) 35. Mailing prospectuses to existing accounts on receipt of the first direct investment transaction after a new prospectus has been issued by a Fund. 36. Mailing cash election notices when required prior to capital gains distributions. 37. Maintaining information, performing the necessary research and producing reports required to comply with all applicable state escheat or abandoned property laws. With respect to each Fund, the Transfer Agent will produce reports as requested by a Fund including, but not limited to, the following:

EXHIBIT C Transfer Agent Fee Schedule Charges to Funds Group 1 - Monthly Dividend Funds Per open account per year* $26.75 Per closed account per year 9.00 Group 2 - Quarterly Dividend Funds Per open account per year* $25.75 Per closed account per year 9.00 Group 3 - Semi-Annual and Annual Dividend Funds Per open account per year* $24.75 Per closed account per year 9.00 Group 4 - Money Market Funds Per open account per year* $26.75 Per closed account per year 9.00 Charges to Shareholders Group 5 - ERISA** Per IRA participant per year $10.00 with a maximum of $20.00** Per Keogh participant per year $10.00 with a maximum of $20.00 Per TSA per year $10.00 with a maximum of $20.00 * For shareholder accounts only. The Funds pay cost plus 15% for broker accounts. **These fees are not borne by the Funds, but are direct shareholder charges. Funds that have "seed" capital only will not be charged until the Fund has public shareholders. This Fee Schedule is exclusive of out-of-pocket reimbursable expenses. Out-of-pocket expenses include but are not limited to the following: Stationery and supplies Checks Express Delivery Postage Printing of forms Telephone Photocopies and Microfilm Dated: January 2, 2002 p/procedures & agreements/master transfer agreement/master transfer agreement as of 1'1'02.doc EX-7 9 emmtkpmg.txt CONSENT OF KPMG LLP CONSENT OF INDEPENDENT AUDITORS Board of Trustees Evergreen Money Market Trust We consent to the use of our report dated March 1, 2002 for Evergreen California Municipal Money Market Fund, Evergreen Florida Municipal Money Market Fund, Evergreen Money Market Fund, Evergreen Municipal Money Market Fund, Evergreen New Jersey Municipal Money Market Fund, Evergreen New York Municipal Money Market Fund, Evergreen Pennsylvania Municipal Money Market Fund, Evergreen Treasury Money Market Fund, and, Evergreen US Government Money Market Fund, portfolios of Evergreen Money Market Trust, incorporated herein by reference and to the references to our firm under the captions "FINANCIAL HIGHLIGHTS" in the prospectuses and "Independent Auditors" in the Statement of Additional Information. /s/ KPMG LLP Boston, Massachusetts May 27, 2002 EX-8 10 mcpaug.txt MULTIPLE CLASS PLAN MULTIPLE CLASS PLAN FOR THE EVERGREEN FUNDS As amended August 1, 2001 Each Fund in the Evergreen group of mutual funds currently offers one or more of the following seventeen classes of shares with the following class provisions and current offering and exchange characteristics. Additional classes of shares (such classes being shares having characteristics referred to in Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940 Act")), when created, may have characteristics that differ from those described. I. CLASSES A. Class A Shares 1. Class A Shares may adopt a distribution plan pursuant to Rule 12b-1 under the 1940 Act (a "12b-1 Distribution Plan") and/or a shareholder services plan. The plans provide for annual payments of distribution and/or shareholder service fees that are based on a percentage of average daily net assets of Class A Shares, as described in a Fund's current prospectus. 2. Class A Shares are offered with a front-end sales load, except that purchases of Class A Shares made under certain circumstances are not subject to the front-end load but may be subject to a contingent deferred sales charge ("CDSC"), as described in a Fund's current prospectus. 3. Shareholders may exchange Class A Shares of a Fund for Class A Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. B. Class B Shares 1. Class B Shares may adopt a 12b-1 Distribution Plan and/or a shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Class B Shares, as described in a Fund's current prospectus. 2. Class B Shares are offered at net asset value without a front-end sales load, but may be subject to a CDSC as described in a Fund's current prospectus. 3. Class B Shares automatically convert to Class A Shares without a sales load or exchange fee after designated periods. 4. Shareholders may exchange Class B Shares of a Fund for Class B Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. C. Class C Shares 1. Class C Shares may adopt a 12b-1 Distribution Plan and/or a shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Class C Shares, as described in a Fund's current prospectus. 2. Class C Shares are offered at net asset value without a front-end sales load, but may be subject to a CDSC, as described in a Fund's current prospectus. 