-----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, Ie6Z4hZKYYgcitMKpWzoOFog4clQeLoaIcnXgeFP9bkBcImwTF3ePUJCa2YO3IeE t+l46OxxRMZFjY0Hl6UksQ== 0000907244-01-000012.txt : 20010129 0000907244-01-000012.hdr.sgml : 20010129 ACCESSION NUMBER: 0000907244-01-000012 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20010125 EFFECTIVENESS DATE: 20010125 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MENTOR FUNDS CENTRAL INDEX KEY: 0000883428 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 251679376 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 333-82853 FILM NUMBER: 1515006 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-06550 FILM NUMBER: 1515007 BUSINESS ADDRESS: STREET 1: RIVERFRONT PLAZA STREET 2: WEST TOWER 901 E BYRD STREET CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8047823648 MAIL ADDRESS: STREET 1: RIVERFRONT PLAZA STREET 2: WEST TOWER 901 E BYRD STREET CITY: RICHMOND STATE: VA ZIP: 23219 FORMER COMPANY: FORMER CONFORMED NAME: CAMBRIDGE SERIES TRUST DATE OF NAME CHANGE: 19920717 485BPOS 1 0001.txt MENTOR FUNDS 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. 25 [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. 27 [X] MENTOR FUNDS (Reserve Money Market Funds) (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) It is proposed that this filing will become effective: [ ] immediately upon filing pursuant to paragraph (b) [X] on January 28, 2001 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) MENTOR FUNDS CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 25 TO REGISTRATION STATEMENT This Post-Effective Amendment No. 23 to Registrant's Registration Statement No. 333-82853 and 811-06555 consists of the following pages, items of information and documents: The Facing Sheet PART A ------ Prospectus for Evergreen Reserve Money Market Fund Evergreen Reserve U.S. Government Money Market Fund Evergreen Reserve Tax-Exempt Money Market Fund is contained herein. PART B ------ Statement of Additional Information for Evergreen Reserve Money Market Fund Evergreen Reserve U.S. Government Money Market Fund Evergreen Reserve Tax-Exempt Money Market Fund is contained herein. PART C ------ Exhibits Indemnification Business and Other Connections of Investment Adviser Principal Underwriter Location of Accounts and Records Undertakings Signatures RESERVE MONEY MARKET FUNDS PART A PROSPECTUS EVERGREEN RESERVE MONEY MARKET FUNDS Evergreen Reserve Money Market Fund Evergreen Reserve Tax-Exempt Money Market Fund Evergreen Reserve U.S. Government Money Market Fund Retail shares Institutional shares Prospectus, February 1, 2001 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. TABLE OF CONTENTS FUND RISK/RETURN SUMMARIES: Overview of Fund Risks...........................1 Evergreen Reserve Money Market Fund..............2 Evergreen Reserve Tax-Exempt Money Market Fund................................4 Evergreen Reserve U.S. Government Money Market Fund................................6 GENERAL INFORMATION: The Funds' Investment Advisors..................8 Calculating the Share Price.....................8 How to Choose an Evergreen Fund.................8 How to Choose the Share Class That Best Suits You.............................9 How to Buy Shares...............................10 How to Redeem Shares............................11 Financial Institutions..........................12 Other Services..................................12 The Tax Consequences of Investing in the Funds..........................12 Fees and Expenses of the Funds..................13 Financial Highlights............................14 Other Fund Practices............................17 In general, Funds included in this prospectus seek to provide investors with a high rate of current income consistent with preservation of capital and maintenance of liquidity and, in the case of Reserve Tax-Exempt Money Market Fund, such income will be exempt from federal income tax. Fund Summaries Key Each Fund's summary is organized around the following basic topics and questions: Investment Goal What is the Fund's financial objective? You can find clarification on how the Fund seeks to achieve its objective by looking at the Fund's strategy and investment policies. The Fund's Board of Trustees can change the investment objective without a shareholder vote. Investment Strategy How does the Fund go about trying to meet its goals? What types of investments does it contain? What style of investing and investment philosophy does it follow? Does it have limits on the amount invested in any particular type of security? Risk Factors What are the specific risks for an investor in the Fund? Performance How well has the Fund performed in the past year? The past five years? The past ten years? Expenses How much does it cost to invest in the Fund? What is the difference between sales charges and expenses? OVERVIEW OF FUND RISKS Reserve Money Market Funds typically rely on a combination of the following strategies: o maintaining $1.00 per share net asset value; o investing primarily in U.S. dollar-denominated high quality money market instruments and other high quality securities meeting credit criteria which the Fund's portfolio manager believes present minimal credit risk; o maintaining a dollar-weighted average maturity of 90 days or less and investing in securities with remaining maturities of less than 397 days; and o selling a portfolio investment: i) when the issuers' investment fundamentals begin to deteriorate; ii) to take advantage of more attractive yield opportunities; iii) when the investment no longer appears to meet the Fund's investment objective; iv) when the Fund must meet redemptions; or v) for other investment reasons which the portfolio manager deems necessary. may be appropriate for investors who: o are seeking current income consistent with preservation of capital and maintenance of liquidity. o are seeking a conservative investment offering maximum liquidity combined with competitive yields and a portfolio consisting of high quality, liquid short-term securities. o are seeking current income exempt from federal income tax (Reserve Tax-Exempt Money Market Fund only). 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: o not guaranteed to achieve its investment goal o not a deposit with a bank o not insured, endorsed or guaranteed by the FDIC or any government agency o 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. 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 and dividend-paying stocks 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. When interest rates go down, interest earned by the Fund on its investments may also decline, which could cause the Fund to reduce the dividends it pays. The longer the term of the 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 and dividend yield and total return earned on your investment may decline if an issuer fails to pay an obligation on a timely basis. RESERVE MONEY MARKET FUNDS 1 RESERVE MONEY MARKET FUND FUND FACTS: Goals: o High Current Income o Maintenance of Liquidity o Preservation of Capital Principal Investment: o High Quality Short-Term Instruments Classes of Shares Offered in this Prospectus: o Retail shares o Institutional shares Investment Advisor: o Evergreen Investment Management Dividend Payment Schedule: o Monthly Investment Goal The Fund seeks as high a rate of current income as the investment advisor believes is 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 invest in high quality, short-term instruments consisting of any or all of the following: U.S. Government securities, bankers' acceptances, prime commercial paper, repurchase agreements with respect to U.S. Government or agency securities and other short-term obligations of corporate issuers. The Fund may invest in high quality U.S. dollar- denominated obligations of foreign issuers and 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 can invest without limit in obligations of domestic branches of U.S. banks. The Fund primarily invests in U.S. dollar-denominated high quality securities and other U.S. dollar-denominated money market instruments meeting credit criteria which the Fund's investment advisor believes present minimal credit risk. "High quality securities", in the case of the Fund, are (i) commercial paper or other short-term obligations rated A-1 by Standard & Poor's Ratings Services ("S&P") and P-1 by Moody's Investors Service, Inc. ("Moody's") and (ii) obligations rated AAA or AA by S&P and Aaa or Aa by Moody's at the time of investment. 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: o Interest Rate Risk o Credit Risk If the Fund invests in non-U.S. securities 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 value of your investment. Certain foreign countries have less developed and less regulated securities markets and accounting systems than the U.S. This may make it harder to get accurate information about a security or company, and increase the likelihood that an investment will not perform as well as expected. For further information regarding the Fund's investment strategy and risk factors see "Other Fund Practices." RESERVE MONEY MARKET FUNDS 2 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 Institutional shares of the Fund in each calendar year since the Institutional shares' inception on 11/19/1997. 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 Institutional Shares (%) 1998 1999 2000 5.39 5.05 6.17 Best Quarter: 4th Quarter 2000 +1.59% Worst Quarter: 1st Quarter 1999 +1.15% This next table lists the Fund's average annual total return by class over the past year and since inception (through 12/31/2000). 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 12/31/2000)* Inception Performance Date of 1 year 5 year 10 year Since Class 11/19/1997 Retail shares 10/15/1998 5.77% N/A N/A 5.20% Institutional 11/19/1997 6.17% N/A N/A 5.55% shares *Historical performance shown for the Retail shares prior to its inception is based on the performance of the Institutional shares, the original class offered. These historical returns for the Retail shares have not been adjusted to reflect the effect of the Retail shares' 0.38% 12b-1 fee. The Institutional shares do not pay 12b-1 fees. If these fees had been reflected, returns would have been lower. To obtain current yield information call 1-800-343-2898. EXPENSES This section describes the fees and expenses you would pay if you bought and held shares of the Fund. You pay no shareholder transaction fees. Annual Fund Operating Expenses (expenses that are deducted from Fund assets) + Total Fund Management 12b-1 Other Operating Fees Fees Expenses Expenses Retail shares 0.17% 0.38% 0.10% 0.65% Institutional 0.17% 0.00% 0.10% 0.27% shares +Restated for the fiscal year ended 9/30/2000 to reflect current fees. The table below shows the total expenses you would pay on a $10,000 investment over one-, three-, five- and ten-year periods. The example is intended to help you compare the cost of investing in this Fund versus other mutual funds and is for illustration only. The example assumes a 5% average annual return and reinvestment of all dividends and distributions. Your actual costs may be higher or lower. Example of Fund Expenses After: Retail shares Institutional shares 1 year $66 $28 3 years $208 $87 5 years $362 $152 10 years $810 $343 RESERVE MONEY MARKET FUNDS 3 RESERVE TAX-EXEMPT MONEY MARKET FUND FUND FACTS: Goals: o High Current Income Exempt from Federal Income Tax o Maintenance of Liquidity o Preservation of Capital Principal Investment: o Tax-Exempt Securities Class of Shares Offered in this Prospectus: o Retail shares Investment Advisor: o Evergreen Investment Management Company, LLC Dividend Payment Schedule: o Monthly Investment Goal The Fund seeks as high a rate of current income exempt from federal income tax as the investment advisor believes is 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 invests, as a fundamental policy, at least 80% of its net assets in tax-exempt securities such as: municipal notes, municipal bonds, municipal securities backed by the U.S. Government or any of its agencies or instrumentalities, tax-exempt commercial paper or participation interests in any of these securities. The Fund may invest the remainder of its assets in other U.S. dollar-denominated high quality money market instruments which are exempt from federal income tax other than the alternative minimum tax. The Fund also reserves the right to invest more than 25% of its assets in tax-exempt securities relating to any one or more states (including the District of Columbia), U.S. territories or possessions, or any of their political subdivisions. The Fund may temporarily invest up to 100% of its assets in high quality taxable money market instruments in response to adverse economic, political or market conditions. This strategy is inconsistent with the Fund's principal investment strategy and investment goal, and if employed could result in a lower return and loss of market opportunity. 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: o Interest Risk o Credit Risk In addition, an investment in a Fund that may concentrate its investments in a limited number of states 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 such states' economies that may weaken or jeopardize the ability of the states' municipal bond issuers to pay interest and principal on their securities. For further information regarding the Fund's investment strategy and risk factors see "Other Fund Practices." RESERVE MONEY MARKET FUNDS 4 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 Retail shares of the Fund in each calendar year since inception on 10/15/1998. 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 Retail Shares (%) 1999 2000 2.63 3.57 Best Quarter: 4th Quarter 2000 +0.95% Worst Quarter: 1st Quarter 1999 +0.56% This next table lists the Fund's average annual total return over the past year and since inception (through 12/31/2000). 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 12/31/2000) Inception Performance Date of 1 year 5 year 10 year Since Class 10/15/1998 Retail shares 10/15/1998 3.57% N/A N/A 3.11% To obtain current yield information call 1-800-343-2898. EXPENSES This section describes the fees and expenses you would pay if you bought and held shares of the Fund. You pay no shareholder transaction fees. Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+ Total Fund Management 12b-1 Other Operating Fees Fees Expenses Expenses Retail shares 0.21% 0.33% 0.16% 0.70% +Actual for the fiscal year ended 9/30/2000. The table below shows the total expenses you would pay on a $10,000 investment over one-, three-, five- and ten-year periods. The example is intended to help you compare the cost of investing in this Fund versus other mutual funds and is for illustration only. The example assumes a 5% average annual return and reinvestment of all dividends and distributions. Your actual costs may be higher or lower. Example of Fund Expenses After: Retail shares 1 year $72 3 years $224 5 years $390 10 years $871 RESERVE MONEY MARKET FUNDS 5 RESERVE U.S. GOVERNMENT MONEY MARKET FUND FUND FACTS: Goals: o High Current Income o Maintenance of Liquidity o Preservation of Capital Principal Investment: o U.S. Government Securities Classes of Shares Offered in this Prospectus: o Retail shares o Institutional shares Investment Advisor: o Evergreen Investment Management Dividend Payment Schedule: o Monthly Investment Goal The Fund seeks as high a rate of current income as is 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 invests exclusively in U.S. Treasury bills, notes, and bonds, and other obligations issued or guaranteed as to principal or interest by the U.S. Government, its agencies, or instrumentalities, and in repurchase agreements with respect to such obligations. Certain of the obligations in which the Fund invests, including U.S. Treasury bills, notes, and bonds, mortgage participation certificates issued or guaranteed by the Government National Mortgage Association, and Federal Housing Administration debentures, are supported by the full faith and credit of the United States. Other U.S. Government securities issued by federal agencies or government sponsored enterprises are not supported by the full faith and credit of the United States. These securities include obligations supported by the right of the issuer to borrow from the U.S. Treasury, such as obligations of Federal Home Loan Banks, and obligations supported only by the credit of an instrumentality, such as Federal National Mortgage Association bonds. Short-term U.S. Government obligations generally are considered among the safest short-term investments. Because of their added safety, the yields available from U.S. Government obligations are generally lower than the yields available from comparable corporate debt securities. The U.S. Government guarantee of securities owned by the Fund does not guarantee the net asset value of the Fund's shares, which the Fund seeks to maintain at $1.00 per share. 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: o Interest Rate Risk o Credit Risk For further information regarding the Fund's investment strategy and risk factors see "Other Fund Practices." RESERVE MONEY MARKET FUNDS 6 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 Institutional shares of the Fund in each calendar year since the Institutional shares' inception on 6/27/1997. 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 Institutional Shares (%) 1998 1999 2000 5.28 4.89 6.05 Best Quarter: 4th Quarter 2000 +1.57% Worst Quarter: 1st Quarter 1999 +1.14% This next table lists the Fund's average annual total return by class over the past year and since inception (through 12/31/2000). 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 12/31/2000)* Inception Performance Date of 1 year 5 year 10 year Since Class 6/27/1997 Retail shares 10/15/1998 5.65% N/A N/A 5.13% Institutional 6/27/1997 6.05% N/A N/A 5.41% shares * Historical performance shown for the Retail shares prior to its inception is based on the performance of the Institutional shares, the original class offered. These historical returns for the Retail shares have not been adjusted to reflect the effect of the Retail shares' 0.38% 12b-1 fee. The Institutional shares do not pay 12b-1 fees. If these fees had been reflected, returns would have been lower. To obtain current yield information call 1-800-343-2898. EXPENSES This section describes the fees and expenses you would pay if you bought and held shares of the Fund. You pay no shareholder transaction fees. Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+ Total Fund Management 12b-1 Other Operating Fees Fees Expenses Expenses Retail shares 0.18% 0.38% 0.09% 0.65% Institutional 0.18% 0.00% 0.09% 0.27% shares +Restated for the fiscal year ended 9/30/2000 to reflect current fees. The table below shows the total expenses you would pay on a $10,000 investment over one-, three-, five- and ten-year periods. The example is intended to help you compare the cost of investing in this Fund versus other mutual funds and is for illustration only. The example assumes a 5% average annual return and reinvestment of all dividends and distributions. Your actual costs may be higher or lower. Example of Fund Expenses After: Retail shares Institutional shares 1 year $ 66 $ 28 3 years $208 $ 87 5 years $362 $152 10 years $810 $343 RESERVE MONEY MARKET FUNDS 7 THE FUNDS' INVESTMENT ADVISORS An investment advisor manages a Fund's investments and supervises its daily business affairs. There are two investment advisors for the Funds included in this prospectus. All investment advisors for the Evergreen Funds are subsidiaries of First Union Corporation, the sixth largest bank holding company in the United States, with over $254.2 billion in consolidated assets as of 12/31/2000. First Union Corporation is located at 301 South College Street, Charlotte, North Carolina 28288-0013. Evergreen Investment Management Company, LLC (EIMC) is the investment advisor to: o Reserve Tax-Exempt Money Market Fund EIMC has been managing mutual funds and private accounts since 1932 and currently manages over $23.6 billion in assets for 58 of the Evergreen Funds. EIMC is located at 200 Berkeley Street, Boston, Massachusetts 02116-5034. Evergreen Investment Management (EIM) is the investment advisor to: o Reserve Money Market Fund o Reserve U.S. Government Money Market Fund EIM (formerly known as Capital Management Group), a division of First Union National Bank (FUNB), has been managing money for over 50 years and currently manages over $48.4 billion in assets for 30 of the Evergreen Funds. EIM is located at 201 South College Street, Charlotte, North Carolina 28288-0630. For the fiscal year ended 9/30/2000, the aggregate advisory fee paid to the investment advisor by the Funds were as follows: % of the Fund's Fund average daily net assets Reserve Money Market Fund 0.17%* Reserve Tax-Exempt Money Market Fund 0.21%* Reserve U.S. Government Money Market 0.18%* Fund *Effective November 1, 2000, Reserve Money Market Fund's and Reserve U.S. Government Money Market Fund's investment advisory contract was transferred to EIM and Reserve Tax-Exempt Money Market Fund's investment advisory contract was transferred to EIMC. There were no changes in advisory fee rates. Each Fund will pay its investment advisor an annual advisory fee based on the Fund's average daily net assets. Calculating The Share Price The value of one share of a Fund, also known as the net asset value, or NAV, is calculated daily as of the time the Exchange closes (normally 4 p.m. Eastern time). The Fund calculates its 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 you pay per share 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 a Fund is accepted at or before 2:00 p.m. Eastern time for Reserve Money Market Fund and Reserve U.S. Government Money Market Fund and 12:00 noon Eastern time for Reserve Tax-Exempt 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 who purchase shares 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: o Most importantly, read the prospectus to see if the Fund is suitable for you. o 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. o 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. RESERVE MONEY MARKET FUNDS 8 HOW TO CHOOSE THE SHARE CLASS THAT BEST SUITS YOU After choosing a Fund, you select a share class. Each Fund in this prospectus offers up to two different share classes: Retail and Institutional. To determine which classes of shares are offered by a Fund, see the Fund Facts section next to each Fund's Risk/Return Summary previously presented. Pay particularly close attention to the fee structure of each class so you know how much you will be paying before you invest. Retail shares Each Fund offers Retail shares at net asset value without a front-end sales charge or deferred sales charge. Retail shares are subject to 12b-1 fees. There is no minimum investment required. Institutional shares Each Fund (except Evergreen Reserve Tax-Exempt Money Market Fund) offers Institutional shares at net asset value without a front-end sales charge, deferred sales charge or 12b-1 fees. Investors will be required to make minimum initial investments of $500,000 and minimum subsequent investments of $25,000. Investments made through advisory accounts maintained with investment advisors registered under the Investment Advisors Act of 1940, as amended (including "wrap" accounts), are not subject to these minimum investment requirements. The Funds reserve the right at any time to change the initial and subsequent investment minimums required of investors. RESERVE MONEY MARKET FUNDS 9 HOW TO BUY SHARES 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. Retail shares are only offered through a number of selected financial institutions, such as investment dealers and banks (each, a "Financial Institution"). Institutional shares are only offered to investment advisory clients of an investment advisor of an Evergreen Fund (or the investment advisor's affiliates) and through special arrangements with Financial Institutions.