3. Shareholders may exchange Class C Shares of a Fund for Class C Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. D. Class L Shares 1. Class L Shares may adopt a 12b-1 Distribution Plan and/or a shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Class L Shares, as described in a Fund's current prospectus. 2. Class L Shares are offered at net asset value without a front-end sales load, but may be subject to a CDSC, as described in a Fund's current prospectus. 3. Shareholders holding Class L Shares of a Fund in the Variable Annuity Trust may only exchange Class L shares for Class L shares of another Fund within the Variable Annuity Trust. E. Class S Shares 1. Class S Shares may adopt a 12b-1Distribution Plan and/or a shareholder services plan. The plans provide for annual payments of distribution and/or shareholder service fees that are based on a percentage of average daily net assets of Class S Shares, as described in a Fund's current prospectus. 2. Class S Shares are offered at net asset value without a front-end sales load, but may be subject to a CDSC as described in a Fund's current prospectus. 3. Shareholders may exchange Class S Shares of a Fund for Class S Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. F. Class S1 Shares 1. Class S1 Shares may adopt a 12b-1Distribution Plan and/or a shareholder services plan. The plans provide for annual payments of distribution and/or shareholder service fees that are based on a percentage of average daily net assets of Class S1 Shares, as described in a Fund's current prospectus. 2. Class S1 Shares are offered at net asset value without a front-end sales load, but may be subject to a CDSC as described in a Fund's current prospectus. 3. Shareholders may exchange Class S1 Shares of a Fund for Class S1 Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. G. Institutional Shares 1. Institutional Shares have no distribution or shareholder services plans. 2. Institutional Shares are offered at net asset value without a front-end sales load or CDSC. 3. Shareholders may exchange Institutional Shares of a Fund for Institutional Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. Shareholders holding Institutional Shares of a Fund in the Variable Annuity Trust may only exchange Institutional Shares for Institutional Shares of another Fund within the Variable Annuity Trust. H. Institutional Service Shares 1. Institutional Service Shares may adopt a 12b-1 Distribution Plan and/or shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Institutional Service Shares, as described in a Fund's current prospectus. 2. Institutional Service Shares are offered at net asset value without a front-end sales load or CDSC. 3. Shareholders may exchange Institutional Service Shares of a Fund for Institutional Service Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. I. Retail Shares 1. Retail Shares may adopt a 12b-1 Distribution Plan and/or a shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Retail Shares, as described in a Fund's current prospectus. 2. Retail Shares are offered at net asset value without a front-end sales load, but may be subject to a CDSC as described in a Fund's current prospectus. 3. Shareholders may exchange Retail Shares of a Fund for Retail Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. J. Administrative Shares 1. Administrative Shares may adopt a 12b-1 Distribution Plan and/or shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Administrative Shares, as described in a Fund's current prospectus. 2. Administrative Shares are offered at net asset value without a front-end sales load or CDSC. 3. Shareholders may exchange Administrative Shares of a Fund for Administrative Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. K. Investor Shares 1. Investor Shares may adopt a 12b-1 Distribution Plan and/or shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Investor Shares, as described in a Fund's current prospectus. 2. Investor Shares are offered at net asset value without a front-end sales load or CDSC. 3. Shareholders may exchange Investor Shares of a Fund for Investor Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. L. Participant Shares 1. Preferred Shares may adopt a 12b-1 Distribution Plan and/or shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Preferred Shares, as described in a Fund's current prospectus. 2. Preferred Shares are offered at net asset value without a front-end sales load or CDSC. 3. Shareholders may exchange Preferred Shares of a Fund for Preferred Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. M. Reserve Shares 1. Plus Shares may adopt a 12b-1 Distribution Plan and/or shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Plus Shares, as described in a Fund's current prospectus. 2. Plus Shares are offered at net asset value without a front-end sales load or CDSC. 3. Shareholders may exchange Plus Shares of a Fund for Plus Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. N. Resource Shares 1. Resource Shares may adopt a 12b-1 Distribution Plan and/or shareholder services plan. The plans provide for annual payments of distribution and/or shareholder services fees that are based on a percentage of average daily net assets of Resource Shares, as described in a Fund's current prospectus. 2. Resource Shares are offered at net asset value without a front-end sales load or CDSC. 3. Shareholders may exchange Resource Shares of a Fund for Resource Shares of any other fund, in accordance with any limitations as described in a Fund's current prospectus, to the extent they are offered by a Fund. II. CLASS EXPENSES Each class bears the expenses of its 12b-1 Distribution Plan and/or shareholder services plan. Class J Shares shall also bear that portion of the Transfer Agency fees and other expenses allowed by Rule 18f-3 that are attributable to them due to distribution outside of the United States. There currently are no other class specific expenses. III. EXPENSE ALLOCATION METHOD All income, realized and unrealized capital gains and losses and expenses not assigned to a class will be allocated to each class based on the relative net asset value of each class. IV. VOTING RIGHTS A. Each class will have exclusive voting rights on any matter submitted to its shareholders that relates solely to its class arrangement. B. Each class will have separate voting rights on any matter submitted to shareholders where the interests of one class differ from the interests of any other class. C. In all other respects, each class has the same rights and obligations as each other class. V. EXPENSE WAIVERS OR REIMBURSEMENTS Any expense waivers or reimbursements will be in compliance with Rule 18f-3 issued under the 1940 Act. EX-9 11 ethics.txt CODE OF ETHICS CODE OF ETHICS EVERGREEN INVESTMENT MANAGEMENT COMPANY TATTERSALL ADVISORY GROUP, INC. Effective May 11, 2001 As an Employee of any of the CMG Covered Companies, you are required to read, understand and abide by this Code of Ethics. The Code contains affirmative requirements as well as prohibitions that you are required to adhere to in connection with securities transactions effected on your behalf and on behalf of clients (including the Evergreen Funds). Such requirements include, among other things, (i.) notifying the Compliance Department upon establishing a personal securities account with a broker/dealer, (ii.) in certain cases, obtaining permission prior to engaging in a personal securities transaction, and (iii.) reporting personal securities transactions to the Compliance Department. Failure to adhere to the Code could result in sanctions, including dismissal from employment, and could also in certain cases expose you to civil or criminal penalties such as fines and/or imprisonment. No written code can explicitly cover every situation that possibly may arise. Even in situations not expressly described, the Code and your fiduciary obligations generally require you to put the interests of your clients ahead of your own. If you have any questions regarding the appropriateness of any action under this Code or under your fiduciary duties generally, you should contact your Compliance Officer or Assistant General Counsel to discuss the matter before taking the action in question. Similarly, you should consult with your Compliance or Legal officer if you have any questions concerning the meaning or interpretation of any provision of the Code. Finally, as an Employee of First Union Corporation or one of its divisions or subsidiaries, you should consult First Union's Code of Conduct contained in your Employee Handbook. This Code uses many defined terms that are defined in Section V. I. PROHIBITED ACTIVITIES A. No Employee shall engage in any Security transactions, activity or relationship that creates or has the appearance of creating a conflict of interest (financial or other) between the Employee and a Covered Company or a Client Account. Each Employee shall always place the financial and business interests of the Covered Companies and Client Accounts before his or her own personal financial and business interests. B. No Employee shall: (1) employ any device, scheme or artifice to defraud a Client Account; (2) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon a Client Account; or (3) engage in any fraudulent, deceptive or manipulative practice with respect to a Client Account. C. No Employee shall purchase or sell, directly or indirectly, any Security for any Personal Account, any Client Account, the account of a Covered Company, or any other account, while in possession of Inside Information concerning that Security or the issuer without the prior written approval of the Compliance Officer and the Assistant General Counsel and (per First Union's Code of Conduct) First Union's Conflict of Interest Committee, which approval shall specifically determine that such trading would not constitute an improper use of such Inside Information. Employees possessing Inside Information shall take reasonable precautions to ensure that such information is not disseminated beyond those Employees with a need to know such information. Any questions should be directed to the Compliance Officer or Assistant General Counsel. D. No