Method Opening an Account Adding to an Account By Mail or through o Complete and sign the account application. o Make your check payable to an Investment o Make the check payable to Evergreen Funds. Cash, Evergreen Funds. Professional credit cards, third party checks, credit card checks o Write a note specifying: or money orders will not be accepted. - the Fund name o Mail the application and your check to the address - share class below: - your account number Postal Service Address: Overnight Address: - the name(s) in which the account is Evergreen Service Company, LLC Evergreen Service Company, LLC registered. P.O. Box 2121 200 Berkeley St. o Mail to the address to the left or Boston, MA 02106-9970 Boston, MA 02116-5034 deliver to your investment professional. o Or deliver them to your investment professional (provided he or she has a broker/dealer arrangement with Evergreen Distributor, Inc. (EDI)). By Phone o Call 1-800-343-2898 to set up an account number o Call the Evergreen Express Line at and get wiring instructions (call before 12 noon if 1-800-346-3858 24 hours a day or to you want wired funds to be credited that day). speak with an Evergreen professional o Instruct your bank to wire or transfer your call 1-800-343-2898 between 8 a.m. purchase (they may charge a wiring fee). and 6 p.m. Eastern time, on any o Complete the account application and mail to: business day. Postal Service Address: Overnight Address: Evergreen Service Company, LLC Evergreen Service Company, LLC o If your bank account is set up on P.O. Box 2121 200 Berkeley St. file, you can request either: Boston, MA 02106-9970 Boston, MA 02116-5034 - Federal Funds Wire (offers immediate access to funds) or - Electronic transfer through the Automated Clearing House which avoids o Wires received after 4 p.m. Eastern time on market wiring fees. trading days will receive the next market day's closing price.* By Exchange o You can make an additional investment by exchange from an existing Evergreen Fund's account by contacting your investment professional or calling the Evergreen Express Line at 1-800-346-3858.** o You can only exchange shares within the same class and accounts with the same registration. o There is no sales charge or redemption fee when exchanging Funds within the Evergreen Fund family.*** o Orders placed before 4 p.m. Eastern time on market trading days will receive that day's closing share price (if not, you will receive the next market day's closing price).* o Exchanges are limited to three per calendar quarter, but in no event more than five per calendar year. o 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 o You can transfer money automatically from your bank o To establish automatic Investment Plan account into your Fund on a monthly or quarterly basis. investing for an existing (SIP) o Initial investment minimum is $50 if you invest at least account, call 1-800-343-2898 (Retail shares $25 per month with this service. for an application. Only) o To enroll, check off the box on the account application o The minimum is $25 per and provide: month or $75 per quarter. - your bank account information o You can also establish an - the amount and date of your monthly or quarterly investing program through investment. direct deposit from your paycheck. Call 1-800-343-2898 for details.
* The Fund's shares may be made available through financial service firms which are also investment dealers and which have a service agreement with EDI. The Fund has approved the acceptance of purchase and repurchase request orders effective as of the time of their receipt by certain authorized financial intermediaries. ** Once you have authorized either the telephone exchange or redemption service, anyone with a Personal Identification Number (PIN) and the required account information (including your broker) can request a telephone transaction in your account. All calls are recorded and 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. *** 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. RESERVE MONEY MARKET FUNDS 10 HOW TO REDEEM SHARES We offer you several convenient ways to redeem your shares in any of the Evergreen Funds: Methods Requirements Call Us o Call the Evergreen Express Line at 1-800-346-3858 24 hours a day or to speak with an Evergreen professional call 1-800-343-2898 between 8 a.m. and 6 p.m. Eastern time, on any business day. o This service must be authorized ahead of time, and is only available for regular accounts.* o All authorized requests made before 4 p.m. Eastern time on market trading days will be processed at that day's closing price. Requests made after 4 p.m. will be processed the following business day.** o We can either: - wire the proceeds into your bank account (service charges may apply) - electronically transmit the proceeds to your bank account via the Automated Clearing House service - mail you a check. o 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. o See "Exceptions: Redemption Requests That Require A Signature Guarantee" below for requests that must be made in writing with your signature guaranteed. Write Us o You can mail a redemption request to: Postal Service Address: Overnight Address: Evergreen Service Company, LLC Evergreen Service Company, LLC P.O. Box 2121 200 Berkeley St. Boston, MA 02106-9970 Boston, MA 02116-5034 o 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). o See "Exceptions: Redemption Requests That Require A Signature Guarantee" below for requests that must be signature guaranteed. o To redeem from an IRA or other retirement account, call 1-800-343-2898 for special instructions. Redeem Your o You may also redeem your shares through participating Shares in Person broker-dealers by delivering a letter as described above to or calling your broker-dealer. o A fee may be charged for this service. Systematic o You can transfer money automatically from your Fund Withdrawal account on a monthly or quarterly basis without redemption Plan (SWP) fees. (Retail shares o The withdrawal can be mailed to you, or deposited directly Only) to your bank account. o The minimum is $75 per month. o The maximum is 1.00% of your account per month or 3.00% per quarter. o To enroll, call 1-800-343-2898 for an instructions. * Once you have authorized either the telephone exchange or redemption service, anyone with a Personal Identification Number (PIN) and the required account information (including your broker) can request a telephone transaction in your account. All calls are recorded and 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 if placing it would, in the judgment of the portfolio manager, adversely affect the price of the Fund. ** 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. Timing of Proceeds Normally, we will send your redemption proceeds on the next business day after we receive your request; however, we reserve the right to wait up to seven business days to redeem any investments made by check and five business days for investments made by Automated Clearing House transfer. We also reserve the right to redeem in kind, under certain circumstances, by paying you the proceeds of a redemption in securities rather than in cash, and to redeem the remaining amount in the account if your redemption brings the account balance below the initial minimum of $1,000. Exceptions: Redemption Requests That Require A Signature Guarantee To protect you and the Evergreen Funds against fraud, certain redemption requests must be made in writing with your signature guaranteed. A signature guarantee can be obtained at most banks and securities dealers. A notary public is not authorized to provide a signature guarantee. The following circumstances require signature guarantees: o You are redeeming more than $50,000. (Retail shares) o You want the proceeds transmitted to a bank account not listed on the account. o You want the proceeds payable to anyone other than the registered owner(s) of the account. o Either your address or the address of your bank account has been changed within 30 days. o The account is registered in the name of a fiduciary corporation or any other organization. In these cases, additional documentation is required: (Retail shares) 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: o Commercial Bank o Trust Company o Savings Association o Credit Union o Member of a U.S. stock exchange RESERVE MONEY MARKET FUNDS 11 FINANCIAL INSTITUTIONS Financial Institutions provide varying arrangements for their clients with respect to the purchase and redemption of Fund shares and the confirmation thereof and may arrange with their clients for other investment or administrative services. When you effect transactions with a Fund (including among other things the purchase, redemption, or exchange of Fund shares) through a Financial Institution, the Financial Institution, and not the Fund, will be responsible for taking all steps, and furnishing all necessary documentation, to effect such transactions. Financial Institutions have the responsibility to deliver purchase and redemption requests to a Fund promptly. Some Financial Institutions may establish minimum investment requirements with respect to a Fund. They may also establish and charge fees and other amounts to their client for their services. Certain privileges, such as the check writing privilege or reinvestment options, may not be available through certain Financial Institutions or they may be available only under certain conditions. If your Financial Institution holds your investment in a Fund in its own name, then your Financial Institution will be the shareholder of record in respect of that investment; your ability to take advantage of any investment options or services of the Fund will depend on whether, and to what extent, your Financial Institution is willing to take advantage of them on your behalf. Financial Institutions, including First Union Securities Inc., an affiliate of the Funds' investment advisors, may charge fees to or impose restrictions on your shareholder account. Consult your Financial Institution for information about any fees or restrictions or for further information concerning its services. OTHER SERVICES Automatic Reinvestment of Dividends For the convenience of investors, all dividends and capital gains distributions are automatically reinvested, unless you request otherwise. Distributions can be made by check or electronic transfer through the Automated Clearing House to your bank account. The details of your dividends and other distributions will be included on your statement. THE TAX CONSEQUENCES OF INVESTING IN THE FUNDS You may be taxed in two ways: o On Fund distributions (dividends and capital gains) o On any profit you make when you sell any or all of your shares. Fund Distributions A mutual fund passes along to all of its shareholders the net income or profits it receives from its investments. The shareholders of the fund then pay any taxes due, whether they receive these distributions in cash or elect to have them reinvested. The Reserve Tax-Exempt Money Market Fund expects that substantially all of its regular dividends will be exempt from federal income tax including the alternative minimum tax. Otherwise, the Funds will distribute two types of taxable income to you: o Dividends. To the extent that the 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. o Capital Gains. When a mutual fund sells a security it owns for a profit, the result is a capital gain. The Funds generally distribute capital gains, if any, at least once a year, near the end of the calendar year. Short-term capital gains reflect securities held by the Fund for a year or less and are considered ordinary income just like dividends. Profits on securities held longer than 12 months are considered long-term capital gains and are taxed at a special tax rate (20% for most taxpayers). It is not anticipated that any significant capital gains will be realized by the Funds. Dividend and Capital Gain Reinvestment Unless you choose otherwise on the account application, all dividend and capital gain payments will be reinvested to buy additional shares. Distribution checks that are returned and distribution checks that are uncashed when the shareholder has failed to respond to mailings from the shareholder servicing agent will automatically be reinvested to buy additional shares. RESERVE MONEY MARKET FUNDS 12 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 with a tax statement of your dividend and capital gains distributions for each calendar year on Form 1099 DIV. Proceeds from a sale are reported on Form 1099B. You must report these on your tax return. Since the IRS receives a copy as well, you could pay a penalty if you neglect to report them. Evergreen Service Company, 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 Fund. Retirement Plans You may invest in each 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 broker-dealer. To determine if a retirement plan may be appropriate for you, consult your tax advisor. FEES AND EXPENSES OF THE FUNDS Every mutual fund has fees and expenses that are assessed either directly or indirectly. This section describes each of those fees. Management Fee The management fee pays for the normal expenses of managing the Fund, including portfolio manager salaries, research costs, corporate overhead expenses and related expenses. 12b-1 Fees The Trustees of the Evergreen Funds have approved a policy to assess 12b-1 fees for Retail shares of the Funds. Currently the 12b-1 fees for Retail shares are limited to 0.38% (for all funds except Reserve Tax-Exempt Money Market Fund which are limited to 0.33%) 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 might use the 12b-1 fees for advertising and marketing and as a "service fee" to the broker-dealer for additional shareholder services. Other Expenses Other expenses include miscellaneous fees from affiliated and outside service providers. These may include legal, audit, custodial and safekeeping fees, the printing and mailing of reports and statements, automatic reinvestment of distributions and other conveniences for which the shareholder pays no transaction fees. Total Fund Operating Expenses The total cost of running the Fund is called the expense ratio. As a shareholder, you are not charged these fees directly; instead they are taken out before the Fund's net asset value is calculated, and are expressed as a percentage of the Fund's average daily net assets. The effect of these fees is reflected in the performance results for that share class. Because these fees are "invisible", investors should examine them closely in the prospectus, especially when comparing one fund with another fund in the same investment category. There are three things to remember about expense ratios: 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) a Fund's investment advisor may waive a portion of the Fund's expenses for a period of time, reducing its expense ratio. RESERVE MONEY MARKET FUNDS 13 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 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 Statement of Additional Information. EVERGREEN Reserve Money Market Fund
Year Ended Period Ended September 30, 2000 September 30, 1999 (a) CLASS R Net asset value, beginning of period $ 1.00 $ 1.00 -------- -------- Income from investment operations Net investment income 0.05 0.04 Less distributions to shareholders from Net investment income (0.05) (0.04) -------- -------- Net asset value, end of period $ 1.00 $ 1.00 -------- -------- Total return 5.50% 4.93% Ratios and supplemental data Net assets, end of period (thousands) $409,560 $323,392 Ratios to average net assets Expenses++ 0.70% 0.83%+ Net investment income 5.51% 4.32%+
Year Ended September 30, -------------------------- 2000 1999 1998 (b) CLASS I Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- Income from investment operations Net investment income 0.06 0.05 0.05 Less distributions to shareholders from Net investment income (0.06) (0.05) (0.05) ------- ------- ------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- Total return 5.94% 4.95% 4.74% Ratios and supplemental data Net assets, end of period (thousands) $24,707 $37,506 $40,970 Ratios to average net assets Expenses++ 0.27% 0.32% 0.33%+ Net investment income 5.87% 4.82% 5.35%+
(a) For the period from October 15, 1998 (commencement of class operations) to September 30, 1999. (b) For the period from November 19, 1997 (commencement of class operations) to September 30, 1998. ++ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers. + Annualized. RESERVE MONEY MARKET FUNDS 14 FINANCIAL HIGHLIGHTS EVERGREEN Reserve Tax-Exempt Money Market Fund
Year Ended Period Ended September 30, 2000 September 30, 1999 (a) CLASS R Net asset value, beginning of period $ 1.00 $ 1.00 ------- ------- Income from investment operations Net investment income 0.03 0.03 Less distributions to shareholders from Net investment income (0.03) (0.03) ------- ------- Net asset value, end of period $ 1.00 $ 1.00 ------- ------- Total return 3.37% 2.53% Ratios and supplemental data Net assets, end of period (thousands) $97,035 $66,047 Ratios to average net assets Expenses++ 0.70% 0.74%+ Net investment income 3.35% 2.51%+
(a) For the period from October 15, 1998 (commencement of class operations) to September 30, 1999. ++ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers. + Annualized. RESERVE MONEY MARKET FUNDS 15 FINANCIAL HIGHLIGHTS EVERGREEN Reserve U.S. Government Money Market Fund
Year Ended Period Ended September 30, 2000 September 30, 1999 (a) CLASS R Net asset value, beginning of period $ 1.00 $ 1.00 -------- ------- Income from investment operations Net investment income 0.05 0.04 Less distributions to shareholders from Net investment income (0.05) (0.04) -------- ------- Net asset value, end of period $ 1.00 $ 1.00 -------- ------- Total return 5.36% 4.93% Ratios and supplemental data Net assets, end of period (thousands) $141,257 $99,417 Ratios to average net assets Expenses++ 0.69% 0.80%+ Net investment income 5.35% 4.23%+
Year Ended September 30, ------------------------------------ 2000 1999 1998 1997(b) CLASS I Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- -------- -------- ------- Income from investment operations Net investment income 0.06 0.05 0.05 0.01 Less distributions to shareholders from Net investment income (0.06) (0.05) (0.05) (0.01) ------- -------- -------- ------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- -------- -------- ------- Total return 5.76% 4.80% 5.42% 1.39% Ratios and supplemental data Net assets, end of period (thousands) $20,153 $109,102 $106,273 $61,805 Ratios to average net assets Expenses++ 0.27% 0.33% 0.33% 0.33%+ Net investment income 5.47% 4.69% 5.27% 5.26%+
(a) For the period from October 15, 1998 (commencement of class operations) to September 30, 1999. (b) For the period from June 27, 1997 (commencement of class operations) to September 30, 1997. ++ The ratio of expenses to average net assets excludes expense reductions but includes fee waivers. + Annualized. RESERVE MONEY MARKET FUNDS 16 OTHER FUND PRACTICES The Funds 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. Purchases made under such conditions may involve the risk that the security may be valued at less than its purchase price, 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 be disadvantaged. The Funds do not intend to purchase when-issued securities for speculative purposes. The Funds may invest in repurchase agreements. Under a repurchase agreement, a Fund purchases a debt instrument for a relatively short period (usually not more than one week), which the seller agrees to repurchase at a fixed time and price, representing the Fund's cost plus interest. A Fund will enter into repurchase agreements only with commercial banks and with registered broker-dealers who are members of a national securities exchange or market makers in government securities, and only if the debt instrument subject to the repurchase agreement is a U.S. Government security. A Fund bears a risk of loss if the other party defaults on its obligation and the Fund is delayed or prevented from exercising its rights to dispose of the collateral. If the other party should become involved in bankruptcy or insolvency proceedings, it is possible that a Fund may be treated as an unsecured creditor and required to return the collateral to the other party's estate. Please consult the Statement of Additional Information for more information regarding these and other investment practices used by the Funds, including risks. RESERVE MONEY MARKET FUNDS 17 Notes RESERVE MONEY MARKET FUNDS 18 Notes RESERVE MONEY MARKET FUNDS 19 Evergreen Funds Money Market Funds Florida Municipal Money Market Fund Money Market Fund Municipal Money Market Fund New Jersey Municipal Money Market Fund Pennsylvania Municipal Money Market Fund Treasury Money Market Fund 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 Municipal Bond Fund Short-Intermediate Municipal Bond Fund Short and Intermediate Term Bond Funds Intermediate Term Bond Fund Select Adjustable Rate Fund Short-Duration Income Fund Intermediate and Long Term Bond Funds Diversified Bond Fund High Yield Bond Fund Quality Income Fund Strategic Income Fund U.S. Government Fund Balanced Funds Balanced Fund Foundation 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 Value Fund Domestic Growth Funds Aggressive Growth Fund Capital Growth Fund Evergreen Fund Growth Fund Large Company Growth Fund Masters Fund Omega Fund Premier 20 Fund Small Company Growth Fund Special Equity 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 Growth Fund Latin America Fund Perpetual Global Fund Perpetual International Fund Precious Metals Fund Select Money Market Select Money Market Fund Select Treasury Money Market Fund Select Municipal Money Market Fund Select 100% Treasury Money Market Fund Select U.S. Government Money Market Fund Select Fixed Income Select Adjustable Rate Fund Select Core Bond Fund Select Fixed Income Fund Select Fixed Income Fund II Select High Yield Bond Fund Select Income Plus Fund Select Intermediate Term Municipal Bond Fund Select International Bond Fund Select Limited Duration Fund Select Equity Trust Select Balanced Fund Select Core Equity Fund Equity Index Fund Select Secular Growth Fund Select Small Cap Growth Fund Special Equity Fund Select Strategic Growth Fund Select Strategic Value Fund Investor Services 800.343.2898 www.evergreen-funds.com RESERVE MONEY MARKET FUNDS 20 QUICK REFERENCE GUIDE 1. Investor Services Call 1-800-343-2898 Monday through Friday, 8 a.m. to 6 p.m. Eastern time to o buy, redeem or exchange shares o order applications o get assistance with your account 2. Information Line for Hearing and Speech Impaired (TTY/TDD) Call 1-800-343-2888 Monday through Friday, 8 a.m. to 6 p.m. Eastern time 3. Write us a letter Evergreen Service Company, LLC P.O. Box 2121 Boston, MA 02106-9970 o to buy, redeem or exchange shares o to change the registration on your account o for general correspondence 4. For express, registered or certified mail Evergreen Service Company, LLC 200 Berkeley St. Boston, MA 02116-5034 5. Visit us on-line www.evergreen-funds.com 6. Regular communications you will receive Account Statements -- You will receive quarterly statements for each Fund you invest in. Confirmation Notices - We send a confirmation of transactions, other than SIP and SWP transactions, you make within five days. Annual and Semi-annual reports -- You will receive a detailed financial report on each Fund you invest in twice a year. Tax Forms -- Each January you will receive any Fund tax information you need to include with your tax returns as well as the Evergreen Tax Information Guide. For More Information About the Evergreen Reserve Money Market Funds, Ask for: The Funds' most recent Annual or Semi-annual Report, which contains a complete financial accounting for each Fund and a complete list of the Fund's portfolio holdings as of a specific date, as well as commentary from the Fund's portfolio manager. This Report discusses the market conditions and investment strategies that significantly affected the Fund's performance during the most recent fiscal year or period. The Statement of Additional Information (SAI), which contains more detailed information about the policies and procedures of the Funds. The SAI has been filed with the Securities and Exchange Commission (SEC) and its contents are legally considered to be part of this prospectus. For questions, other information, or to request a copy, without charge, of any of the documents, call 1-800-343-2898 or ask your investment professional. We will mail material within three business days. 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 information about the operation of the Public Reference Room, call the SEC at 1-202-942-8090. [LOGO OF EVERGREEN FUNDS APPEARS HERE] Evergreen Distributor, Inc. 90 Park Avenue New York, New York 10016 SEC File No.: 811-06550 EVERGREEN RESERVE MONEY MARKET FUNDS PART B STATEMENT OF ADDITIONAL INFORMATION EVERGREEN RESERVE MONEY MARKET FUNDS 200 Berkeley Street Boston, Massachusetts 02116 (800) 633-2700 STATEMENT OF ADDITIONAL INFORMATION February 1, 2001 Evergreen Reserve Money Market Fund ("Reserve Money Market Fund") Evergreen Reserve Tax-Exempt Money Market Fund ("Reserve Tax-Exempt Money Market Fund") Evergreen Reserve U.S. Government Money Market Fund ("Reserve U.S. Government Money Market Fund") (Each a "Fund"; together, the "Funds") Each Fund is a series of Mentor Funds (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 dated February 1, 2001 for the Fund in which you are making or contemplating an investment. The Funds are offered through one single prospectus offering Retail shares and Institutional shares of the Funds. You may obtain the prospectus without charge by calling (800) 343-2898. Certain information may be incorporated by reference to the Funds' Annual Report dated September 30, 2000. You may obtain a copy of the Annual Report without charge by calling (800) 343-2898. TABLE OF CONTENTS TRUST HISTORY...............................................................1 INVESTMENT RESTRICTIONS.....................................................1 OTHER SECURITIES AND INVESTMENT PRACTICES...................................2 EXPENSES....................................................................7 MANAGEMENT OF TRUST.........................................................8 PRINCIPAL HOLDERS OF FUND SHARES............................................12 PERFORMANCE.................................................................13 SERVICE PROVIDERS...........................................................14 PURCHASE AND REDEMPTION OF SHARES ..........................................15 PRICING OF SHARES...........................................................16 PERFORMANCE CALCULATIONS....................................................17 PRINCIPAL UNDERWRITER.......................................................18 DISTRIBUTION EXPENSES UNDER RULE 12b-1......................................19 TAX INFORMATION.............................................................21 FINANCIAL STATEMENTS........................................................24 BROKERAGE...................................................................24 ORGANIZATION................................................................25 INVESTMENT ADVISORY AGREEMENT...............................................26 CORPORATE AND MUNICIPAL BOND RATINGS........................................27 ADDITIONAL INFORMATION......................................................36 TRUST HISTORY The Mentor Funds is an open-end management investment company, which was organized as a Massachusetts business trust on January 20, 1992. Each Fund is a diversified series of the Trust. 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 RESTRICTIONS As fundamental investment restrictions, which may not be changed with respect to a Fund without approval by the holders of a majority of the outstanding shares of that Fund, a Fund may not: 1. Purchase any security (other than U.S. Government securities) if as a result: (i) as to 75% of such Fund's total assets, more than 5% of the Fund's total assets (taken at current value) would then be invested in securities of a single issuer, or (ii) more than 25% of the Fund's total assets would be invested in a single industry; except that the Reserve Money Market Fund may invest up to 100% of its assets in securities of issuers in the banking industry. 2. Acquire more than 10% of the voting securities of any issuer. 3. Act as underwriter of securities of other issuers except to the extent that, in connection with the disposition of portfolio securities, it may be deemed to be an underwriter under certain federal securities laws. 4. Issue any class of securities which is senior to the Fund's shares of beneficial interest. 5. Purchase or sell real estate or interest in real estate, including real estate mortgage loans, although it may purchase and sell securities which are secured by real estate and securities of companies that invest or deal in real estate or real estate limited partnership interests. (For purpose of this restriction, investments by a Fund in mortgage-backed securities and other securities representing interest in mortgage pools shall not constitute the purchase or sale of real estate or interests in real estate or real estate mortgage loans.) 6. Borrow money in excess of 5% of the value (taken at the lower of cost or current value) of its total assets (not including the amount borrowed) at the time the borrowing is made, and then only from banks as a temporary measure to facilitate the meeting of redemption requests (not for leverage) which might otherwise require the untimely disposition of portfolio investments or for extraordinary or emergency purposes. 7. Purchase or sell commodities or commodity contracts, except that a Fund may purchase or sell financial futures contracts, options on futures contracts, forward contracts, and options with respect to foreign currencies, and may enter into swap transactions. 8. Make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies, by entering into repurchase agreements or by lending its portfolio securities. In addition, it is contrary to the current policy of each Fund, which policy may be changed without shareholder approval, to invest in (a) securities which at the time of such investment are not readily marketable, (b) securities restricted as to resale (excluding securities determined by the Trustees of the Trust (or the person designated by the Trustees to make such determinations) to be readily marketable), and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 10% of the Fund's net assets (taken at current value) would then be invested in securities described in (a), (b) and (c). 1 All percentage limitations on investment will apply at the time of investment and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment. Except for the investment restrictions listed above as fundamental or to the extent designated as such in a prospectus with respect to a Fund, the other investment policies described in this SAI or in a prospectus are not fundamental and may be changed by approval of the Trustees. The Investment Company Act of 1940, as amended (the 1940 Act), provides that a "vote of a majority of the outstanding voting securities" of a Fund means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of the Fund, and (2) 67% or more of the shares present at a meeting if more than 50% of the outstanding shares are represented at the meeting in person or by proxy. OTHER SECURITIES AND INVESTMENT PRACTICES Listed below are securities and investment practices the Funds may use in addition to those discussed in the prospectus. The information below applies to all Funds unless otherwise noted. 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 the Fund is a money market fund or if, in the opinion of the portfolio manager, market conditions warrant a temporary defensive investment strategy. U.S. Government Securities The Fund may invest in securities issued or guaranteed by U.S. Government agencies or instrumentalities. These securities are backed by (1) the discretionary authority of the U.S. Government to purchase certain obligations of agencies or instrumentalities or (2) the credit of the agency or instrumentality issuing the obligations. Some government agencies and instrumentalities may not receive financial support from the U.S. Government. Examples of such agencies are: (i) Farm Credit System, including the National Bank for Cooperatives, Farm Credit Banks and Banks for Cooperatives; (ii) Farmers Home Administration; (iii) Federal Home Loan Banks; (iv) Federal Home Loan Mortgage Corporation; (v) Federal National Mortgage Association; and Student Loan Marketing Association. Securities Issued by the Government National Mortgage Association (GNMA). The Fund may invest in securities issued by the GNMA, a corporation wholly-owned by the U.S. Government. GNMA securities or "certificates" represent ownership in a pool of underlying mortgages. The timely payment of principal and interest due on these securities is guaranteed. 2 Unlike conventional bonds, the principal on GNMA certificates is not paid at maturity but over the life of the security in scheduled monthly payments. While mortgages pooled in a GNMA certificate may have maturities of up to 30 years, the certificate itself will have a shorter average maturity and less principal volatility than a comparable 30-year bond. The market value and interest yield of GNMA certificates can vary due not only to market fluctuations, but also to early prepayments of mortgages within the pool. Since prepayment rates vary widely, it is impossible to accurately predict the average maturity of a GNMA pool. In addition to the guaranteed principal payments, GNMA certificates may also make unscheduled principal payments resulting from prepayments on the underlying mortgages. Although GNMA certificates may offer yields higher than those available from other types of U.S. Government securities, they may be less effective as a means of locking in attractive long-term rates because of the prepayment feature. For instance, when interest rates decline, prepayments are likely to increase as the holders of the underlying mortgages seek refinancing. As a result, the value of a GNMA certificate is not likely to rise as much as the value of a comparable debt security would in response to same decline. In addition, these prepayments can cause the price of a GNMA certificate originally purchased at a premium to decline in price compared to its par value, which may result in a loss. When-Issued, Delayed-Delivery and Forward Commitment Transactions 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. 3 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 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. Illiquid and Restricted Securities The Fund may not invest more than 10% 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 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. Securities Lending A Fund may lend its portfolio securities, provided: (1) the loan is secured continuously by collateral consisting of U.S. Government securities, cash, or cash equivalents adjusted daily to have market value at least equal to the current market value of the securities loaned; (2) the Fund may at any time call the loan and regain the securities loaned; (3) a Fund will receive any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities of any Fund loaned will not at any time exceed one-third (or such other limit as the Trustee may establish) of the total assets 4 of the Fund. Cash collateral received by a Fund may be invested in any securities in which the Fund may invest consistent with its investment policies. In addition, it is anticipated that a Fund may share with the borrower some of the income received on the collateral for the loan or that it will be paid a premium for the loan. Before a Fund enters into a loan, its investment advisor considers all relevant facts and circumstances including the creditworthiness of the borrower. The risks in lending portfolio securities, as with other extensions of credit, consistent of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. Although voting rights or rights to consent with respect to the loaned securities pass to the borrower, a Fund retains the right to call the loans at any time on reasonable notice, and it will do so in order that the securities may be voted by a Fund if the holders of such securities are asked to vote upon or consent to matters materially affecting the investment. A Fund will not lend portfolio securities to borrowers affiliated with the Fund. Stand-by Commitments (Reserve Tax-Exempt Money Market Fund only) 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 securities 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. The Fund does not expect to assign any value to stand-by commitments. Obligations of Foreign Branches of United States Banks (Reserve Money Market Fund only) The Fund may invest in obligations of foreign branches of U.S. banks. These may be general obligations of the parent bank in addition to the issuing branch, or may be limited by the terms of a specific obligation and by government regulation. Payment of interest and principal upon these obligations may also be affected by governmental action in the country of domicile of the branch (generally referred to as sovereign risk). In addition, evidences of ownership of such securities may be held outside the U.S. and the Fund may be subject to the risks associated with the holding of such property overseas. Examples of governmental actions would be the imposition of currency controls, interest limitations, withholding taxes, seizure of assets or the declaration of a moratorium. Various provisions of federal law governing domestic branches do not apply to foreign branches of domestic banks. Obligations of United States Branches of Foreign Banks (Reserve Money Market Fund only) 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 (Reserve Money Market Fund only) The Fund may invest in obligations of foreign issuers and in bank certificates of deposit and bankers' acceptances payable in U.S. dollars and issued by foreign banks (including U.S. branches of foreign banks) or by foreign branches of U.S. banks. These investments subject the Fund to investment risks different from those associated with domestic investment. Such risks include adverse political and economic developments in foreign countries, the imposition of withholding taxes on interest income, seizure or nationalization of foreign 5 deposits, or the adoption of other governmental restrictions which may adversely affect the payment of principal and interest on such obligations. Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the U.S. or in other foreign countries. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of the Fund's assets held abroad) and expenses not present in the settlement of domestic investments. In addition, foreign securities may be less liquid than U.S. securities, and foreign accounting and disclosure standards may differ from U.S. standards. Special tax considerations apply to foreign investments. Tax-Exempt Securities (Reserve Tax-Exempt Money Market Fund only) The term "Tax-Exempt Securities" includes debt obligations issued by a state, its political subdivisions (for example, counties, cities, towns villages, districts and authorities) and their agencies, instrumentalities or other governmental units, the interest from which is, in the opinion of bond counsel, exempt from federal income tax. Such obligations are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities, such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which tax-exempt securities may be issued include the refunding of outstanding obligations or the payment of general operating expenses. Short-term tax-exempt securities are generally issued by state and local governments and public authorities as interim financing in anticipation of tax collections, revenue receipts, or bond sales to finance such public purposes. In addition, certain types of "private activity" bonds may be issued by public authorities to finance such projects as privately operated housing facilities and certain local facilities for water supply, gas, electricity or sewage or solid waste disposal, student loans, or the obtaining of funds to lend to public or private institutions for the construction of facilities such as educational, hospital and housing facilities. Other types of private activity bonds, the proceeds of which are used for the construction, constitute tax-exempt securities, although the current federal tax laws place substantial limitations on the size of such issues. Tax-exempt securities also include tax-exempt commercial paper, which are promissory notes issued by municipalities to enhance their cash flows. The two principal classifications of tax-exempt securities are general obligation and special obligation (or revenue) securities. General obligation securities involve the credit of an issuer possessing taxing power and are payable from the issuer's general unrestricted revenues. Special obligations are payable only from the revenues derived from a particular facility or class of facilities, or a specific revenue source and generally are not payable from the unrestricted revenues of the issuer. Participation Interests (Reserve Tax-Exempt Money Market Fund only) The Fund may invest in tax-exempt securities either by purchasing them directly or by purchasing certificates of accrual or similar instruments evidencing direct ownership of interest payments or principal payments, or both, on tax-exempt securities, provided that, in the opinion of counsel to the initial seller of each such certificate or instrument, any discount accruing on the certificate or instrument that is purchased at a yield not greater than the coupon rate of interest on the related tax-exempt securities will be exempt from federal income tax to the same extent as interest on the tax-exempt securities. The Fund may also invest in tax-exempt securities by purchasing from banks participation interests in all or part of specific holdings of tax-exempt securities. These participations may be backed in whole or in part by an irrevocable letter of credit or guarantee of the selling bank. The selling bank may receive a fee from the Fund in connection with the arrangement. 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) 6 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 in January 2000, 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. EXPENSES Advisory Fees Each Fund has its own investment advisor. For more information, see "Investment Advisory Agreements" herein. Evergreen Investment Management (EIM) is the investment advisor to Reserve Money Market Fund and Reserve U.S. Government Money Market Fund. Evergreen Investment Management Company, LLC (EIMC) is the investment advisor to the Reserve Tax-Exempt Money Market Fund. The investment advisor is entitled to receive an annual fee based on the combined average daily net assets of each Fund and its comparable fund within the Evergreen CRT Money Market Funds as follows: ---------------------------------------------- ----------------------- Average Daily Net Assets Fee ---------------------------------------------- ----------------------- ---------------------------------------------- ----------------------- First $500 million 0.22% ---------------------------------------------- ----------------------- ---------------------------------------------- ----------------------- Next $500 million 0.20% ---------------------------------------------- ----------------------- ---------------------------------------------- ----------------------- Next $1 billion 0.175% ---------------------------------------------- ----------------------- ---------------------------------------------- ----------------------- Next $1 billion 0.16% ---------------------------------------------- ----------------------- ---------------------------------------------- ----------------------- Over $3 billion 0.15% ---------------------------------------------- ----------------------- Advisory Fees Paid Below are the advisory fees accrued or paid by each Fund for the last three fiscal years. Amounts paid by each Fund were paid to the Fund's previous investment advisor. - -------------------------------------------------------------------------------- Year Ended September 30, 2000 Advisory Fees Paid - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Money Market Fund $692,416 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Tax-Exempt Money Market Fund $183,105 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve U.S. Government Money Market Fund $268,143 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7 Year Ended September 30, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Money Market Fund $307,339 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Tax-Exempt Money Market Fund $64,707 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve U.S. Government Money Market Fund $301,770 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year Ended September 30, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Money Market Fund $52,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Tax-Exempt Money Market Fund N/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve U.S. Government Money Market Fund $202,000 - -------------------------------------------------------------------------------- Brokerage Commissions The Funds paid no brokerage commissions during the fiscal years ended September 30, 1998, 1999 and 2000. Underwriting Commissions The Funds paid no underwriting commissions during the fiscal years ended September 30, 1998, 1999 and 2000. For more information, see "Principal Underwriter" herein. 12b-1 Fees Below are the 12b-1 fees paid by each Fund with respect to the Retail shares of the Funds for the fiscal year ended September 30, 2000. For more information, see "Distribution Expenses Under Rule 12b-1" herein. Institutional shares do not pay 12b-1 fees. - -------------------------------------------------------------------------------- Fund Service Fees - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Money Market Fund $1,462,503 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Tax-Exempt Money Market Fund $283,629 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve U.S. Government Money Market Fund $447,043 - -------------------------------------------------------------------------------- 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. The Trust has an Executive Committee which consists of the Chairman of the Board, Michael S. Scofield, K. Dun Gifford and Russell Salton, each of whom is an Independent Trustee. The Executive Committee recommends Trustees to fill vacancies, prepares the agenda for Board Meetings and acts on routine matters between scheduled Board meetings. 8 Set forth below are the Trustees and officers of the Trust and their principal occupations and affiliations over the last five years. Unless otherwise indicated, the address for each Trustee and officer is 200 Berkeley Street, Boston, Massachusetts 02116. Each Trustee is also a Trustee of each of the other Trusts in the Evergreen Fund complex.
Name Position with Trust Principal Occupations for Last Five Years Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc.(investment (DOB: 10/23/34) advice); former Director, Executive Vice President and Treasurer, State Street Research & Management Company (investment advice); Director, The Andover Companies (insurance); Trustee, Arthritis Foundation of New England; and Director, Health Development Corp. (fitness-wellness centers); Formerly, Director, Mentor Income Fund, Inc. K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the Finance Committee, (DOB: 10/23/38) Cambridge College; Chairman Emeritus and Director, American Institute of Food and Wine; Chairman and President, Oldways Preservation and Exchange Trust (education); former Chairman of the Board, Director, and Executive Vice President, The London Harness Company (leather goods purveyor); former Managing Partner, Roscommon Capital Corp.; former Chief Executive Officer, Gifford Gifts of Fine Foods; former Chairman, Gifford, Drescher & Associates (environmental consulting); Formerly, Director, Mentor Income Fund, Inc. Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer, Carson (DOB: 2/14/39) Products Company (manufacturing); Director of Phoenix Total Return Fund and Equifax, Inc. (worldwide information management); Trustee of Phoenix Series Fund, Phoenix Multi-Portfolio Fund, and The Phoenix Big Edge Series Fund; and former President, Morehouse College; Formerly, Director, Mentor Income Fund, Inc. Gerald M. McDonnell Trustee Sales and Marketing Management with Nucor Steel Company; (DOB: 7/14/39) Formerly, Director, Mentor Income Fund, Inc. Thomas L. McVerry Trustee Former Vice President and Director of Rexham Corporation (DOB: 8/2/39) (manufacturing); and Director of Carolina Cooperative Credit Union; Formerly, Director, Mentor Income Fund, Inc. Louis W. Moelchert, Jr. (DOB: Trustee President, Private Advisors, LLC; Vice President for 12/20/41) Investments, University of Richmond; Chairman, Investment Committee Virginia Retirement System; former Chairman of the Board of the Common Fund; former Board member Common Fund Capital; 9 Name Position with Trust Principal Occupations for Last Five Years Board member Common Fund Institutional Funds; Formerly, Trustee, Mentor Variable Investment Portfolios and Mentor Institutional Trust; Formerly, Director, Mentor Income Fund, Inc. and America's Utility Fund, Inc. William Walt Pettit Trustee Partner in the law firm of William Walt Pettit, P.A.; (DOB: 8/26/55) Formerly, Director, Mentor Income Fund, Inc. David M. Richardson Trustee President, Richardson, Runden & Company (new business (DOB: 9/14/41) development/consulting company); Managing Director, Kennedy Information (executive recruitment information and research company); former Vice Chairman, DHR International, Inc. (executive recruitment); former Senior Vice President, Boyden International Inc. (executive recruitment); Director, Commerce and Industry Association of New Jersey, 411 International, Inc. (communications), and J&M Cumming Paper Co.(paper merchandise);. Formerly, Director, Mentor Income Fund, Inc. Russell A. Salton, III MD Trustee Medical Director, U.S. Health Care/Aetna Health Services; (DOB: 6/2/47) former Managed Health Care Consultant; and former President, Primary Physician Care; Formerly, Director, Mentor Income Fund, Inc. Michael S. Scofield Chairman of the Board Attorney, Law Offices of Michael S. Scofield; Formerly, (DOB: 2/20/43) of Trustees Director, Mentor Income Fund, Inc. Richard J. Shima Trustee Independent Consultant; former Chairman, Environmental (DOB: 8/11/39) Warranty, Inc. (insurance agency); former Executive Consultant, Drake Beam Morin, Inc. (executive outplacement); Director of CTG Resources, Inc. (natural gas), Hartford Hospital, Old State House Association, and Enhance Financial Services, Inc.; former Director Middlesex Mutual Assurance Company; former Chairman, Board of Trustees, Hartford Graduate Center; Trustee, Greater Hartford YMCA; Formerly, Director, Mentor Income Fund, Inc. Richard K. Wagoner, CFA* Trustee Former Chief Investment Officer, Executive Vice President (DOB: 12/12/37) and Head of Capital Management Group, FUNB ; former consultant to the Board of Trustees of the Evergreen Funds; former member, New York Stock Exchange; member, North Carolina Securities Traders Association; member, Financial Analysts Society. 10 Name Position with Trust Principal Occupations for Last Five Years William M. Ennis** President President and Chief Executive Officer, Evergreen Investment (DOB: 6/26/60) Company and Chief Operating Officer, Capital Management Group, FUNB. Carol Kosel*** Treasurer Senior Vice President, Evergreen Investment Services, Inc. (DOB: 12/25/63) and Treasurer, Vestaur Securities, Inc.; former Senior Manager, KPMG LLP. Michael H. Koonce*** Secretary Senior Vice President and General Counsel, Evergreen (DOB: 4/20/60) Investment Services, Inc.; Senior Vice President and Assistant General Counsel, First Union Corporation; former Senior Vice President and General Counsel, Colonial Management Associates, Inc. Nimish S. Bhatt**** Vice President and Vice President, Tax, BISYS Fund Services; former Assistant (DOB: 6/6/63) Assistant Treasurer Vice President, EAMC/FUNB; former Senior Tax Consulting/Acting Manager, Investment Companies Group, PricewaterhouseCoopers LLP, New York. Bryan Haft**** Vice President Team Leader, Fund Administration, BISYS Fund Services.
*This Trustee may be considered an "interested person" of the Fund within the meaning of the 1940 Act. ** Address: 301 S. Tryon, 12th Floor, Charlotte, NC 28288 ***Address: 200 Berkeley Street, Boston, MA 02116 ****Address: BISYS, 3435 Stelzer Road, Columbus, Ohio 43219-8001 Trustee Compensation Listed below is the Trustee compensation paid by the Trust individually for the twelve months ended September 30, 2000 and by the Trust and the ten other trusts in the Evergreen Fund Complex for the twelve months ended December 31, 2000. The Trustees do not receive pension or retirement benefits from the Funds.