Employee shall recommend or cause a Covered Company or Client Account to take action or refrain from taking action for the Employee's own personal benefit. E. It is presumed that Employees in a geographic location which does not effect trades will not have knowledge of transactions involving Client Accounts managed at a different geographic location, but use of any such information would likewise be prohibited. (1) No Employee shall purchase or sell any Security for any Personal Account if he or she knows such Security (i.) is being purchased or sold for any Covered Company or Client Account or (ii.) is being actively considered for purchase or sale by any Covered Company or Client account. (2) A Covered Company shall not purchase or sell any Security for its own account if the Employee making such purchase or sale knows such Security (i.) is being purchased or sold for any Client Account or (ii.) is being actively considered for purchase or sale by any Client Account. The prohibitions contained in E.(1) and E.(2) shall not apply to: (a) purchases pursuant to a dividend reinvestment program or purchases based upon preexisting status as a security holder, policy holder or depositor; (b) purchases of Securities through the exercise of rights issued to the Employee as part of a pro rata issue to all holders of such Securities, and the sale of such rights; (c) transactions that are non-volitional, including any sale out of a brokerage account resulting from a bona fide margin call as long as collateral was not withdrawn from such account within 10 days prior to the call; and (d) transactions previously approved in writing by the Compliance Officer that have been determined not to be harmful to any Client Account because of the volume of trading in the Security. F. No Employee shall purchase a Security for any Personal Account in an initial public offering, except for initial public offerings where the individual has a right to purchase the Security based on a preexisting status as a security holder, policy holder or depositor. G. No Employee shall maintain or open a brokerage account constituting a Personal Account unless duplicate confirmations and statements of all account activity are forwarded to the Compliance Officer. H. No Employee shall use any Derivative to evade the restrictions of this Code of Ethics. I. No Investment Person shall be a director of a publicly traded company other than First Union Corporation without prior written approval of the Compliance Officer. Approval generally will not be granted. J. No Access Person shall make investments for any Personal Account in any investment club without prior written approval from the Compliance Officer. K. No Access Person may purchase a Security for any Personal Account in a private offering without prior written approval of the person's Chief Investment Officer or the Compliance Officer. In considering whether to grant such approval, the Compliance Officer or Chief Investment Officer will consider several factors, including but not limited to: (1) whether the investment opportunity should be reserved for a Client Account; and (2) whether the opportunity is being offered to the Access Person by virtue of his or her position with respect to a Client Account or a Covered Company. If approval is granted, the Access Person must disclose the investment to the appropriate Chief Investment Officer before participating in any way in any decision as to whether a Client Account should invest in such Security or in another Security issued by the same issuer. In such circumstances, the Chief Investment Officer will conduct a review by investment personnel with no interest in the issuer prior to a purchase on behalf of a Client Account. The Compliance Officer shall retain a record of this approval and the rationale supporting it. L. No Access Person may offer investment advice or manage any person's portfolio in which he or she does not have Beneficial Ownership other than a Client Account without prior written approval from the Compliance Officer. M. No Investment Person may profit from the purchase and sale or sale and purchase of the same (or equivalent) Securities (other than securities issued by First Union Corporation) in a Personal Account within 60 calendar days. Any resulting profits will be disgorged as instructed by the Compliance Officer. N. No Investment Person may buy or sell a Security for any Personal Account within seven calendar days before or after a Client Account that he or she manages, or provides information or advice to, or executes investment decisions for, trades in that Security, except: (1) purchases pursuant to a dividend reinvestment program or purchases based upon preexisting status as a security holder, policy holder or depositor; (2) purchases of Securities through the exercise of rights issued to the Employee as part of a pro rata issue to all holders of such Securities, and the sale of such rights; (3) transactions that are non-volitional, including any sale out of a brokerage account resulting from a bona fide