- ----------------------------------------------------------------------------------------------- Aggregate Compensation Total Compensation from the Trustee from Trust for fiscal year Evergreen Fund Complex for the ended 9/30/2000 calendar year ended 12/31/2000* - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Laurence B. Ashkin** $360 $82,500 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Charles A. Austin, III $360 $88,500 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Arnold H. Dreyfuss** $333 $83,000 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- K. Dun Gifford $360 $91,500 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- James S. Howell*** $182 $38,750 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Leroy Keith, Jr. $360 $83,000 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Gerald M. McDonnell $360 $88,500 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Thomas L. McVerry $406 $98,500 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Louis W. Moelchert, Jr. $333 $83,000 - ----------------------------------------------------------------------------------------------- 11 - ----------------------------------------------------------------------------------------------- Aggregate Compensation Total Compensation from the Trustee from Trust for fiscal year Evergreen Fund Complex for the ended 9/30/2000 calendar year ended 12/31/2000* - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- William Walt Pettit $360 $88,500 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- David M. Richardson $360 $88,500 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Russell A. Salton, III $406 $101,000 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Michael S. Scofield $452 $112,000 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Richard J. Shima $360 $83,000 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Richard K. Wagoner $333 $88,500 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- *Certain Trustees have elected to defer all or part of their total compensation for the twelve months ended December 31, 2000. The amounts listed below will be payable in later years to the respective Trustees: - ----------------------------------------------------------------------------------------------- Austin $26,250 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Howell $27,125 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- McDonnell $88,500 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- McVerry $98,500 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Moelchert $83,000 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Pettit $88,500 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Salton $101,000 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Scofield $65,100 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- **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. - -----------------------------------------------------------------------------------------------
PRINCIPAL HOLDERS OF FUND SHARES As of January 1, 2001 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 January 1, 2001. -------------------------------------------------------------------------- Reserve Money Market Fund - Retail shares -------------------------------------------------------------------------- ------------------------------------------------------- ------------------ First Union National Bank Cap Accounts 100% 401 South Tyron Street Charlotte, NC 28202-3215 ------------------------------------------------------- ------------------ -------------------------------------------------------------------------- Reserve Money Market Fund - Institutional shares -------------------------------------------------------------------------- ------------------------------------------------------- ------------------ City of Hopewell 300 North Main Street 16.99% Hopewell, VA 23860-2740 ------------------------------------------------------- ------------------ ------------------------------------------------------- ------------------ Orange County 112 West Main Street 11.59% P.O. Box 469 Orange, VA 22960-0276 ------------------------------------------------------- ------------------ ------------------------------------------------------- ------------------ Sussex County 11.53% P.O. Box 1399 Sussex, VA 23884-0399 ------------------------------------------------------- ------------------ 12 ------------------------------------------------------- ------------------ Dinwiddie County 11.03% P.O. Box 178 Dinwiddie, VA 2381-0178 ------------------------------------------------------- ------------------ ------------------------------------------------------- ------------------ Franklin County 8.12% c/o Treasurer Office 275 South Main Street Rocky Mount, VA 24151-1539 ------------------------------------------------------- ------------------ ------------------------------------------------------- ------------------ New Kent County 7.85% P.O. Box 109 New Kent, VA 23124-0109 ------------------------------------------------------- ------------------ -------------------------------------------------------------------------- Reserve Tax-Exempt Money Market Fund - Retail shares -------------------------------------------------------------------------- First Union National Bank Cap Accounts 100% 401 South Tyron Street Charlotte, NC 28202-3215 ------------------------------------------------------- ------------------ -------------------------------------------------------------------------- Reserve U.S. Government Money Market Fund - Retail shares ------------------------------------------------------- ------------------ First Union National Bank Cap Accounts 100% 401 South Tyron Street Charlotte, NC 28202-3215 -------------------------------------------------------------------------- Reserve U.S. Government Money Market Fund - Institutional shares ------------------------------------------------------- ------------------ Smyth County Community Foundation 73.41% Attn: William Mahone P.O. Box 880 700 Park Boulevard Marion, VA 24354-0880 ------------------------------------------------------- ------------------ ------------------------------------------------------- ------------------ Amelia County Landfill 9.26% Attn: Pamela Conyers - Treasurer P.O. Box 730 Amelia Ct House, VA 23002-0730 ------------------------------------------------------- ------------------ ------------------------------------------------------- ------------------ Robert W. Lynn 5.77% 7109 Briar Cove Dallas, TX 75240-2705 ------------------------------------------------------- ------------------ PERFORMANCE Current, Effective and Tax Equivalent Yields Below are the yields for each class of shares of the Funds for the seven-day period ended September 30, 2000. With respect to the tax-equivalent yield of the Reserve Tax-Exempt Money Market Fund, a federal rate of (39.6%) is assumed. - -------------------------------------------------------------------------------- Fund/Class Current Effective Tax-Equivalent Yield - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Money Market Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Retail shares 5.82% 5.99% N/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Institutional shares 6.20% 6.39% N/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Tax-Exempt Money Market Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Retail shares 4.21% 4.30% 6.97% - -------------------------------------------------------------------------------- 13 - -------------------------------------------------------------------------------- Fund/Class Current Effective Tax-Equivalent Yield - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve U.S. Government Money Market Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Retail shares 5.77% 5.93% N/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Institutional shares 6.14% 6.33% N/A - -------------------------------------------------------------------------------- Total Return Below are the average annual total returns for each class of shares of the Funds (including applicable sales charges) as of September 30, 2000. For more information, see "Total Return" under "Performance Calculations" herein.
- ----------------------------------------------------------------------------------------------------- Fund/Class One Year Five Years Ten Years or Inception Date Since Inception - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- Reserve Money Market Fund (1) - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- Retail shares 5.50% N/A 5.13% 10/15/1998 - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- Institutional shares 5.94% N/A 5.46% 11/19/1997 - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- Reserve Tax-Exempt Money Market Fund - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- Retail shares 3.37% N/A 3.01% 10/15/1998 - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- Reserve U.S. Government Money Market Fund (1) - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- Retail shares 5.36% N/A 5.06% 10/15/1998 - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- Institutional shares 5.76% N/A 5.34% 6/27/1997 - -----------------------------------------------------------------------------------------------------
(1) Historical performance shown for the Retail shares prior to its inception is based on the performance of the Institutional shares, the original class offered. These historical returns for the Retail shares have not been adjusted to reflect the effect of the Retail shares' 0.38% 12b-1 fee. The Institutional shares do not pay a 12b-1 fee. If these fees had been reflected, returns would have been lower. SERVICE PROVIDERS Administrator Evergreen Investment Services, Inc. (EIS), 200 Berkeley Street, Boston, Massachusetts 02116, 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 a fee from each Fund at the annual rate of 0.02% of the Fund's average daily net assets. Below are the administrative fees paid by each Fund for the last three fiscal years. - -------------------------------------------------------------------------------- Fund/Fiscal Year Administrative Fees Paid - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year Ended September 30, 2000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Money Market Fund $83,142 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Tax-Exempt Money Market Fund $17,190 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve U.S. Government Money Market Fund $29,913 - -------------------------------------------------------------------------------- 14 - -------------------------------------------------------------------------------- Fund/Fiscal Year Administrative Fees Paid - -------------------------------------------------------------------------------- Year Ended September 30, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Money Market Fund $35,759 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Tax-Exempt Money Market Fund $6,067 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve U.S. Government Money Market Fund $33,558 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year Ended September 30, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Money Market Fund $0 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve Tax-Exempt Money Market Fund N/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Reserve U.S. Government Money Market Fund $0 - -------------------------------------------------------------------------------- Transfer Agent Evergreen Service Company, LLC (ESC), P.O. Box 2121, Boston, Massachusetts 02106-2121, a subsidiary of First Union Corporation, is the Funds' transfer agent. ESC issues and redeems shares, pays dividends and performs other duties in connection with the maintenance of shareholder accounts. The Fund pays ESC annual fees as follows: ----------------------------- -------------------- ---------------------- Annual Fee Per Annual Fee Per Fund Type Open Account* Closed Account** ----------------------------- -------------------- ---------------------- ----------------------------- -------------------- ---------------------- Monthly Dividend Funds $25.50 $9.00 ----------------------------- -------------------- ---------------------- ----------------------------- -------------------- ---------------------- Quarterly Dividend Funds $24.50 $9.00 ----------------------------- -------------------- ---------------------- ----------------------------- -------------------- ---------------------- Semiannual Dividend Funds $23.50 $9.00 ----------------------------- -------------------- ---------------------- ----------------------------- -------------------- ---------------------- Annual Dividend Funds $23.50 $9.00 ----------------------------- -------------------- ---------------------- ----------------------------- -------------------- ---------------------- Money Market Funds $25.50 $9.00 ----------------------------- -------------------- ---------------------- *For shareholder accounts only. The Funds pay ESC cost plus 15% for broker accounts. **Closed account are maintained on the system in order to facilitate historical and tax information. PURCHASE AND REDEMPTION OF SHARES You may buy shares of each Fund through Evergreen Distributor, Inc. (EDI), broker-dealers that have entered into special agreements with EDI or certain other financial institutions. The Funds (with the exception of Reserve Tax-Exempt Money Market Fund which offers one class of shares) offer two classes of shares that differ primarily with respect to distribution fees. Retail Shares Each Fund offers Retail shares at net asset value without an initial sales charge or deferred sales charge. Retail shares are subject to 12b-1 fees. There is no minimum investment required. Institutional Shares Each Fund (except Reserve Tax-Exempt Money Market Fund) offers Institutional shares at net asset value without an initial sales charge, 15 deferred sales charge or 12b-1 fees. Investors will be required to make minimum initial investments of $500,000 and minimum subsequent investments of $25,000. Investments made through advisory accounts maintained with investment advisors registered under the Investment Advisors Act of 1940, as amended (including "wrap" accounts), are not subject to these minimum investment requirements. The Funds reserve the right at any time to change the initial and subsequent investment minimums required of investors. Exchanges Investors may exchange shares of a Fund for shares of the same class of any other Evergreen Reserve Money Market Fund. See "By Exchange" under "How to Buy Shares" in the prospectus. Before you make an exchange, you should read the prospectus of the Evergreen Reserve Money Market Funds 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 Each Fund calculates its net asset value (NAV) twice daily on Monday through Friday, as described in the prospectus. Each Fund will not compute its NAV on the days the New York Stock Exchange is closed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The NAV of each 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 a 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. 16 (4) Short-term investments maturing in sixty days or less as well as money market securities, are valued at amortized cost, which approximates market. (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) Tax-exempt securities are valued by an independent pricing service at fair value using a variety of factors which may include yield, liquidity, interest rate risk, credit quality, coupon, maturity and type of issue. Foreign securities are generally valued on the basis of valuations provided by a pricing service, approved by the Trust's Board of Trustees, which uses information with respect to transactions in such securities, quotations from broker-dealers, market transactions in comparable securities, and various relationships between securities and yield to maturity in determining value. PERFORMANCE CALCULATIONS Total Return Total return quotations for a class of shares of the Funds as they may appear from time to time in advertisements are calculated by finding the average annual compounded rates of return over one, five and ten year periods, or the time periods for which such class of shares has been effective, whichever is relevant, on a hypothetical $1,000 investment that would equate the initial amount invested in the class to the ending redeemable value. To the initial investment all dividends and distributions are added, and all recurring fees charged to all shareholder accounts are deducted. The ending redeemable value assumes a complete redemption at the end of the relevant periods. The following is the formula used to calculate average annual total return: [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 Yield Described below are yield calculations the Funds 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] 17 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 a Fund invests primarily in tax-exempt securities, 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 Funds. The Trust has entered into a Principal Underwriting Agreement (Underwriting Agreement) with EDI with respect to each class of the Funds. 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. 18 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 Funds and each Fund reserves the right, in its sole discretion, to reject any order received. Under the Underwriting Agreement, each 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 Funds, 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 Each Fund bears some of the costs of selling its Retail shares, 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 each Fund's expense table in the prospectus. Under the Distribution Plan (the Plan) that each Fund has adopted for its Retail shares, the Fund may incur expenses for 12b-1 fees of 0.38% (0.33% for Reserve Tax-Exempt Money Market Fund) of average daily net assets attributable to the class. The 12b-1 fee serves 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. Each Fund may not, during any fiscal period, pay service fees greater than the amounts above. Service fees are accrued daily and paid at least annually on Retail shares and are charged as class expenses, as accrued. Amounts paid under a Plan are used to compensate EDI pursuant to a Distribution Agreement (the Agreement) that each Fund has entered into with respect to its Retail shares. Each Agreement provides that EDI will use the service fees received from the Fund for the following purposes: (1) to compensate broker-dealers or other persons for distributing Fund shares; 19 (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. Each Agreement also provides that EDI may use service fees to make interest and principal payments in respect of amounts that have been financed to pay broker-dealers or other persons for servicing Fund shares. EDI may assign its rights to receive compensation under each Plan to secure such financings. FUNB or its affiliates may finance payments made by EDI to compensate broker-dealers or other persons for servicing shares of the Fund. In the event a Fund acquires the assets of another mutual fund, compensation paid to EDI under the Agreement may be paid by EDI to the acquired fund's distributor or its predecessor. Since EDI's compensation under each Agreement is not directly tied to the expenses incurred by EDI, the compensation received by it under the Agreement during any fiscal year may be more or less than its actual expenses and may result in a profit to EDI. Servicing expenses incurred by EDI in one fiscal year that exceed the compensation paid to EDI for that year may be paid from service fees received from the Fund in subsequent fiscal years. Service fees are accrued daily and paid at least annually on Retail shares and are charged as class expenses, as accrued. The service fees attributable to the Retail shares are designed to permit an investor to purchase such shares through broker-dealers without the assessment of a front-end sales charge, while at the same time permitting EDI to compensate broker-dealers. Under each Plan, the Treasurer of the Trust reports the amounts expended under the Plan 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 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. Each Plan permits the payment of fees to brokers and others for shareholder-related administrative services and to broker-dealers, depository institutions, financial intermediaries and administrators for administrative services as to Retail shares. Each Plan is designed to (i) stimulate brokers to provide administrative support services to the Fund and holders of Retail shares and (ii) stimulate administrators to render administrative support services to the Fund and holders of Retail 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 Retail shares; assisting clients in changing dividend options, account designations, and addresses; and providing such other services as the Fund reasonably requests for its Retail shares. In the event that the Plan or Agreement is terminated or not continued with respect to the Retail shares of a Fund, (i) no service fees (other than current amounts accrued but not yet paid) would be owed by the Fund to EDI and 20 (ii) the Fund would not be obligated to pay EDI for any amounts expended under the Agreement not previously recovered by EDI from services fees in respect of Retail shares of such class or classes. 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 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 Agreement without the approval of a majority of the holders of the outstanding voting shares of the class affected. Any Plan or Agreement may be terminated (i) by the Fund without penalty at any time by a majority vote of the holders of the outstanding voting securities of the Fund, voting separately by class or by a majority vote of the Independent Trustees, or (ii) by EDI. To terminate any 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 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" herein. TAX INFORMATION Requirements for Qualifications as a Regulated Investment Company Each Fund intends to qualify for and elect the tax treatment applicable to regulated investment companies (RIC) under Subchapter M of the Internal Revenue Code of 1986 (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, a Fund is not subject to federal income tax if it timely distributes its investment company taxable income and any net realized capital gains. A 4% nondeductible excise tax will be imposed on the Fund to the extent it does not meet certain distribution requirements by the end of each calendar year. Each Fund anticipates meeting such distribution requirements. Taxes on Distributions Unless a Fund is a tax-exempt 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). Each Fund will include dividends it receives from domestic corporations when the Fund calculates its gross investment income. Unless the Fund is a municipal bond fund or U.S. Treasury or U.S. Government money market fund, it anticipates that all or a portion of the ordinary dividends which it pays will qualify for the 70% dividends-received 21 deduction for corporations. Each Fund will inform shareholders of the amounts that so qualify. If the Fund is a tax-exempt 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, each 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 a 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 a 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 Reserve Tax-Exempt Money Market Fund 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 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. 22 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 a Fund and to certify as to its correctness and certain other shareholders may be subject to a 31% federal income tax backup withholding requirement on dividends, distributions of capital gains and redemption proceeds paid to them by the Fund. If the withholding provisions are applicable, any such dividends or capital gain distributions to these shareholders, whether taken in cash or reinvested in additional shares, and any redemption proceeds will be reduced by the amounts required to be withheld. Investors may wish to consult their own tax advisors about the applicability of the backup withholding provisions. Other Tax Considerations The foregoing discussion relates solely to U.S. federal income tax law as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations, partnerships, trusts and estates). It does not reflect the special tax consequences to certain taxpayers (e.g., banks, insurance companies, tax exempt organizations and foreign persons). Shareholders are encouraged to consult their own tax advisors regarding specific questions relating to federal, state and local tax consequences of investing in shares of the Fund. Each shareholder who is not a U.S. person should consult his or her tax advisor regarding the U.S. and foreign tax consequences of ownership of shares of the Fund, including the possibility that such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under a tax treaty) on amounts treated as income from U.S. sources under the Code. Distributor Evergreen Distributor, Inc. (EDI), 125 W. 55th Street, New York, New York 10019, markets the Funds through broker-dealers and other financial representatives. 23 Independent Auditors KPMG LLP, 99 High Street, Boston, Massachusetts 02110, audits the financial statements of each Fund. Custodian State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, keeps custody of each Fund's securities and cash and performs other related duties. Legal Counsel Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036, provides legal advice to the Funds. 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, P.O. Box 2121, Boston, Massachusetts 02106-9970 or by calling (800) 343-2898. BROKERAGE Brokerage Commissions Each Fund expects to buy and sell fixed income securities directly from the issuer or an underwriter or market maker for the securities. Generally, the Funds will not pay brokerage commissions for such purchases. When a 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 a Fund executes transactions in the over-the-counter market, it will deal with primary market makers unless more favorable prices are otherwise obtainable. Selection of Brokers When buying and selling portfolio securities, the investment 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. 24 The Funds may pay higher brokerage commissions to a broker providing it with research services, as defined in item 6, above. Pursuant to Section 28(e) of the Securities Exchange Act of 1934, this practice is permitted if the commission is reasonable in relation to the brokerage and research services provided. Research services provided by a broker to the investment advisor do not replace, but 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. Simultaneous Transactions The investment advisor makes investment decisions for each 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 a 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 a 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 share. Shares generally vote together as one class on all matters. Classes of shares of each 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. 25 Limitation of Trustees' Liability The Declaration of Trust provides that a Trustee will not be liable for errors of judgment or mistakes of fact or law, but nothing in the Declaration of Trust protects a Trustee against any liability to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his duties involved in the conduct of his office. Code of Ethics The Trust and its various advisors have each adopted a code of ethics pursuant to the requirements of Rule 17j-1 of the 1940 Act (Code of Ethics). Each of these Codes of Ethics permits Fund personnel to invest in securities for their own accounts and is on file with, and available from, the SEC. INVESTMENT ADVISORY AGREEMENT On behalf of each Fund, the Trust has entered into an investment advisory agreement with the Fund's investment advisor (the Management Contract). Under the Management Contract, and subject to the supervision of the Trust's Board of Trustees, the investment advisor furnishes to the 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. Each 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 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. Each Management Contract 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 Management Contract 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. Each Management Contract 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. Each Management Contract will terminate automatically upon its "assignment" as that term is defined in the 1940 Act. Transactions Among Advisory Affiliates The Trust has adopted procedures pursuant to Rule 17a-7 of the 1940 Act (Rule 17a-7 Procedures). The Rule 17a-7 Procedures permit the Fund to buy or sell securities from another investment company for which a subsidiary of First 26 Union Corporation is an investment advisor. The Rule 17a-7 Procedures also allow the Fund to buy or sell securities from other advisory clients for whom a subsidiary of First Union Corporation is an investment advisor. The Fund may engage in such transaction if it is equitable to each participant and consistent with each participant's investment objective. CORPORATE AND MUNICIPAL BOND RATINGS Each 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 a 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. 27 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 28 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 The D rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to D either: ! On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or ! Upon voluntary bankruptcy filing or similar action. An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a D rating. Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. Fitch Corporate Long-Term Bond Ratings Investment Grade AAA Highest credit quality. AAA ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. AA Very high credit quality. AA ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A High credit quality. A ratings denote a lower expectation of credit risk. The 29 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 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. 30 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. S&P Corporate Short-Term Obligation Ratings A-1 A short-term obligation rated A-1 is rated in the highest category by S&P. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong. A-2 A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory. A-3 A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. B A short-term obligation rated B is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. C A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. D The D rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred--and not where a default is only expected. S&P changes ratings to D either: ! On the day an interest and/or principal payment is due and is not paid. An exception is made if there is a grace period and S&P believes that a payment will be made, in which case the rating can be maintained; or ! Upon voluntary bankruptcy filing or similar action, An exception is made if S&P expects that debt service payments will continue to be made on a specific issue. In the absence of a payment default or bankruptcy filing, a technical default (i.e., covenant violation) is not sufficient for assigning a D rating. Fitch Corporate Short-Term Obligation Ratings F1 Highest credit quality. Indicates the strongest capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature. 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 31 is adequate; however, near-term adverse changes could result in a reduction to non-investment grade. B Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions. C High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment. D Default. Denotes actual or imminent payment default. MUNICIPAL BONDS LONG-TERM RATINGS Moody's Municipal Long-Term Bond Ratings Aaa Bonds rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa Bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities. A Bonds rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future. Baa Bonds rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba Bonds rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B Bonds rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. 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. 32 Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating classification from Aa to B. The modifier 1 indicates that the company ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range raking and the modifier 3 indicates that the company ranks in the lower end of its generic rating category. S&P Municipal Long-Term Bond Ratings AAA An obligation rated AAA has the highest rating assigned by S&P. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA An obligation rated AA differs from the highest-rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. BB An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions, which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet it financial commitment on the obligation. 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. 33 Fitch Municipal Long-Term Bond Ratings Investment Grade AAA Highest credit quality. AAA ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. AA Very high credit quality. AA ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A High credit quality. A ratings denote a lower expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. BBB Good credit quality. BBB ratings indicate that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category. Speculative Grade BB Speculative. BB ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade. 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. 34 - -- High rates of return on funds employed. - -- Conservative capitalization structure with moderate reliance on debt and ample asset protection. - -- Broad margins in earnings coverage of fixed financial changes and high internal cash generation. - -- Well-established access to a range of financial markets and assured sources of alternate liquidity. Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Not Prime Issuers rated Not Prime do not fall within any of the Prime rating categories. 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. 35 D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes such payments will be made during such grace period. S&P Municipal Short-Term Obligation Ratings SP-1 Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3 Speculative capacity to pay principal and interest. 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, each 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 Funds' prospectus, SAI or in supplemental sales literature issued by the Funds or EDI, and no person is entitled to rely on any information or representation not contained therein. The Funds' 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. 36 EVERGREEN RESERVE MONEY MARKET FUNDS PART C OTHER INFORMATION Item 23 Exhibits Unless otherwise indicated, each of the Exhibits listed below is filed herewith.