margin call as long as collateral was not withdrawn from such account within ten days prior to the call; and (4) transactions previously approved in writing by the Compliance Officer that have been determined not to be harmful to any Client Account because of the volume of trading in the Security. Any related profits from such transaction will be disgorged as instructed by the Compliance Officer. O. No Employee shall, directly or indirectly, in connection with any purchase or sale of any Security by a Client Account or a Covered Company or in connection with the business of a Client Account or a Covered Company, accept or receive from a third party any gift or other thing of more than de minimis value, other than (i.) business entertainment such as meals and sporting events involving no more than ordinary amenities and (ii.) unsolicited advertising or promotional materials that are generally available. An Employee also should consult First Union Corporation's Code of Conduct relating to acceptance of gifts from customers and suppliers. An Employee shall refer questions regarding the permissibility of accepting items of more than de minimis value to the Compliance Officer. II. PRE-CLEARING PERSONAL TRADES Pre-Clearance Procedures and Standards A. No Access Person may engage in a Securities transaction (other than a transaction described in Section B. below) involving a Personal Account unless he/she has first pre-cleared the transaction by completing a Personal Investment Pre-Clearance Form and had the form signed and/or initialed as set forth therein. Approval shall be indicated by the Access Person's Chief Investment Officer or other designated supervisor signing and dating the Form where indicated at the bottom. Any such approval shall only be valid until the end of the next trading day. The time allotment is limited to the actual time of purchase or sale of the Security. If execution of the trade does not take place by the end of the next trading day, then another pre-clearance request must be processed and approved. "Good till canceled" orders are forbidden and "no limit" orders must be canceled or pre-cleared again by the end of the next trading day after the approval if the trade is not executed. B. The following transactions are excluded from the pre-clearance requirement: (1) any transactions in Securities traded on a national securities exchange or NASDAQ NMS with an aggregate amount of (i.) 500 shares or less or (ii.) $25,000 or less (whichever is a lessor amount) of a particular security within a seven-day window. The de minimis is not valid for an Investment Person who has knowledge of recent purchases and sales of the same security within Client accounts. (2) purchases pursuant to a dividend reinvestment program (DRIP) or purchases based upon preexisting status as a security holder, policy holder or depositor; (3) purchases of Securities through the exercise of rights issued to the Employee as part of a pro rata issue to all holders of such Securities, and the sale of such rights; (4) transactions that are non-volitional, including any sale out of a brokerage account resulting from a bona fide margin call as long as collateral was not withdrawn from such account within ten days prior to the call; (5) transactions in Securities issued by First Union Corporation; (6) transactions by an Investment Person in a Security that all Client Accounts for which the person makes or executes investment decisions or recommendations are prohibited under their investment guidelines from purchasing; and (7) transactions previously approved in writing by the Compliance Officer that have been determined not to be harmful to any Client Account because of the volume of trading in the Security. C. Failure to receive pre-approval on applicable trades will result in the following actions: (1) First Failure: Letter of Reprimand; (2) Second Failure: $100.00 fine, payable to a charity agreeable to the Compliance Officer and the Access Person; (3) Third Failure: $250.00 fine, payable to a charity agreeable to the Compliance Officer and the Access Person; (4) Fourth Failure: Referral to appropriate management for action. D. All employees should consult the First Union Code of Conduct regarding the permissibility of investing in other financial institutions. III. REPORTING REQUIREMENTS A. Each year every Employee must sign an acknowledgment stating that he/she has received and reviewed and will comply with this Code of Ethics. New Employees should read and sign the policy within 30 days of employment. B. Each Employee shall give written instructions to every broker with whom he or she transacts for any Personal Account to provide duplicate confirmation for all purchases and sales of Securities to: For Evergreen Investment Management Company. - White Plains, NY Employees: Evergreen Funds 1311 Mamaroneck Avenue White Plains, NY 10605 ATTN: Compliance Department For Evergreen Investment Management Company - Boston, Richmond, and Charlotte Employees: For Tattersall Advisory Group, Inc. Employees: Tattersall Advisory Group, Inc. 6802 Paragon Place, Suite 200 Richmond, VA 23230 ATTN: Compliance Department C. Employees who are not Investment Persons or Access Persons must report all transactions for their Personal Account annually for each year ending December 31 by the following January 31. D. Each Access Person must report all Securities holdings in all Personal Accounts upon commencement of employment (or within ten days of becoming an Access Person) and thereafter annually, for each year ending December 31 by the following January 31. A separate holdings list need not be provided if all personal security holdings are otherwise listed on copies of brokerage statements received by Compliance. E. Each Access Person shall file with the Compliance Officer within ten calendar days after the end of each calendar quarter (March 31, June 30, September 30, December 31) a report listing each Security transaction (including those exempt from the pre-clearance requirements) effected during the quarter for any Personal Account; provided, however, a Security transaction need not be separately reported under this paragraph if a copy of a broker confirmation for the transaction was forwarded to the appropriate Compliance Officer as required under Section 1.G. F. Any Employee who becomes aware of any person trading on or communicating Inside Information (or contemplating such actions) must report such event to the Compliance Officer or the Assistant General Counsel. G. Any Employee who becomes aware of any person violating this Code of Ethics must report such event to the Compliance Officer or the Assistant General Counsel. IV. ENFORCEMENT A. Review:- The Compliance Officer shall review reports filed under the Code of Ethics to determine whether any violation of this Code of Ethics may have occurred. B. Investigation: - The Assistant General Counsel shall investigate any substantive alleged violation of the Code of Ethics. An Employee allegedly involved in a violation of the Code of Ethics may be required to deliver to the Assistant General Counsel or his/her designee all tax returns involving any Personal Account or any Securities for which the Employee has Beneficial Ownership for all years requested. Failure to comply may result in termination. C. Sanctions: - In determining the sanctions to be imposed for a violation of this Code of Ethics, the following factors, among others, may be considered: (1) the degree of willfulness of the violation; (2) the severity of the violation; (3) the extent, if any, to which an Employee profited or benefited from the violation; (4) the adverse effect, if any, of the violation on a Covered Company or a Client Account; and (5) any history of prior violation of the Code. The following sanctions, among others, may be considered: (1) disgorgement of profits; (2) fines; (3) letter of reprimand; (4) suspension or termination of employment; and (5) such other actions as the Compliance Officer in concert with appropriate legal counsel, or the Boards of Trustees of the Evergreen Funds, shall determine. D. All violations of the Code of Ethics involving Employees with responsibilities relating to the Evergreen Funds or otherwise involving the Evergreen Funds, and any sanctions imposed shall be reported to the Boards of Trustees of the Evergreen Funds. All violations of the Code and any sanctions also shall be reported to the Employee's supervisor, and any regulatory agency requiring such reporting, and shall be filed in the Employee's personnel record. E. Potential Legal Penalties for Misuse of Inside Information (1) civil penalties up to three times the profit gained or loss avoided; (2) disgorgement of profits; (3) injunctions, including being banned from the securities industry; (4) criminal penalties up to $1 million; and/or (5) jail sentences. V. DEFINITIONS Access Person: Access Person includes: (i.) any director of a Covered Company or any officer of a Covered Company with the title of Vice President or above, but excluding any such director or officer excluded in writing by the Covered Company's Compliance Officer with the approval of the Assistant General Counsel; (ii.) any Investment Person, but excluding any such person excluded in writing by the appropriate person's Compliance Officer with the approval of the Assistant General Counsel; and (iii.) any Employee of a Covered Company who, in connection with his or her regular duties, makes, participates in, or obtains information regarding the purchase or sale of a Security by a Client Account or a Covered Company. Upon the hiring of a new Employee or of a change in an Employee's job title or responsibilities, the Chief Operating Officer, with the approval of the appropriate Compliance Officer, will determine whether the employee or has become an Access Person under the Code. The Compliance Officer will notify the employee. Assistant General Counsel: Michael H. Koonce - 617/210-3663 Beneficial Ownership: A direct or indirect financial interest in an investment giving a person the opportunity directly or indirectly to participate in the