Exhibit Number Description - ------- ------------ (a) Declaration of Trust Incorporated by reference to Registrant's Registration Statement Filed on December 12, 1997 (b) By-laws Incorporated by reference to Registrant's Registration Statement Filed on December 12, 1997 (c) Provisions of instruments defining the rights Incorporated by reference to of holders of the securities being registered Registrant's Registration Statement are contained in the Declaration of Trust Filed on December 12, 1997 Articles II, III.(6)(c), VI.(3), IV.(8), V, VI, VII, VIII and By-laws Articles II, III and VIII included as part of Exhibits 1 and 2 of this Registration Statement (d)(1) Investment Advisory and Management Agreement between Filed herein. the Registrant and First Union National Bank (d)(2) Investment Advisory and Management Agreement between Filed herein. the Registrant and Evergreen Investment Management Company (e) Form of Principal Underwriting Agreement between Filed herein. Registrant and Evergreen Distributor, Inc. (f) Deferred Compensation Plan Filed herein. (g) Custody Agreement between Registrant and State Street Filed herein. Bank and Trust Company (h)(1) Administration Services Agreement between Registrant Filed herein. and Evergreen Investment Services, Inc. (h)(2) Transfer Agency Agreement between Registrant and Filed herein. Evergreen Service Company (h)(3) Letter Amendment to Transfer Agency Agreement between Filed herein. the Registrant and Evergreen Service Company (i) Opinion and Consent of Sullivan & Worcester LLP Incorporated by reference to Registrant's Post-Effective Amendment No. 22 Filed on August 26, 1999. (j) Consent of KPMG LLP Filed herein. (k) Not applicable (l) Not applicable (m) Plan of Distribution Filed herein. (n) Not applicable (o) Multiple Class Plan Filed herein. (p) Code of Ethics Filed herein.
Item 24. Persons Controlled by or Under Common Control with Registrant. None Item 25. Indemnification. Registrant has obtained from a major insurance carrier a trustees and officers liability policy covering certain types of errors and ommissions. Provisions for the indemnification of the Registrant's Trustees and officers are also contained in the Registrant's Declaration of Trust. Provisions for the indemnification of the Registrant's Investment Advisors are contained in their respective Investment Advisory and Management Agreements. Provisions for the indemnification of Evergreen Distributor, Inc., the Registrant's principal underwriter, are contained in the Principal Underwriting Agreement between Evergreen Distributor, Inc. and the Registrant. Provisions for the indemnification of Evergreen Service Company, the Registrant's transfer agent, are contained in the Master Transfer and Recordkeeping Agreement between Evergreen Service Company and the Registrant. Provisions for the indemnification of State Street Bank and Trust Co., the Registrant's custodian, are contained in the Custodian Agreement between State Street Bank and Trust Co., and the Registrant. Item 26. Business or Other Connections of Investment Adviser. The Directors and principal executive officers of First Union National Bank are: Edward E. Crutchfield, Jr. Chairman, First Union Corporation and First Union National Bank G. Kennedy Thompson Chief Executive Officer, President and Director, First Union Corporation and First Union National Bank Mark C. Treanor Executive Vice President, Secretary and General Counsel, First Union Corporation; Secretary and Executive Vice President, First Union National Bank Robert T. Atwood Executive Vice President and Chief Financial Officer, First Union Corporation; Chief Financial Officer and Executive Vice President, First Union National Bank All of the above persons are located at the following address: First Union National Bank, One First Union Center, Charlotte, NC 28288. The information required by this item with respect to Evergreen Investment Management Company is incorporated by reference to the Form ADV (File No. 801-5436) of Evergreen Investment Management Company. The information required by this item with respect to Meridian Investment Company is incorporated by reference to the Form ADV (File No. 801-8327) of Meridian Investment Company. 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 Maryann Bruce President Kevin J. Dell Vice President, General Counsel and Secretary Messrs. Mangum, Sheehan and Dell are located at the following address: Evergreen Distributor, Inc., 90 Park Aveneu, New York, New York 10019. Ms. Bruce is located at 201 South College Street, Charlotte, NC 28288. The Registrant has not paid, directly or indirectly, any commissions or other compensation to the Principal Underwriters in the last fiscal year. 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 and Evergreen Investment Management Company (formerly Keystone Investment Management Company), all located at 200 Berkeley Street, Boston, Massachusetts 02110 First Union National Bank, One First Union Center, 301 S. College Street, Charlotte, North Carolina 28288 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 25th day of January, 2001. MENTOR FUNDS 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 25th day of January, 2001.
/s/ William M. Ennis /s/ Michael H. Koonce /s/ Carol A. Kosel - ----------------------------- ----------------------------- ------------------------------ William M. Ennis* Michael H. Koonce Carol A. Kosel* President Secretary Treasurer (Chief Operating Officer) (Principal Financial and Accounting Officer) /s/ Charles A. Austin, III /s/ K. Dun Gifford /s/ William Walt Pettit - ---------------------------- ---------------------------- ---------------------------------- Charles A. Austin III* K. Dun Gifford* William Walt Pettit* Trustee Trustee Trustee /s/ Gerald M. McDonnell /s/ Thomas L. McVerry /s/ Louis M. Moelchert, Jr. - ----------------------------- ----------------------------- ------------------------------- Gerald M. McDonnell* Thomas L. McVerry* Louis M. Moelchert, Jr.* Trustee Trustee Trustee /s/ Michael S. Scofield /s/ David M. Richardson /s/ Russell A. Salton, III MD - ------------------------------ ------------------------------ ------------------------------- Michael S. Scofield* David M. Richardson* Russell A. Salton, III MD* Chairman of the Board Trustee Trustee and Trustee /s/ Leroy Keith, Jr. /s/ Richard J. Shima /s/ Richard K. Wagoner - ------------------------------ ------------------------------ --------------------------- Leroy Keith, Jr.* Richard J. Shima* Richard K. Wagoner* Trustee Trustee Trustee
*By: /s/ Catherine E. Foley - ------------------------------- Catherine E. Foley Attorney-in-Fact *Catherine E. Foley, by signing her name hereto, does hereby sign this document on behalf of each of the above-named individuals pursuant to powers of attorney duly executed by such persons. INDEX TO EXHIBITS Exhibit Number Exhibit - -------------- ------- (d)(1) Investment Advisory and Management Agreement between the Registrant and First Union National Bank (d)(2) Investment Advisory and Management Agreement between the Registrant and Evergreen Investment Management Company (e) Form of Principal Underwriting Agreement between Registrant and Evergreen Distributor, Inc. (f) Deferred Compensation Plan (g) Custody Agreement between Registrant and State Street Bank and Trust Company (h)(1) Administration Services Agreement between Registrant and Evergreen Investment Services, Inc. (h)(2) Transfer Agency Agreement between Registrant and Evergreen Service Company (h)(3) Letter Amendment to Transfer Agency Agreement between the Registrant and Evergreen Service Company (j) Consent of KPMG LLP (m) Plan of Distribution (o) Multiple Class Plan (p) Code of Ethics EX-99.(D)(1) 2 0002.txt FUNB INVESTMENT ADVISORY AGREEMENT INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AGREEMENT made the 1st day of November, 2000, by and between MENTOR FUNDS, a Massachusetts business trust (the "Trust") and FIRST UNION NATIONAL BANK, a national banking association (the "Adviser"). WHEREAS, the Trust and the Adviser wish to enter into an Agreement setting forth the terms on which the Adviser will perform certain services for the Trust, its series of shares as listed on Schedule 1 to this Agreement and each series of shares subsequently issued by the Trust (each singly a "Fund" or collectively the "Funds"). THEREFORE, in consideration of the promises and the mutual agreements hereinafter contained, the Trust and the Adviser agree as follows: 1. (a) The Trust hereby employs the Adviser to manage and administer the operation of the Trust and each of its Funds, to supervise the provision of the services to the Trust and each of its Funds by others, and to manage the investment and reinvestment of the assets of each Fund of the Trust in conformity with such Fund's investment objectives and restrictions as may be set forth from time to time in the Fund's then current prospectus and statement of additional information, if any, and other governing documents, all subject to the supervision of the Board of Trustees of the Trust, for the period and on the terms set forth in this Agreement. The Adviser hereby accepts such employment and agrees during such period, at its own expense, to render the services and to assume the obligations set forth herein, for the compensation provided herein. The Adviser shall for all purposes herein be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Trust in any way or otherwise be deemed an agent of the Trust. (b) In the event that the Trust establishes one or more Funds, in addition to the Funds listed on Schedule 1, for which it wishes the Adviser to perform services hereunder, it shall notify the Adviser in writing. If the Adviser is willing to render such services, it shall notify the Trust in writing and such Fund shall become a Fund hereunder and the compensation payable to the Adviser by the new Fund will be as agreed in writing at the time. 2. The Adviser shall place all orders for the purchase and sale of portfolio securities for the account of each Fund with broker-dealers selected by the Adviser. In executing portfolio transactions and selecting broker-dealers, the Adviser will use its best efforts to seek best execution on behalf of each Fund. In assessing the best execution available for any transaction, the Adviser shall consider all factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker-dealer, and the reasonableness of the commission, if any (all for the specific transaction and on a continuing basis). In evaluating the best execution available, and in selecting the broker-dealer to execute a particular transaction, the Adviser may also consider the brokerage and research services (as those terms are used in Section 28(e) of the Securities Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. The Adviser is authorized to pay a broker-dealer who provides such brokerage and research services a commission for executing a portfolio transaction for a Fund which is in excess of the amount of commission another broker-dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker-dealer viewed in terms of that particular transaction or in terms of all of the accounts over which investment discretion is so exercised. 3. The Adviser, at its own expense, shall furnish to the Trust office space in the offices of the Adviser or in such other place as may be agreed upon by the parties from time to time, all necessary office facilities, equipment and personnel in connection with its services hereunder, and shall arrange, if desired by the Trust, for members of the Adviser's organization to serve without salaries from the Trust as officers or, as may be agreed from time to time, as agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust for: (a) the compensation (if any) of the Trustees of the Trust who are affiliated with the Adviser or with its affiliates, or with any adviser retained by the Adviser, and of all officers of the Trust as such; and (b) all expenses of the Adviser incurred in connection with its services hereunder. The Trust assumes and shall pay all other expenses of the Trust and its Funds, including, without limitation: (a) all charges and expenses of any custodian or depository appointed by the Trust for the safekeeping of the cash, securities and other property of any of its Funds; (b) all charges and expenses for bookkeeping and auditors; (c) all charges and expenses of any transfer agents and registrars appointed by the Trust; (d) all fees of all Trustees of the Trust who are not affiliated with the Adviser or any of its affiliates, or with any adviser retained by the Adviser; (e) all brokers' fees, expenses, and commissions and issue and transfer taxes chargeable to a Fund in connection with transactions involving securities and other property to which the Fund is a party; (f) all costs and expenses of distribution of shares of its Funds incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the Investment Company Act of 1940 ("1940 Act"); (g) all taxes and trust fees payable by the Trust or its Funds to Federal, state, or other governmental agencies; (h) all costs of certificates representing shares of the Trust or its Funds; (i) all fees and expenses involved in registering and maintaining registrations of the Trust, its Funds and of their shares with the Securities and Exchange Commission (the "Commission") and registering or qualifying the Funds' shares under state or other securities laws, including, without limitation, the preparation and printing of registration statements, prospectuses, and statements of additional information for filing with the Commission and other authorities; (j) expenses of preparing, printing, and mailing prospectuses and statements of additional information to shareholders of each Fund of the Trust; (k) all expenses of shareholders' and Trustees' meetings and of preparing, printing, and mailing notices, reports, and proxy materials to shareholders of the Funds; (l) all charges and expenses of legal counsel for the Trust and its Funds and for Trustees of the Trust in connection with legal matters relating to the Trust and its Funds, including, without limitation, legal services rendered in connection with the Trust and its Funds' existence, trust, and financial structure and relations with its shareholders, registrations and qualifications of securities under Federal, state, and other laws, issues of securities, expenses which the Trust and its Funds have herein assumed, whether customary or not, and extraordinary matters, including, without limitation, any litigation involving the Trust and its Funds, its Trustees, officers, employees, or agents; (m) all charges and expenses of filing annual and other reports with the Commission and other authorities; and (n) all extraordinary expenses and charges of the Trust and its Funds. In the event that the Adviser provides any of these services or pays any of these expenses, the Trust and any affected Fund will promptly reimburse the Adviser therefor. The services of the Adviser to the Trust and its Funds hereunder are not to be deemed exclusive, and the Adviser shall be free to render similar services to others. 4. As compensation for the Adviser's services to the Trust with respect to each Fund during the period of this Agreement, the Trust will pay to the Adviser a fee at the annual rate set forth on Schedule 2 for such Fund provided, however, that for purposes of determining the annual rate at which such fee will be computed and paid, the Portfolio's assets will be deemed to include the assets of Evergreen CRT Money Market Fund and Evergreen U.S. Government Money Market Fund, both a series of shares of Cash Resource Trust. The Adviser's fee is computed as of the close of business on each business day. A pro rata portion of the Trust's fee with respect to a Fund shall be payable in arrears at the end of each day or calendar month as the Adviser may from time to time specify to the Trust. If and when this Agreement terminates, any compensation payable hereunder for the period ending with the date of such termination shall be payable upon such termination. Amounts payable hereunder shall be promptly paid when due. 5. The Adviser may enter into an agreement to retain, at its own expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all or any of its Funds all of the services to be provided by the Adviser hereunder, if such agreement is approved as required by law. Such agreement may delegate to such SubAdviser all of Adviser's rights, obligations, and duties hereunder. 6. The Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust or any of its Funds in connection with the performance of this Agreement, except a loss resulting from the Adviser's willful misfeasance, bad faith, gross negligence, or from reckless disregard by it of its obligations and duties under this Agreement. Any person, even though also an officer, Director, partner, employee, or agent of the Adviser, who may be or become an officer, Trustee, employee, or agent of the Trust, shall be deemed, when rendering services to the Trust or any of its Funds or acting on any business of the Trust or any of its Funds (other than services or business in connection with the Adviser's duties hereunder), to be rendering such services to or acting solely for the Trust or any of its Funds and not as an officer, Director, partner, employee, or agent or one under the control or direction of the Adviser even though paid by it. 7. The Trust shall cause the books and accounts of each of its Funds to be audited at least once each year by a reputable independent public accountant or organization of public accountant or organization of public accountants who shall render a report to the Trust. 8. Subject to and in accordance with the Declaration of Trust of the Trust, the governing documents of the Adviser and the governing documents of any SubAdviser, it is understood that Trustees, Directors, officers, agents and shareholders of the Trust or any Adviser are or may be interested in the Adviser (or any successor thereof) as Directors and officers of the Adviser or its affiliates, as stockholders of First Union Corporation or otherwise; that Directors, officers and agents of the Adviser and its affiliates or stockholders of First Union Corporation are or may be interested in the Trust or any Adviser as Trustees, Directors, officers, shareholders or otherwise; that the Adviser (or any such successor) is or may be interested in the Trust or any SubAdviser as shareholder, or otherwise; and that the effect of any such adverse interests shall be governed by the Declaration of Trust of the Trust, governing documents of the Adviser and governing documents of any SubAdviser. 9. This Agreement shall continue in effect for two years from the date set forth above and after such date (a) such continuance is specifically approved at least annually by the Board of Trustees of the Trust or by a vote of a majority of the outstanding voting securities of the Trust, and (b) such renewal has been approved by the vote of the majority of Trustees of the Trust who are not interested persons, as that term is defined in the 1940 Act, of the Adviser or of the Trust, cast in person at a meeting called for the purpose of voting on such approval. 10. On sixty days' written notice to the Adviser, this Agreement may be terminated at any time without the payment of any penalty by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of any Fund with respect to that Fund; and on sixty days' written notice to the Trust, this Agreement may be terminated at any time without the payment of any penalty by the Adviser with respect to a Fund. This Agreement shall automatically terminate upon its assignment (as that term is defined in the 1940 Act). Any notice under this Agreement shall be given in writing, addressed and delivered, or mailed postage prepaid, to the other party at the main office of such party. 11. This Agreement may be amended at any time by an instrument in writing executed by both parties hereto or their respective successors, provided that with regard to amendments of substance such execution by the Trust shall have been first approved by the vote of the holders of a majority of the outstanding voting securities of the affected Funds and by the vote of a majority of Trustees of the Trust who are not interested persons (as that term is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or of the Trust, cast in person at a meeting called for the purpose of voting on such approval. A "majority of the outstanding voting securities" of the Trust or the affected Funds shall have, for all purposes of this Agreement, the meaning provided therefor in the 1940 Act. 12. Any compensation payable to the Adviser hereunder for any period other than a full year shall be proportionately adjusted. 13. The provisions of this Agreement shall be governed, construed, and enforced in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. MENTOR FUNDS By: /s/ Maureen E. Towle -------------------------------- Name: Maureen E. Towle Title: Assistant Secretary FIRST UNION NATIONAL BANK By: /s/ Michael H. Koonce ------------------------------ Name: Michael H. Koonce Title: Senior Vice President Schedule 1 Evergreen Reserve Money Market Fund (formerly Mentor Money Market Portfolio) Evergreen Reserve U.S. Government Money Market Fund (formerly Mentor U.S. Government Money Market Portfolio) Schedule 2 As compensation for the Adviser's services to each Fund during the period of this Agreement, each Fund will pay to the Adviser a fee at the annual rate of : I. Evergreen Reserve Money Market Fund (formerly Mentor Reserve Money Market Portfolio) Evergreen Reserve U.S. Government Money Market Fund (formerly Mentor U.S. Government Money Market Portfolio) Aggregate Net Asset Value Management Fee of Shares of the Fund 0.220% of the first $500,000,000; plus 0.200% of the next $500,000,000; plus 0.175% of the next $1,000,000,000; plus 0.160% of the next $1,000,000,000; and 0.150% of amounts over $3,000,000,000; computed as of the close of business on each business day. EX-99.(D)(2) 3 0003.txt EIMC INVESTMENT ADVISORY AGREEMENT INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AGREEMENT made the 1st day of November, 2000, by and between MENTOR FUNDS, a Massachusetts business trust (the "Trust") and EVERGREEN INVESTMENT MANAGEMENT COMPANY, a Delaware corporation (the "Adviser"). WHEREAS, the Trust and the Adviser wish to enter into an Agreement setting forth the terms on which the Adviser will perform certain services for the Trust, its series of shares as listed on Schedule 1 to this Agreement and each series of shares subsequently issued by the Trust (each singly a "Fund" or collectively the "Funds"). THEREFORE, in consideration of the promises and the mutual agreements hereinafter contained, the Trust and the Adviser agree as follows: 1. (a) The Trust hereby employs the Adviser to manage and administer the operation of the Trust and each of its Funds, to supervise the provision of the services to the Trust and each of its Funds by others, and to manage the investment and reinvestment of the assets of each Fund of the Trust in conformity with such Fund's investment objectives and restrictions as may be set forth from time to time in the Fund's then current prospectus and statement of additional information, if any, and other governing documents, all subject to the supervision of the Board of Trustees of the Trust, for the period and on the terms set forth in this Agreement. The Adviser hereby accepts such employment and agrees during such period, at its own expense, to render the services and to assume the obligations set forth herein, for the compensation provided herein. The Adviser shall for all purposes herein be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Trust in any way or otherwise be deemed an agent of the Trust. (b) In the event that the Trust establishes one or more Funds, in addition to the Funds listed on Schedule 1, for which it wishes the Adviser to perform services hereunder, it shall notify the Adviser in writing. If the Adviser is willing to render such services, it shall notify the Trust in writing and such Fund shall become a Fund hereunder and the compensation payable to the Adviser by the new Fund will be as agreed in writing at the time. 2. The Adviser shall place all orders for the purchase and sale of portfolio securities for the account of each Fund with broker-dealers selected by the Adviser. In executing portfolio transactions and selecting broker-dealers, the Adviser will use its best efforts to seek best execution on behalf of each Fund. In assessing the best execution available for any transaction, the Adviser shall consider all factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker-dealer, and the reasonableness of the commission, if any (all for the specific transaction and on a continuing basis). In evaluating the best execution available, and in selecting the broker-dealer to execute a particular transaction, the Adviser may also consider the brokerage and research services (as those terms are used in Section 28(e) of the Securities Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. The Adviser is authorized to pay a broker-dealer who provides such brokerage and research services a commission for executing a portfolio transaction for a Fund which is in excess of the amount of commission another broker-dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker-dealer viewed in terms of that particular transaction or in terms of all of the accounts over which investment discretion is so exercised. 3. The Adviser, at its own expense, shall furnish to the Trust office space in the offices of the Adviser or in such other place as may be agreed upon by the parties from time to time, all necessary office facilities, equipment and personnel in connection with its services hereunder, and shall arrange, if desired by the Trust, for members of the Adviser's organization to serve without salaries from the Trust as officers or, as may be agreed from time to time, as agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust for: (a) the compensation (if any) of the Trustees of the Trust who are affiliated with the Adviser or with its affiliates, or with any adviser retained by the Adviser, and of all officers of the Trust as such; and (b) all expenses of the Adviser incurred in connection with its services hereunder. The Trust assumes and shall pay all other expenses of the Trust and its Funds, including, without limitation: (a) all charges and expenses of any custodian or depository appointed by the Trust for the safekeeping of the cash, securities and other property of any of its Funds; (b) all charges and expenses for bookkeeping and auditors; (c) all charges and expenses of any transfer agents and registrars appointed by the Trust; (d) all fees of all Trustees of the Trust who are not affiliated with the Adviser or any of its affiliates, or with any adviser retained by the Adviser; (e) all brokers' fees, expenses, and commissions and issue and transfer taxes chargeable to a Fund in connection with transactions involving securities and other property to which the Fund is a party; (f) all costs and expenses of distribution of shares of its Funds incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the Investment Company Act of 1940 ("1940 Act"); (g) all taxes and trust fees payable by the Trust or its Funds to Federal, state, or other governmental agencies; (h) all costs of certificates representing shares of the Trust or its Funds; (i) all fees and expenses involved in registering and maintaining registrations of the Trust, its Funds and of their shares with the Securities and Exchange Commission (the "Commission") and registering or qualifying the Funds' shares under state or other securities laws, including, without limitation, the preparation and printing of registration statements, prospectuses, and statements of additional information for filing with the Commission and other authorities; (j) expenses of preparing, printing, and mailing prospectuses and statements of additional information to shareholders of each Fund of the Trust; (k) all expenses of shareholders' and Trustees' meetings and of preparing, printing, and mailing notices, reports, and proxy materials to shareholders of the Funds; (l) all charges and expenses of legal counsel for the Trust and its Funds and for Trustees of the Trust in connection with legal matters relating to the Trust and its Funds, including, without limitation, legal services rendered in connection with the Trust and its Funds' existence, trust, and financial structure and relations with its shareholders, registrations and qualifications of securities under Federal, state, and other laws, issues of securities, expenses which the Trust and its Funds have herein assumed, whether customary or not, and extraordinary matters, including, without limitation, any litigation involving the Trust and its Funds, its Trustees, officers, employees, or agents; (m) all charges and expenses of filing annual and other reports with the Commission and other authorities; and (n) all extraordinary expenses and charges of the Trust and its Funds. In the event that the Adviser provides any of these services or pays any of these expenses, the Trust and any affected Fund will promptly reimburse the Adviser therefor. The services of the Adviser to the Trust and its Funds hereunder are not to be deemed exclusive, and the Adviser shall be free to render similar services to others. 4. As compensation for the Adviser's services to the Trust with respect to each Fund during the period of this Agreement, the Trust will pay to the Adviser a fee at the annual rate set forth on Schedule 2 for such Fund provided, however, that for purposes of determining the annual rate at which such fee will be computed and paid, the Portfolio's assets will be deemed to include the assets of Evergreen CRT Tax-Exempt Money Market Fund, a series of shares of Cash Resource Trust. The Adviser's fee is computed as of the close of business on each business day. A pro rata portion of the Trust's fee with respect to a Fund shall be payable in arrears at the end of each day or calendar month as the Adviser may from time to time specify to the Trust. If and when this Agreement terminates, any compensation payable hereunder for the period ending with the date of such termination shall be payable upon such termination. Amounts payable hereunder shall be promptly paid when due. 5. The Adviser may enter into an agreement to retain, at its own expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all or any of its Funds all of the services to be provided by the Adviser hereunder, if such agreement is approved as required by law. Such agreement may delegate to such SubAdviser all of Adviser's rights, obligations, and duties hereunder. 6. The Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust or any of its Funds in connection with the performance of this Agreement, except a loss resulting from the Adviser's willful misfeasance, bad faith, gross negligence, or from reckless disregard by it of its obligations and duties under this Agreement. Any person, even though also an officer, Director, partner, employee, or agent of the Adviser, who may be or become an officer, Trustee, employee, or agent of the Trust, shall be deemed, when rendering services to the Trust or any of its Funds or acting on any business of the Trust or any of its Funds (other than services or business in connection with the Adviser's duties hereunder), to be rendering such services to or acting solely for the Trust or any of its Funds and not as an officer, Director, partner, employee, or agent or one under the control or direction of the Adviser even though paid by it. 7. The Trust shall cause the books and accounts of each of its Funds to be audited at least once each year by a reputable independent public accountant or organization of public accountant or organization of public accountants who shall render a report to the Trust. 8. Subject to and in accordance with the Declaration of Trust of the Trust, the governing documents of the Adviser and the governing documents of any SubAdviser, it is understood that Trustees, Directors, officers, agents and shareholders of the Trust or any Adviser are or may be interested in the Adviser (or any successor thereof) as Directors and officers of the Adviser or its affiliates, as stockholders of First Union Corporation or otherwise; that Directors, officers and agents of the Adviser and its affiliates or stockholders of First Union Corporation are or may be interested in the Trust or any Adviser as Trustees, Directors, officers, shareholders or otherwise; that the Adviser (or any such successor) is or may be interested in the Trust or any SubAdviser as shareholder, or otherwise; and that the effect of any such adverse interests shall be governed by the Declaration of Trust of the Trust, governing documents of the Adviser and governing documents of any SubAdviser. 9. This Agreement shall continue in effect for two years from the date set forth above and after such date (a) such continuance is specifically approved at least annually by the Board of Trustees of the Trust or by a vote of a majority of the outstanding voting securities of the Trust, and (b) such renewal has been approved by the vote of the majority of Trustees of the Trust who are not interested persons, as that term is defined in the 1940 Act, of the Adviser or of the Trust, cast in person at a meeting called for the purpose of voting on such approval. 10. On sixty days' written notice to the Adviser, this Agreement may be terminated at any time without the payment of any penalty by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of any Fund with respect to that Fund; and on sixty days' written notice to the Trust, this Agreement may be terminated at any time without the payment of any penalty by the Adviser with respect to a Fund. This Agreement shall automatically terminate upon its assignment (as that term is defined in the 1940 Act). Any notice under this Agreement shall be given in writing, addressed and delivered, or mailed postage prepaid, to the other party at the main office of such party. 11. This Agreement may be amended at any time by an instrument in writing executed by both parties hereto or their respective successors, provided that with regard to amendments of substance such execution by the Trust shall have been first approved by the vote of the holders of a majority of the outstanding voting securities of the affected Funds and by the vote of a majority of Trustees of the Trust who are not interested persons (as that term is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or of the Trust, cast in person at a meeting called for the purpose of voting on such approval. A "majority of the outstanding voting securities" of the Trust or the affected Funds shall have, for all purposes of this Agreement, the meaning provided therefor in the 1940 Act. 12. Any compensation payable to the Adviser hereunder for any period other than a full year shall be proportionately adjusted. 13. The provisions of this Agreement shall be governed, construed, and enforced in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. MENTOR FUNDS By: /s/ Michael H. Koonce -------------------------------- Name: Michael H. Koonce Title: Secretary EVERGREEN INVESTMENT MANAGEMENT COMPANY By: /s/ Christopher C. Conkey -------------------------------- Name: Christopher C. Conkey Title: Chief Investment Officer Schedule 1 Evergreen Reserve Tax-Exempt Money Market Fund (formerly Mentor Tax-Exempt Money Market Portfolio) Schedule 2 As compensation for the Adviser's services to each Fund during the period of this Agreement, each Fund will pay to the Adviser a fee at the annual rate of : I. Evergreen Reserve Tax-Exempt Money Market Fund (formerly Mentor Tax-Exempt Money Market Portfolio) Aggregate Net Asset Value Management Fee of Shares of the Fund 0.220% of the first $500,000,000; plus 0.200% of the next $500,000,000; plus 0.175% of the next $1,000,000,000; plus 0.160% of the next $1,000,000,000; and 0.150% of amounts over $3,000,000,000, computed as of the close of business on each business day. EX-99.(E) 4 0004.txt FORM OF PRINCIPAL UNDERWRITING AGREEMENT FORM OF PRINCIPAL UNDERWRITING AGREEMENT EVERGREEN MONEY MARKET TRUST RETAIL SHARES AGREEMENT made this 1st day of October, 1999 by and between Evergreen Reserve Money Market Funds on behalf of its series listed on Exhibit A attached hereto and made a part hereof (such Trust and series referred to herein as "Fund" individually or "Funds" collectively) and Evergreen Distributor, Inc., a Delaware corporation ("Principal Underwriter"). It is hereby mutually agreed as follows: 1. The Fund hereby appoints Principal Underwriter a principal underwriter of the Retail shares of beneficial interest of the Fund ("Shares") as an independent contractor upon the terms and conditions hereinafter set forth. Except as the Fund may from time to time agree, Principal Underwriter will act as agent for the Fund and not as principal. 2. Principal Underwriter will use its best efforts to find purchasers for the Shares, to promote distribution of the Shares and may obtain orders from brokers, dealers or other persons for sales of Shares to them. No such broker, dealer or other person shall have any authority to act as agent for the Fund; such dealer, broker or other person shall act only as principal in the sale of Shares. 3. Sales of Shares by Principal Underwriter shall be at the applicable public offering price determined in the manner set forth in the prospectus and/or statement of additional information of the Fund current at the time of the Fund's acceptance of the order for Shares; provided that Principal Underwriter also shall have the right to sell Shares at net asset value, if such sale is permissible under and consistent with applicable statutes, rules, regulations and orders. All orders shall be subject to acceptance by the Fund, and the Fund reserves the right in its sole discretion to reject any order received. The Fund shall not be liable to anyone for failure to accept any order. 4. On all sales of Shares, the Fund shall receive the current net asset value, and Principal Underwriter shall be entitled to receive fees for sales of Retail Shares as set forth on Exhibit B attached hereto and made a part hereof. 5. Payment to the Fund for Shares shall be in New York or Boston Clearing House funds received by Principal Underwriter within (3) business days after notice of acceptance of the purchase order and the amount of the applicable public offering price has been given to the purchaser. If such payment is not received within such 3-day period, the Fund reserves the right, without further notice, forthwith to cancel its acceptance of any such order. The Fund shall pay such issue taxes as may be required by law in connection with the issue of the Shares. 6. Principal Underwriter shall not make in connection with any sale or solicitation of a sale of the Shares any representations concerning the Shares except those contained in the then current prospectus and/or statement of additional information covering the Shares and in printed information approved by the Fund as information supplemental to such prospectus and statement of additional information. Copies of the then current prospectus and statement of additional information will be supplied by the Fund to Principal Underwriter in reasonable quantities upon request. 7. Principal Underwriter agrees to comply with the Business Conduct Rules of the National Association of Securities Dealers, Inc. 8. The Fund appoints Principal Underwriter as its agent to accept orders for redemptions and repurchases of Shares at values and in the manner determined in accordance with the then current prospectus and/or statement of additional information of the Fund. 9. The Fund agrees to indemnify and hold harmless the Principal Underwriter, its officers and Directors and each person, if any, who controls the Principal Underwriter within the meaning of Section 15 of the Securities Act of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and expenses (including the cost of any legal fees incurred in connection therewith) which the Principal Underwriter, its officers, Directors or any such controlling person may incur under the 1933 Act, under any other statute, at common law or otherwise, arising out of or based upon a) any untrue statement or alleged untrue statement of a material fact contained in the Fund's registration statement, prospectus or statement of additional information (including amendments and supplements thereto), or b) any omission or alleged omission to state a material fact required to be stated in the Fund's registration statement, prospectus or statement of additional information necessary to make the statements therein not misleading, provided, however, that insofar as losses, claims, damages, liabilities or expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made in reliance and in conformity with information furnished to the Fund by the Principal Underwriter for use in the Fund's registration statement, prospectus or statement of additional information, such indemnification is not applicable. In no case shall the Fund indemnify the Principal Underwriter or its controlling person as to any amounts incurred for any liability arising out of or based upon any action for which the Principal Underwriter, its officers and Directors or any controlling person would otherwise be subject to liability by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its obligations and duties under this Agreement. 10. The Principal Underwriter agrees to indemnify and hold harmless the Fund, its officers, Trustees and each person, if any, who controls the Fund within the meaning of Section 15 of the 1933 Act against any loss, claims, damages, liabilities and expenses (including the cost of any legal fees incurred in connection therewith) which the Fund, its officers, Trustees or any such controlling person may incur under the 1933 Act, under any other statute, at common law or otherwise arising out of the acquisition of any Shares by any person which a) may be based upon any wrongful act by the Principal Underwriter or any of its employees or representatives, or b) may be based upon any untrue statement or alleged untrue statement of a material fact contained in the Fund's registration statement, prospectus or statement of additional information (including amendments and supplements thereto), or any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon information furnished or confirmed in writing to the Fund by the Principal Underwriter. 11. The Fund agrees to execute such papers and to do such acts and things as shall from time to time be reasonably requested by Principal Underwriter for the purpose of qualifying the Shares for sale under the so-called "blue sky" laws of any state or for registering Shares under the 1933 Act or the Fund under the Investment Company Act of 1940 ("1940 Act"). Principal Underwriter shall bear the expense of preparing, printing and distributing advertising, sales literature, prospectuses and statements of additional information. The Fund shall bear the expense of registering Shares under the 1933 Act and the Fund under the 1940 Act, qualifying Shares for sale under the so-called "blue sky" laws of any state, the preparation and printing of prospectuses, statements of additional information and reports required to be filed with the Securities and Exchange Commission and other authorities, the preparation, printing and mailing of prospectuses and statements of additional information to shareholders of the Fund and the direct expenses of the issue of Shares. 12. To the extent required by the Fund's 12b-1 Plans, Principal Underwriter shall provide to the Board of Trustees of the Fund in connection with such 12b-1 Plans, not less than quarterly, a written report of the amounts expended pursuant to such 12b-1 Plans and the purposes for which such expenditures were made. 13. This Agreement shall become effective as of the date of the commencement of operations of the Fund and shall remain in force for two years unless sooner terminated or continued as provided below. This Agreement shall continue in effect after such term if its continuance is specifically approved by a majority of the Trustees of the Fund and a majority of the 12b-1 Trustees referred to in the 12b-1 Plans of the Fund ("Rule 12b-1 Trustees") at least annually in accordance with the 1940 Act and the rules and regulations thereunder. This Agreement may be terminated at any time, without payment of any penalty, by vote of a majority of any Rule 12b-1 Trustees or by a vote of a majority of the Fund's outstanding Shares on not more than sixty (60) days written notice to any other party to the Agreement; and shall terminate automatically in the event of its assignment (as defined in the 1940 Act). 14. This Agreement shall be construed in accordance with the laws of The Commonwealth of Massachusetts. All sales hereunder are to be made, and title to the Shares shall pass, in Boston, Massachusetts. 15. The Fund is a series of a Delaware business trust established under a Declaration of Trust, as it may be amended from time to time. The obligations of the Fund 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 Fund, but only the property of the Fund shall be bound. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized at Boston, Massachusetts, as of the day and year first written above. MENTOR FUNDS By: ----------------------------------- Name: Title: EVERGREEN DISTRIBUTOR, INC. By: ----------------------------------- Name: Title: EXHIBIT A As revised October 1, 1999 EVERGREEN MONEY MARKET TRUST Evergreen Money Market Fund Evergreen Pennsylvania Municipal Money Market Fund** Evergreen Municipal Money Market Fund Evergreen Treasury Money Market Fund** Evergreen Florida Municipal Money Market Fund Evergreen New Jersey Money Market Fund Evergreen U.S. Government Money Market Fund Evergreen California Municipal Money Market Fund Evergreen Reserve Money Market Fund Evergreen Reserve Tax-Exempt Money Market Fund Evergreen Reserve U.S. Government Money Market Fund ** Class C Shares authorized but not issued EXHIBIT B TO PRINCIPAL UNDERWRITING AGREEMENT DATED OCTOBER 1, 1999 Schedule of Payments Retail Shares Shares Up to 0.33% annually of the average daily net asset value of Retail Class shares of Evergreen Reserve Tax-Exempt Fund (formerly Mentor Tax-Exempt Money Market Portfolio) Retail Shares Up to 0.38% annually of the average daily net asset value of Retail Class shares of Reserve U.S. Government Fund (formerly Mentor U.S. Government Money Market Portfolio) and Reserve Money Market Fund (formerly Mentor Money Market Portfolio) A sales charge, the difference between the current offering price of Shares, as set forth in the current prospectus for each Fund, and the net asset value, less any reallowance that is payable in accordance with the sales charge schedule in effect at any given time with respect to the Shares EX-99.(F) 5 0005.txt DEFERRED COMP PLAN THE EVERGREEN FUNDS DEFERRED COMPENSATION PLAN This Deferred Compensation Plan, effective as of September 18, 1997, sets forth the terms whereby a Trustee of the Evergreen Funds, entitled to compensation payable by the Evergreen Funds, may defer the receipt of his or her compensation. 1. . DEFINITION OF TERMS AND CONDITIONS 1.1 DEFINITIONS. Unless a different meaning is plainly implied by the context, the following terms as used in this Plan shall have the meanings specified below: (1) "BENEFICIARY" shall mean such person or persons designated pursuant to Section 4.3 hereof to receive benefits after the death of the Trustee. (2) "BOARD OF TRUSTEES" shall mean the Board of Trustees or the Board of Directors of an Evergreen Fund. (3) "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. (4) "COMPENSATION" shall mean the amount of trustees' fees paid by an Evergreen Fund to the Trustee during a Deferral Year prior to reduction for Compensation Deferrals made under this Plan. (5) "COMPENSATION DEFERRAL" shall mean the amount or amounts of the Trustee's Compensation deferred under the provisions of Section 3 of this Plan. (6) "DEFERRAL ACCOUNT" shall mean the account maintained to reflect the Trustee's Compensation Deferrals made pursuant to Section 3 hereof and any other credits or debits thereto. (7) "DEFERRAL YEAR" shall mean each calendar year during which the Trustee makes, or is entitled to make, Compensation Deferrals under Section 3 hereof. (8) "EVERGREEN FUNDS" shall mean any and all of the registered investment companies currently or subsequently advised by Evergreen Investment Management Company or any of its affiliates. (9) "VALUATION DATE" shall mean the last business day of each calendar year and any other day upon which an Evergreen Fund makes a valuation of the Deferred Account. 1.2 PLURALS AND GENDER. Where appearing in this Plan the singular shall include the plural and the masculine shall include the feminine, and vice versa, unless the context clearly indicates a different meaning. 1.3 TRUSTEES AND DIRECTORS. Where appearing in this Plan, "Trustee" shall also refer to "Director" and "Board of Trustees" shall also refer to "Board of Directors." 1.4 HEADINGS. The headings and sub-headings in this Plan are inserted for the convenience of reference only and are to be ignored in any construction of the provisions hereof. 2. . PERIOD DURING WHICH COMPENSATION DEFERRALS ARE PERMITTED 2.1 COMMENCEMENT OF COMPENSATION DEFERRALS. The Trustee may elect, on a form provided by, and submitted to, the Secretary of an Evergreen Fund, to commence Compensation Deferrals under Section 3 hereof for the period beginning on the date such form is submitted to the Secretary of the Evergreen Fund. 2.2 TERMINATION OF DEFERRALS. The Trustee shall not be eligible to make Compensation Deferrals after the earlier of the following dates: (1) The date on which he ceases to serve as a Trustee of the Evergreen Fund; or (2) The effective date of the termination of this Plan. 3. COMPENSATION DEFERRALS 3.1 COMPENSATION DEFERRAL ELECTIONS. (1) Except as provided below, an executed deferral election on the form described in Section 2.1 hereof, must be filed with the Secretary of an Evergreen Fund prior to the first day of the Deferral Year to which it applies. The form shall set forth the amount of such Compensation Deferral (in whole percentage amounts). Such election shall continue in effect for all subsequent Deferral Years unless it is canceled or modified as provided below. Notwithstanding the foregoing, (i) any person who is elected to the Board during a fiscal year of an Evergreen Fund may elect before becoming a Trustee or within 30 days after becoming a Trustee to defer any unpaid portion of the retainer of such fiscal year and the fees for any future meetings during such fiscal year by filing an election form with the Secretary of the Evergreen Fund, and (ii) Trustees may elect to defer any unpaid portion of the retainer for the fiscal year in which Deferred Compensation Plans or agreements are first authorized by the Board and any unpaid fees for any future meetings during such fiscal year by submitting an election form to the Secretary of an Evergreen Fund within 30 days of such authorization. (2) Compensation Deferrals shall be withheld from each payment of Compensation by an Evergreen Fund to the Trustee based upon the percentage amount elected by the Trustee under Section 3.1 (a) hereof. (3) The Trustee may cancel or modify the amount of his Compensation Deferrals on a prospective basis by submitting to the Secretary of an Evergreen Fund a revised Compensation Deferral election form. Subject to the provisions of Section 4.2 hereof, such change will be effective as of the first day of the Deferral Year following the date such revision is submitted to the Secretary of the Evergreen Fund. 3.2 VALUATION OF DEFERRAL ACCOUNT. (1) An Evergreen Fund shall establish a bookkeeping Deferral Account to which will be credited an amount equal to the Trustee's Compensation Deferrals under this Plan. Compensation Deferrals shall be allocated to the Deferral Account on the day such Compensation Deferrals are withheld from the Trustee's Compensation and shall be deemed invested pursuant to Section 3.3, below, as of the same day. The Deferral Account shall be debited to reflect any distributions from such Account. Such debits shall be allocated to the Deferral Account as of the date such distributions are made. (2) As of each Valuation Date, income, gain and loss equivalents (determined as if the Deferral Account is invested in the manner set forth under Section 3.3, below) attributable to the period following the next preceding Valuation Date shall be credited to and/or deducted from the Trustee's Deferral Account. 