risks and rewards of the investment, regardless of the actual owner of record. Securities of which a person may have Beneficial Ownership include, but are not limited to: (1) securities owned by a spouse, by or for minor children, or by relatives of the person or his/her spouse who live in his/her home, including Securities in trusts of which such persons are beneficiaries; (2) a proportionate interest in Securities held by a partnership of which the person is a general partner; (3) securities for which a person has a right to dividends that are separated or separable from the underlying securities; and (4) securities that a person has a right to acquire through the exercise or conversion of another Security. Client Account: Any account of any person or entity (including an investment company) for which a Covered Company provides investment advisory or investment management services. Client Account does not include brokerage or other accounts not involving investment advisory or management services. Compliance Officer: The Compliance Officers for each Covered Company are set forth below: Evergreen Investment Management Company - White Plains Christina Carroll 914/644-1122 Jim Angelos 617/210-3690 Evergreen Investment Management Company - Charlotte, Boston and Richmond Cathy White 617/210-3606 Jim Angelos 617/210-3690 Barbara Lapple 704/383-6419 Tattersall Advisory Group Margaret Corwin 804/289-2663 Covered Company: Includes Evergreen Investment Management Company, , and Tattersall Advisory Group, Inc. Covered Company also includes any other registered CMG investment advisors that are acquired during the time this Code is in effect. Derivative: Every financial arrangement whose value is linked to, or derived from, fluctuations in the prices of stock, bonds, currencies or other assets. Derivatives include but are not limited to futures, forward contracts, options and swaps on interest rates, currencies, and stocks. Direct or Indirect Influence or Control: The power on the part of an Employee, his/her spouse or a relative living in his/her home to directly or indirectly influence the selection or disposition of investments. Employee: Any director, officer, or employee of a Covered Company, including temporary or part-time employees and employees on short-term disability or leave of absence. Independent contractors and their employees providing services to a Covered Company, if designated by the Compliance Officer, shall be treated as Employees under this Code. Evergreen Funds: The open and closed-end investment companies advised or administered by the Covered Companies. Inside Information: Information regarding a Security or its issuer that has not yet been effectively communicated to the public through an SEC filing or widely distributed news release, and which a reasonable investor would consider important in making an investment decision or which is reasonably likely to impact the trading price of the Security. Inside Information includes, but is not limited to, information about (i.) dividend changes, (ii.) earnings estimates and changes to previously released estimates, (iii.) other changes in financial status, (iv.) proposed mergers or acquisitions, (v.) purchases or sales of material amounts of assets, (vi.) significant new business, products or discoveries or losses of business, (vii.) litigation or investigations, (viii.) liquidity difficulties or (ix.) management changes. Investment Person: An Employee who is a portfolio manager, securities analyst, or trader, or who otherwise makes recommendations regarding or effects the purchase or sale of securities by a Client Account. Personal Account: Any holding of Securities constituting Beneficial Ownership, other than a holding of Securities previously approved by the Compliance Officer over which the Employee has no Direct Influence or Control. A Personal Account is not limited to securities accounts maintained at brokerage firms, but also includes holdings of Securities owned directly by an Employee. Security: Any type of equity or debt instrument and any rights relating thereto, such as derivatives, warrants and convertible securities. Unless otherwise noted, Security does not include: (1) US Government Securities (see definition below); (2) commercial paper, certificates of deposit, repurchase agreements, bankers' acceptances, or any other money market instruments; (3) shares of registered open-end investment companies (i.e., mutual funds); (4) commodities (except the Security that does include options on individual equity or debt securities); (5) real estate investment trusts; (6) guaranteed insurance contracts/ bank investment contracts; or (7) index based securities; (8) derivatives based on any instruments listed above. Shares issued by all closed end funds (excluding index-based derivatives) are included in the definition of Security. U.S. Government Securities: All direct obligations of the U.S. Government and its agencies and instrumentalities (for instance, obligations of GNMA, FHLCC, or FHLBs). -----END PRIVACY-ENHANCED MESSAGE-----