3.3 INVESTMENT OF DEFERRAL ACCOUNT BALANCE. (1) The Trustee may select from various options made available by the Evergreen Funds the investment media in which all or part of his Deferral Account shall be deemed to be invested. (a) The Trustee shall make an investment designation on a form provided by the Secretary of the Evergreen Funds (Attachment A) which shall remain effective until another valid designation has been made by the Trustee as herein provided. The Trustee may amend his investment designation daily by giving instructions to the Secretary of the Evergreen Funds. (b) Any changes to the investment media to be made available to the Trustee, and any limitation on the maximum or minimum percentages of the Trustee's Deferral Account that may be invested in any particular medium, shall be communicated from time-to-time to the Trustee by the Secretary of the Evergreen Funds. (2) Except as provided below, the Trustee's Deferral Account shall be deemed to be invested in accordance with his investment designations, provided such designations conform to the provisions of this Section. If: (a) the Trustee does not furnish the Secretary of the Evergreen Funds with complete, written investment instructions, or Funds with (b) the written investment instructions from the Trustee are unclear, then the Trustee's election to make Compensation Deferrals hereunder shall be held in abeyance and have no force and effect, and he shall be deemed to have selected the Evergreen Money Market Fund until such time as the Trustee shall provide the Secretary of the Evergreen Funds with complete investment instructions. In the event that any Evergreen Fund under which any portion of the Trustee's Deferral Account is deemed to be invested ceases to exist, such portion of the Deferral Account thereafter shall be held in the successor to such Evergreen Fund, subject to subsequent deemed investment elections. The amount of the earnings credited to a Trustee's Deferral Account shall be determined by using the Evergreen Fund(s) selected by the Trustee to measure the hypothetical performance of the Trustee's Deferral Account. The value of a Deferral Account, as of any date, will be equal to the value such account would have had if the amount credited to it had been invested and reinvested in shares of the Evergreen Fund(s) designated by the Trustee ("Designated Shares"). Trustees may change the designation of the Evergreen Fund(s) in which their compensation deferrals are deemed to be invested daily by giving instructions to the Secretary of the Evergreen Funds. In such a case, the Designated Shares of one Evergreen Fund will be exchanged for Designated Shares of another Evergreen Fund based on the net asset value per share of the respective Evergreen Funds. Each Deferral Account will be credited or changed with book adjustments representing all interest, dividends and other earnings and all gains and losses that would have been realized had the amounts credited to such account actually been invested in the Designated Shares. A participating Evergreen Fund's obligation to make payments with respect to a Deferral Account is and will remain a general obligation of the Evergreen Fund to be made pro rata from the general assets and property of each Evergreen Fund portfolio. The Secretary of the Evergreen Funds shall provide an annual statement to the Trustee showing such information as is appropriate, including the aggregate amount in the Deferral Account, as of a reasonably current date. 4. . DISTRIBUTIONS FROM DEFERRAL ACCOUNT 4.1 IN GENERAL. Distributions from the Trustee's Deferral Account may be paid in a lump sum or in installments as elected by the Trustee commencing on or as soon as practicable after a date specified by the Trustee, which may not be sooner than the earlier of the first business day of January following (a) a date five years following the deferral election, or (b) the year in which the Trustee ceases to be a member of the Board of Trustees of the Evergreen Funds. Notwithstanding the foregoing, in the event of the liquidation, dissolution or winding up of an Evergreen Fund or the distribution of all or substantially all of an Evergreen Fund's assets and property relating to one or more series of its shares to the shareholders of such series (for this purpose a sale, conveyance or transfer of an Evergreen Fund's assets to a trust, partnership, association or corporation in exchange for cash, shares or other securities with the transfer being made subject to, or with the assumption by the transferee of, the liabilities of the Evergreen Fund shall not be deemed a termination of the Evergreen Fund or such a distribution), all unpaid amounts in the Deferral Account as of the effective date thereof shall be paid in a lump sum on such effective date. In addition, upon application by a Trustee and determination by the Chairman of the Board of Trustees of the Evergreen Funds that the Trustee has suffered a severe and unanticipated financial hardship, the Secretary shall distribute to the Trustee, in a single lump sum, an amount equal to the lesser of the amount needed by the Trustee to meet the hardship plus applicable income taxes payable upon such distribution, or the balance of the Trustee's Deferral Account. 4.2 DEATH PRIOR TO COMPLETE DISTRIBUTION OF DEFERRAL ACCOUNT. Upon the death of the Trustee (whether prior to or after the commencement of the distribution of the amounts credited to his Deferral Account), the balance of such Account shall be distributed to his Beneficiary in a lump sum as soon as practicable after the Trustee's death. 4.3 DESIGNATION OF BENEFICIARY. For purposes of Section 4.2 hereof, the Trustee's Beneficiary shall be the person or persons so designated by the Trustee in a written instrument submitted to the Secretary of the Evergreen Funds (Attachment B). In the event the Trustee fails to properly designate a Beneficiary, his Beneficiary shall be the person or persons in the first of the following classes of successive preference Beneficiaries surviving at the death of the Trustee: the Trustee's (1) surviving spouse, or (2) estate. 5. . AMENDMENT AND TERMINATION 5.1 The Board of Trustees may at any time in its sole discretion amend or terminate this Plan; provided, however, that no such amendment or termination shall adversely affect the right of Trustees to receive amounts previously credited to their Deferral Accounts. 6. . MISCELLANEOUS 6.1 RIGHTS OF CREDITORS. (1) This Plan is an unfunded and non-qualified deferred compensation arrangement. Neither the Trustee nor other persons shall have any interest in any specific asset or assets of an Evergreen Fund by reason of any Deferral Account hereunder, nor any rights to receive distribution of his Deferral Account except as and to the extent expressly provided hereunder. An Evergreen Fund shall not be required to purchase, hold or dispose of any investments pursuant to this Plan; however, if in order to cover its obligations hereunder the Evergreen Fund elects to purchase any investments the same shall continue for all purposes to be a part of the general assets and property of the Evergreen Fund, subject to the claims of its general creditors and no person other than the Evergreen Fund shall by virtue of the provisions of this Plan have any interest in such assets other than an interest as a general creditor. (2) The rights of the Trustee and the Beneficiaries to the amounts held in the Deferral Account are unsecured and shall be subject to the creditors of the Evergreen Funds. With respect to the payment of amounts held under the Deferral Account, the Trustee and his Beneficiaries have the status of unsecured creditors of the Evergreen Funds. This Plan is executed on behalf of the Evergreen Fund by an officer of an Evergreen Fund as such and not individually. Any obligation of an Evergreen Fund hereunder shall be an unsecured obligation of the Evergreen Fund and not of any other person. 6.2 AGENTS. The Evergreen Funds may employ agents and provide for such clerical, legal, actuarial, accounting, advisory or other services as they deem necessary to perform their duties under this Plan. The Evergreen Funds shall bear the cost of such services and all other expenses they incur in connection with the administration of this Plan. 6.3 INCAPACITY. If an Evergreen Fund shall receive evidence satisfactory to it that the Trustee or any Beneficiary entitled to receive any benefit under this Plan is, at the time when such benefit becomes payable, a minor, or is physically or mentally incompetent to give a valid release therefor, and that another person or an institution is then maintaining or has custody of the Trustee or Beneficiary and that no guardian, committee or other representative of the estate of the Trustee or Beneficiary shall have been duly appointed, the Evergreen Fund may make payment of such benefit otherwise payable to the Trustee or Beneficiary to such other person or institution, including a custodian under a Uniform Gifts to Minors Act, or corresponding legislation (who shall be a guardian of the minor or a trust company), and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit. 6.4 NO GUARANTEE OF TRUSTEESHIP. Nothing contained in this Plan shall be construed as a guaranty or right of any Trustee to be continued as a Trustee of one or more of the Evergreen Funds (or of a right of a Trustee to any specific level of Compensation) or as a limitation of the right of any of the Evergreen Funds, by shareholder action or otherwise, to remove any of its trustees. 6.5 COUNSEL. The Evergreen Funds may consult with legal counsel with respect to the meaning or construction of this Plan, their obligations or duties hereunder or with respect to any action or proceeding or any question of law, and they shall be fully protected with respect to any action taken or omitted by them in good faith pursuant to the advice of legal counsel. 6.6 SPENDTHRIFT PROVISION. The Trustees' and Beneficiaries' interests in the Deferral Account shall not be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charges and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void; nor shall any portion of any such right hereunder be in any manner payable to any assignee, receiver or trustee, or be liable for such person's debts, contracts, liabilities, engagements or torts, or be subject to any legal process to levy upon or attach. 6.7 NOTICES. For purposes of this Plan, notices and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered personally or mailed by United States registered or certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight delivery service, addressed to the Trustee at the home address set forth in the Evergreen Funds' records and to an Evergreen Fund at its principal place of business, provided that all notices to an Evergreen Fund shall be directed to the attention of the Secretary of the Evergreen Fund or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of charge of address shall be effective only upon receipt. 6.8 INTERPRETATION OF PLAN. Interpretation of, and determinations related to, this Plan made by the Evergreen Funds in good faith, including any determinations of the amounts of the Deferral Account, shall be conclusive; and an Evergreen Fund shall not incur any liability to the Trustee for any such interpretation or determination so made or for any other action taken by it in connection with this Plan in good faith. 6.9 SUCCESSORS AND ASSIGNS. This Plan shall be applicable to, and shall inure to the benefit of, the Evergreen Funds and their successors and assigns and to the Trustees and his heirs, executors, administrators and personal representatives. ATTACHMENT A DEFERRED COMPENSATION PLAN DEFERRAL ELECTION FORM TO: The Secretary of the Evergreen Funds FROM: DATE: With respect to the Deferred Compensation Plan I hereby make the following elections: DEFERRAL OF COMPENSATION Starting with Compensation to be paid to me with respect to services provided by me to The Evergreen Funds after the date this election form is provided to The Evergreen Funds, and for all periods thereafter (unless subsequently amended by way of a new election form), I hereby elect that ___ percent (___%) of my Compensation (as defined under the Plan) be deferred and that each Fund establish a bookkeeping account credited with amounts equal to the amount so deferred (the "Deferral Account"). The Deferral Account shall be further credited with income equivalents as provided under the Plan. Each Compensation Deferral (as defined in the Plan) shall be deemed invested as of the end of the calendar quarter during which such Compensation Deferral is withheld from my Compensation. I wish the Compensation Deferral to be invested in the Funds and percentages noted in Annex A to this Form. I understand that the amounts held in the Deferral Account shall remain the general assets of The Evergreen Funds and that, with respect to the payment of such amounts, I am merely a general creditor of The Evergreen Funds. I may not sell, encumber, pledge, assign or otherwise alienate the amounts held under the Deferral Account. DISTRIBUTIONS FROM DEFERRAL ACCOUNT I hereby elect that distributions from my Deferral Account be paid: _____ in a lump sum or _____ in quarterly installments for ____ years (specify a number of years not to exceed five); Commencing on the first business day of January following: _____ the year in which I cease to be a member of the Board of Trustees of the Funds, or _____ (a calendar year but not a year earlier than 2000). I hereby agree that the terms of the Plan are incorporated herein and are made a part hereof. Dated as of the day and year first above written. WITNESS: TRUSTEE: - ------------------------ ------------------------- RECEIVED: THE EVERGREEN FUNDS By:_____________________ Name: __________________ Title: ___________________ Date: ___________________ ANNEX A I desire that my deferred Compensation be invested as follows: [Names of Available Evergreen Funds, _____% as may be updated from time to time] ---------------------- 100% of Deferred Compensation amount ATTACHMENT B THE EVERGREEN FUNDS DEFERRED COMPENSATION PLAN DESIGNATION OF BENEFICIARY You may designate one or more beneficiaries to receive any amount remaining in your Deferral Account at your death. If your Designated Beneficiary survives you, but dies before receiving the full amount of the Deferral Account to which he or she is entitled, the remainder will be paid to the Designated Beneficiary's estate, unless you specifically elect otherwise in your Designation of Beneficiary form. You may indicate the names not only of one or more primary Designated Beneficiaries but also the names of secondary beneficiaries who would receive amounts in your Deferral Account in the event the primary beneficiary or beneficiaries are not alive at your death. In the case of each Designated Beneficiary, give his or her name, address, relationship to you, and the percentage of your Deferral Account he or she is to receive. You may change your Designated Beneficiaries at any time, without their consent, by filing a new Designation of Beneficiary form with the Secretary of the Funds. * * * * * * * * * * * * * As a participant in the Evergreen Funds' Deferred Compensation Plan (the "Plan"), I hereby designate the person or persons listed below to receive any amount remaining in my Deferral Account in the event of my death. This designation of beneficiary shall become effective upon its delivery to the Secretary of the Funds prior to my death, and revokes any designation(s) of beneficiary previously made by me. I reserve the right to revoke this designation of beneficiary at any time without notice to any beneficiary. I hereby name the following as primary Designated Beneficiaries under the Plan: Name Relationship Percentage Address - ---------------------- ---------- ---------% --------------------------- Name Relationship Percentage Address - ---------------------- ---------- ---------% --------------------------- Name Relationship Percentage Address - ---------------------- ---------- ---------% --------------------------- Name Relationship Percentage Address - ---------------------- ----------- ---------% --------------------------- In the event that one or more of my primary Designated Beneficiaries predeceases me, his or her share shall be allocated among the surviving primary Designated Beneficiaries. I name the following as secondary Designated Beneficiaries under the Plan, in the event that no primary Designated Beneficiary survives me: Name Relationship Percentage Address - ----------------------- ---------- ---------% ------- Name Relationship Percentage Address - ----------------------- ---------- ---------% ------- Name Relationship Percentage Address - ----------------------- ---------- ---------% ------- Name Relationship Percentage Address - --------------------------- ---------- ---------% --------- In the event that no primary Designated Beneficiary survives me and one or more of the secondary Designated Beneficiaries predeceases me, his or her share shall be allocated among the surviving secondary Designated Beneficiaries. - ---------------- -------------------------- (Witness) (Signature of Trustee) Date: Date: EX-99.(G) 6 0006.txt CUSTODY AGREEMENT CUSTODIAN AGREEMENT This Agreement between MENTOR FUNDS , a business trust organized and existing under the laws of The Commonwealth of Massachusetts with its principal place of business at 200 Berkeley Street, Boston, Massachusetts 02116-5034 (the "Fund"), and STATE STREET BANK and TRUST COMPANY, a Massachusetts trust company with its principal place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Custodian"), WITNESSETH: WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund intends that this Agreement be applicable to the series set forth Evergreen Reserve Money Market Fund, Evergreen Reserve Tax-Exempt Money Market Fund, Evergreen Reserve U.S. Government Money Market Fund (such series together with all other series subsequently established by the Fund and made subject to this Agreement in accordance with Section 18, be referred to herein as the "Portfolio(s)"); NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows: SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT The Fund hereby employs the Custodian as the custodian of the assets of the Portfolios of the Fund, including securities which the Fund, on behalf of the applicable Portfolio desires to be held in places within the United States ("domestic securities") and securities it desires to be held outside the United States ("foreign securities") pursuant to the provisions of the Fund's Declaration of Trust. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian all securities and cash of the Portfolios, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time to time, and the cash consideration received by it for such new or treasury shares of beneficial interest of the Fund representing interests in the Portfolios ("Shares") as may be issued or sold from time to time. The Custodian shall not be responsible for any property of a Portfolio held or received by the Portfolio and not delivered to the Custodian. Upon receipt of "Proper Instructions" (as such term is defined in Section 6 hereof), the Custodian shall on behalf of the applicable Portfolio(s) from time to time employ one or more sub-custodians located in the United States, but only in accordance with an applicable vote by the Board of Trustees of the Fund (the "Board of Trustees") on behalf of the applicable Portfolio(s), and provided that the Custodian shall have no more or less responsibility or liability to the Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian may employ as sub-custodian for the Fund's foreign securities on behalf of the applicable Portfolio(s) the foreign banking institutions and foreign securities depositories designated in Schedules A and B hereto but only in accordance with the applicable provisions of Sections 3 and 4. SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE CUSTODIAN IN THE UNITED STATES SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for the account of each Portfolio all non-cash property, to be held by it in the United States including all domestic securities owned by such Portfolio, other than (a) securities which are maintained pursuant to Section 2.8 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury (each, a "U.S. Securities System") and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which is deposited and/or maintained in the Direct Paper System of the Custodian (the "Direct Paper System") pursuant to Section 2.9. SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian or in a U.S. Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities for the account of the Portfolio and receipt of payment therefor; 2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio; 3) In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.8 hereof; 4) To the depository agent in connection with tender or other similar offers for securities of the Portfolio; 5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.7 or into the name or nominee name of any sub-custodian appointed pursuant to Section 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian; 7) Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct; 8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 10) For delivery in connection with any loans of securities made by the Portfolio, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund on behalf of the Portfolio, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral; 11) For delivery as security in connection with any borrowing by the Fund on behalf of the Portfolio requiring a pledge of assets by the Fund on behalf of the Portfolio, but only against receipt of amounts borrowed; 12) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio of the Fund; 13) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Portfolio of the Fund; 14) Upon receipt of instructions from the transfer agent for the Fund (the "Transfer Agent") for delivery to such Transfer Agent or to the holders of Shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund related to the Portfolio (the "Prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption; and 15) For any other proper trust purpose, but only upon receipt of, in addition to Proper Instructions from the Fund on behalf of the applicable Portfolio, a copy of a resolution of the Board of Trustees or of the Executive Committee thereof signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary thereof (a "Certified Resolution"), specifying the securities of the Portfolio to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper trust purpose, and naming the person or persons to whom delivery of such securities shall be made. SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio or of any nominee of the Custodian which nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.7 or in the name or nominee name of any sub-custodian appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Agreement shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers. SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940, as amended (the "1940 Act"). Funds held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board of Trustees. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity. SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to such Portfolio's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled. SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only: 1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Portfolio but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.8 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.9; (d) in the case of repurchase agreements entered into between the Fund on behalf of the Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined herein; 2) In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof; 3) For the redemption or repurchase of Shares issued as set forth in Section 5 hereof; 4) For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 5) For the payment of any dividends on Shares declared pursuant to the governing documents of the Fund; 6) For payment of the amount of dividends received in respect of securities sold short; 7) For any other proper trust purpose, but only upon receipt of, in addition to Proper Instructions from the Fund on behalf of the Portfolio, a copy of a Certified Resolution specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper trust purpose, and naming the person or persons to whom such payment is to be made. SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the 1940 Act to act as a custodian, as its agent to carry out such of the provisions of this Section 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may deposit and/or maintain securities owned by a Portfolio in a clearing agency registered with the United States Securities and Exchange Commission (the "SEC") under Section 17A of the Exchange Act , which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "U.S. Securities System" in accordance with applicable Federal Reserve Board and SEC rules and regulations, if any, and subject to the following provisions: 1) The Custodian may keep securities of the Portfolio in a U.S. Securities System provided that such securities are represented in an account of the Custodian in the U.S. Securities System (the "U.S. Securities System Account") which account shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Custodian with respect to securities of the Portfolio which are maintained in a U.S. Securities System shall identify by book-entry those securities belonging to the Portfolio; 3) The Custodian shall pay for securities purchased for the account of the Portfolio upon (i) receipt of advice from the U.S. Securities System that such securities have been transferred to the U.S. Securities System Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Portfolio. The Custodian shall transfer securities sold for the account of the Portfolio upon (i) receipt of advice from the U.S. Securities System that payment for such securities has been transferred to the U.S. Securities System Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Portfolio. Copies of all advices from the U.S. Securities System of transfers of securities for the account of the Portfolio shall identify the Portfolio, be maintained for the Portfolio by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund on behalf of the Portfolio confirmation of each transfer to or from the account of the Portfolio in the form of a written advice or notice and shall furnish to the Fund on behalf of the Portfolio copies of daily transaction sheets reflecting each day's transactions in the U.S. Securities System for the account of the Portfolio; 4) The Custodian shall provide the Fund with any report obtained by the Custodian on the U.S. Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the U.S. Securities System; 5) The Custodian shall have received from the Fund on behalf of the Portfolio the initial or annual certificate, as the case may be, required by Section 15 hereof; 6) Anything to the contrary in this Agreement notwithstanding, the Custodian shall be liable to the Fund for the benefit of the Portfolio for any loss or damage to the Portfolio resulting from use of the U.S. Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the U.S. Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the U.S. Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Portfolio has not been made whole for any such loss or damage. SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may deposit and/or maintain securities owned by a Portfolio in the Direct Paper System of the Custodian subject to the following provisions: 1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions from the Fund on behalf of the Portfolio; 2) The Custodian may keep securities of the Portfolio in the Direct Paper System only if such securities are represented in the Direct Paper System Account, which account shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 3) The records of the Custodian with respect to securities of the Portfolio which are maintained in the Direct Paper System shall identify by book-entry those securities belonging to the Portfolio; 4) The Custodian shall pay for securities purchased for the account of the Portfolio upon the making of an entry on the records of the Custodian to reflect such payment and transfer of securities to the account of the Portfolio. The Custodian shall transfer securities sold for the account of the Portfolio upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Portfolio; 5) The Custodian shall furnish the Fund on behalf of the Portfolio confirmation of each transfer to or from the account of the Portfolio, in the form of a written advice or notice, of Direct Paper on the next business day following such transfer and shall furnish to the Fund on behalf of the Portfolio copies of daily transaction sheets reflecting each day's transaction in the Direct Paper System for the account of the Portfolio; 6) The Custodian shall provide the Fund on behalf of the Portfolio with any report on its system of internal accounting control as the Fund may reasonably request from time to time. SECTION 2.10 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper Instructions on behalf of each applicable Portfolio establish and maintain a segregated account or accounts for and on behalf of each such Portfolio, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Portfolio or commodity futures contracts or options thereon purchased or sold by the Portfolio, (iii) for the purposes of compliance by the Portfolio with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the SEC relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper trust purposes, but only, in the case of clause (iv), upon receipt of, in addition to Proper Instructions from the Fund on behalf of the applicable Portfolio, a copy of a Certified Resolution setting forth the purpose or purposes of such segregated account and declaring such purpose(s) to be a proper trust purpose. SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of each Portfolio held by it and in connection with transfers of securities. SECTION 2.12 PROXIES. The Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Portfolio or a nominee of the Portfolio, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Portfolio such proxies, all proxy soliciting materials and all notices relating to such securities. SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund for each Portfolio all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund on behalf of the Portfolio and the maturity of futures contracts purchased or sold by the Portfolio) received by the Custodian from issuers of the securities being held for the Portfolio. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Portfolio all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Portfolio desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Portfolio shall notify the Custodian at least three business days prior to the date on which the Custodian is to take such action. SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS SECTION 3.1. DEFINITIONS. The following capitalized terms shall have the indicated meanings: "Country Risk" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment; economic and financial infrastructure (including financial institutions such as any Mandatory Securities Depositories operating in the country); prevailing or developing custody and settlement practices; and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country. "Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act, except that the term does not include Mandatory Securities Depositories. "Foreign Assets" means any of the Portfolios' investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios' transactions in such investments. "Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule 17f-5. "Mandatory Securities Depository" means a foreign securities depository or clearing agency that, either as a legal or practical matter, must be used if the Fund, on the Portfolios' behalf, determines to place Foreign Assets in a country outside the United States (i) because required by law or regulation; (ii) because securities cannot be withdrawn from such foreign securities depository or clearing agency; or (iii) because maintaining or effecting trades in securities outside the foreign securities depository or clearing agency is not consistent with prevailing or developing custodial or market practices. SECTION 3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Fund, by resolution adopted by the Board of Trustees, hereby delegates to the Custodian with respect to the Portfolios, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3 with respect to Foreign Assets of the Portfolios held outside the United States, and the Custodian hereby accepts such delegation, as Foreign Custody Manager with respect to the Portfolios. SECTION 3.3. COUNTRIES COVERED. The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A of this Contract, which may be amended from time to time by the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the assets of the Portfolios. Mandatory Securities Depositories are listed on Schedule B to this Contract, which may be amended from time to time by the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedules A and B in accordance with Section 3.7 hereof. Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by the Fund on behalf of the Portfolios of the applicable account opening requirements for the country, the Foreign Custody Manager shall be deemed to have been delegated by the Board of Trustees on behalf of the Portfolios responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board of Trustees on behalf of the Portfolios to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager of the Portfolios with respect to that country. The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Thirty days (or such longer period as to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian's acceptance of delegation is withdrawn. SECTION 3.4. SCOPE OF DELEGATED RESPONSIBILITIES. 3.4.1. Selection of Eligible Foreign Custodians. Subject to the provisions of this Section 3, the Portfolios' Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation: (i) the Eligible Foreign Custodian's practices, procedures, and internal controls, including, but not limited to, the physical protections available for certificated securities (if applicable), its methods of keeping custodial records, and its security and data protection practices; (ii) whether the Eligible Foreign Custodian has the financial strength to provide reasonable care for Foreign Assets; (iii) the Eligible Foreign Custodian's general reputation and standing and, in the case of a foreign securities depository or clearing agency which is not a Mandatory Securities Depository, the foreign securities depository's or clearing agency's operating history and the number of participants in the foreign securities depository or clearing agency; and (iv) whether the Fund will have jurisdiction over and be able to enforce judgments against the Eligible Foreign Custodian, such as by virtue of the existence of any offices of the Eligible Foreign Custodian in the United States or the Eligible Foreign Custodian's consent to service of process in the United States. 3.4.2. Contracts With Eligible Foreign Custodians. The Foreign Custody Manager shall determine that the contract (or the rules or established practices or procedures in the case of an Eligible Foreign Custodian that is a foreign securities depository or clearing agency) governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will provide reasonable care for the Foreign Assets held by that Eligible Foreign Custodian based on the standards applicable to custodians in the particular country. Each such contract shall include provisions that provide: (i) for indemnification or insurance arrangements (or any combination of the foregoing) such that each Portfolio will be adequately protected against the risk of loss of the Foreign Assets held in accordance with such contract; (ii) that the Foreign Assets will not be subject to any right, security interest, or lien or claim of any kind in favor of the Eligible Foreign Custodian or its creditors except a claim of payment for their safe custody or administration or, in the case of cash deposits, liens or rights in favor of creditors of the Eligible Foreign Custodian arising under bankruptcy, insolvency, or similar laws; (iii) that beneficial ownership of the Foreign Assets will be freely transferable without the payment of money or value other than for safe custody or administration; (iv) that adequate records will be maintained identifying the Foreign Assets as belonging to the applicable Portfolio or as being held by a third party for the benefit of such Portfolio; (v) that the independent public accountants for each Portfolio will be given access to those records or confirmation of the contents of those records; and (vi) that the Fund will receive periodic reports with respect to the safekeeping of the Foreign Assets, including, but not limited to, notification of any transfer of the Foreign Assets to or from a Portfolio's account or a third party account containing the Foreign Assets held for the benefit of the Portfolio, or, in lieu of any or all of the provisions set forth in (i) through (vi) above, such other provisions that the Foreign Custody Manager determines will provide, in their entirety, the same or greater level of care and protection for the Foreign Assets as the provisions set forth in (i) through (vi) above, in their entirety. 3.4.3. Monitoring. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board of Trustees in accordance with Section 3.7 hereunder. SECTION 3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes of this Section 3, the Board of Trustees shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Portfolios. The Fund, on behalf of the Portfolios, and the Custodian each expressly acknowledge that the Foreign Custody Manager shall not be delegated any responsibilities under this Section 3 with respect to Mandatory Securities Depositories. SECTION 3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise. SECTION 3.7. REPORTING REQUIREMENTS. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board of Trustees amended Schedules A or B at the end of the calendar quarter in which an amendment to either Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of Trustees of any other material change in the foreign custody arrangements of the Portfolios described in this Article 3 after the occurrence of the material change. SECTION 3.8. REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the Board of Trustees has determined that it is reasonable for the Board of Trustees to rely on the Custodian to perform the responsibilities delegated pursuant to this Agreement to the Custodian as the Foreign Custody Manager of the Portfolios. SECTION 3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Board of Trustees' delegation to the Custodian as Foreign Custody Manager of the Portfolios shall be effective as of the date of execution of this Agreement and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisions of Section 3.3 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Portfolios with respect to designated countries. SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS HELD OUTSIDE OF THE UNITED STATES SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall ----------- have the following meanings: "Foreign Securities System" means either a clearing agency or a securities depository listed on Schedule A hereto or a Mandatory Securities Depository listed on Schedule B hereto. "Foreign Sub-Custodian" means a foreign banking institution serving as an Eligible Foreign Custodian. SECTION 4.2. HOLDING SECURITIES. The Custodian shall identify on its books as belonging to the Portfolios the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the Portfolios which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii) the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian. SECTION 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign Securities System in a designated country only through arrangements implemented by the Foreign Sub-Custodian in such country pursuant to the terms of this Agreement. SECTION 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. 4.4.1. Delivery of Foreign Securities. The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Portfolios held by such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: (i) upon the sale of such foreign securities for the Portfolios in accordance with reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System in accordance with the rules governing the operation of the Foreign Securities System; (ii) in connection with any repurchase agreement related to foreign securities; (iii) to the depository agent in connection with tender or other similar offers for foreign securities of the Portfolios; (iv) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable; (v) to the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; (vi) to brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Foreign Sub-Custodian's own negligence or willful misconduct; (vii) for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; (viii) in the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; (ix) or delivery as security in connection with any borrowing by the Portfolios requiring a pledge of assets by the Portfolios; (x) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (xi) in connection with the lending of foreign securities; and (xii) for any other proper trust purpose, but only upon receipt of, in addition to Proper Instructions, a copy of a Certified Resolution specifying the foreign securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper trust purpose, and naming the person or persons to whom delivery of such securities shall be made. 4.4.2. Payment of Portfolio Monies. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in the following cases only: (i) upon the purchase of foreign securities for the Portfolio, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System; (ii) in connection with the conversion, exchange or surrender of foreign securities of the Portfolio; (iii) for the payment of any expense or liability of the Portfolio, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Agreement, legal fees, accounting fees, and other operating expenses; (iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through the Custodian or its Foreign Sub-Custodians; (v) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (vii) in connection with the borrowing or lending of foreign securities; and (viii) for any other proper trust purpose, but only upon receipt of, in addition to Proper Instructions, a copy of a Certified Resolution specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper trust purpose, and naming the person or persons to whom such payment is to be made. 4.4.3. Market Conditions. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for Foreign Assets received for the account of the Portfolios and delivery of Foreign Assets maintained for the account of the Portfolios may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer. SECTION 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the custody of a Foreign Custodian (other than bearer securities) shall be registered in the name of the applicable Portfolio or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the Fund on behalf of such Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms of this Agreement unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice. SECTION 4.6. BANK ACCOUNTS. A bank account or bank accounts opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian shall be subject only to draft or order by the Custodian or such Foreign Sub-Custodian, acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Portfolio. SECTION 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable endeavors to collect all income and other payments in due course with respect to the Foreign Assets held hereunder to which the Portfolios shall be entitled and shall credit such income, as collected, to the applicable Portfolio. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures. SECTION 4.8. PROXIES. The Custodian will generally with respect to the foreign securities held under this Section 4 use its reasonable endeavors to facilitate the exercise of voting and other shareholder proxy rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. The Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights. SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit promptly to the Fund written information (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith) received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund written information so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Portfolios at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three (3) business days prior to the date on which such right or power is to be exercised. SECTION 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS. Each agreement pursuant to which the Custodian employs as a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties and, to the extent possible, to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian's performance of such obligations. At the Fund's election, the Portfolios shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim. SECTION 4.11. TAX LAW. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund, the Portfolios or the Custodian as custodian of the Portfolios by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of the Fund to notify the Custodian of the obligations imposed on the Fund with respect to the Portfolios or the Custodian as custodian of the Portfolios by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which the Fund has provided such information. SECTION 4.12. CONFLICT. If the Custodian is delegated the responsibilities of Foreign Custody Manager pursuant to the terms of Section 3 hereof, in the event of any conflict between the provisions of Sections 3 and 4 hereof, the provisions of Section 3 shall prevail. SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES The Custodian shall receive from the distributor for the Shares or from the Transfer Agent and deposit into the account of the appropriate Portfolio such payments as are received for Shares thereof issued or sold from time to time by the Fund. The Custodian will provide timely notification to the Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio. From such funds as may be available for the purpose but subject to the limitations of the Fund's Declaration of Trust and any applicable votes of the Board of Trustees pursuant thereto, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between the Fund and the Custodian. SECTION 6. PROPER INSTRUCTIONS Proper Instructions as used throughout this Agreement means a writing signed or initialed by one or more person or persons as the Board of Trustees shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. Upon receipt of a certificate of the Secretary or an Assistant Secretary as to the authorization by the Board of Trustees accompanied by a detailed description of procedures approved by the Board of Trustees, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Board of Trustees and the Custodian are satisfied that such procedures afford adequate safeguards for the Portfolios' assets. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three - party agreement which requires a segregated asset account in accordance with Section 2.10. SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY The Custodian may in its discretion, without express authority from the Fund on behalf of each applicable Portfolio: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement, provided that all such payments shall be accounted for to the Fund on behalf of the Portfolio; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Portfolio except as otherwise directed by the Board of Trustees. SECTION 8. EVIDENCE OF AUTHORITY The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a Certified Resolution as conclusive evidence (a) of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the Board of Trustees pursuant to the Fund's Declaration of Trust as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary. SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF NET ASSET VALUE AND NET INCOME The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Trustees to keep the books of account of each Portfolio and/or compute the net asset value per Share of the outstanding Shares or, if directed in writing to do so by the Fund on behalf of the Portfolio, shall itself keep such books of account and/or compute such net asset value per Share. If so directed, the Custodian shall also calculate daily the net income of the Portfolio as described in the Prospectus and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per Share and the daily income of each Portfolio shall be made at the time or times described from time to time in the Prospectus. SECTION 10. RECORDS The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of the Fund under the 1940 Act, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the SEC. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT The Custodian shall take all reasonable action, as the Fund on behalf of each applicable Portfolio may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to the SEC and with respect to any other requirements thereof. SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS The Custodian shall provide the Fund, on behalf of each of the Portfolios at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a U.S. Securities System or a Foreign Securities System (collectively referred to herein as the "Securities Systems"), relating to the services provided by the Custodian under this Agreement; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. SECTION 13. COMPENSATION OF CUSTODIAN The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund on behalf of each applicable Portfolio and the Custodian. SECTION 14. RESPONSIBILITY OF CUSTODIAN So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be without liability to the Fund and the Portfolios for any loss, liability, claim or expense resulting from or caused by anything which is (A) part of Country Risk (as defined in Section 3 hereof), including without limitation nationalization, expropriation, currency restrictions, or acts of war, revolution, riots or terrorism, or (B) part of the "prevailing country risk" of the Portfolios, as such term is used in SEC Release Nos. IC-22658; IS-1080 (May 12, 1997) or as such term or other similar terms are now or in the future interpreted by the SEC or by the staff of the Division of Investment Management thereof. Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a sub-custodian or agent, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, work stoppages, natural disasters, or other similar events or acts; (ii) errors by the Fund or the Investment Advisor in their instructions to the Custodian provided such instructions have been in accordance with this Agreement; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodian's sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (v) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vi) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (vii) changes to any existing, or any provision of any future, law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth with respect to sub-custodians generally in this Agreement. If the Fund on behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the payment of money or incurring liability of some other form, the Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Portfolio's assets to the extent necessary to obtain reimbursement. In no event shall the Custodian be liable for indirect, special or consequential damages. SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than sixty (60) days after the date of such delivery or mailing; provided, however that the Custodian shall not with respect to a Portfolio act under Section 2.8 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Trustees has approved the initial use of a particular Securities System by such Portfolio, as required by Rule 17f-4 under the 1940 Act and that the Custodian shall not with respect to a Portfolio act under Section 2.9 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Trustees has approved the initial use of the Direct Paper System by such Portfolio; provided further, however, that the Fund shall not amend or terminate this Agreement in contravention of any applicable federal or state regulations, or any provision of the Fund's Declaration of Trust, and further provided, that the Fund on behalf of one or more of the Portfolios may at any time by action of its Board of Trustees (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Agreement, the Fund on behalf of each applicable Portfolio shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements. SECTION 16. SUCCESSOR CUSTODIAN If a successor custodian for one or more Portfolios shall be appointed by the Board of Trustees, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a Certified Resolution, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such resolution. In the event that no written order designating a successor custodian or Certified Resolution shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Agreement on behalf of each applicable Portfolio, and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement. In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the Certified Resolution to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect. SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS In connection with the operation of this Agreement, the Custodian and the Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Fund's Declaration of Trust. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement. SECTION 18. ADDITIONAL FUNDS In the event that the Fund establishes one or more series of Shares in addition to those set forth on Schedule C with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder. SECTION 19. MASSACHUSETTS LAW TO APPLY This Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts. SECTION 20. PRIOR AGREEMENTS This Agreement supersedes and terminates, as of the date hereof, all prior Agreements between the Fund on behalf of each of the Portfolios and the Custodian relating to the custody of the Fund's assets. SECTION 21. NOTICES. Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time. To the Fund: MENTOR FUNDS c/o First Union Corporation - Legal Division 200 Berkeley Street Boston, Massachusetts 02116-5034 Attention: Sally E. Ganem, Esq. Telephone: 617-210-3691 Telecopy: 617-210-3468 To the Custodian: STATE STREET BANK AND TRUST COMPANY Lafayette Corporate Center, LCC/3SW 2 Avenue de Lafayette Boston, MA 02111 Attention: William E. Monaghan, II, Vice President Telephone: 617-662-2401 Telecopy: 617-662-2198 Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence and in the case of cable, telex or telecopy on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting. SECTION 22. REPRODUCTION OF DOCUMENTS This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. SECTION 23. SHAREHOLDER COMMUNICATIONS ELECTION SEC Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Fund to indicate whether it authorizes the Custodian to provide the Fund's name, address, and share position to requesting companies whose securities the Fund owns. If the Fund tells the Custodian "no", the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For the Fund's protection, the Rule prohibits the requesting company from using the Fund's name and address for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below. YES [ ] The Custodian is authorized to release the Fund's name, address, and share positions. NO [ ] The Custodian is not authorized to release the Fund's name, address, and share positions. SECTION 24. DATA ACCESS SERVICES ADDENDUM The Custodian and the Fund agree to be bound by the terms of the Data Access Services Addendum attached hereto. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of June 14, 1999. EVERGREEN MUNICIPAL TRUST FUND SIGNATURE ATTESTED TO BY: By: /s/ Terry L. Perkins By: /s/ Sally E. Ganem --------------------------- --------------------------- Name: Terry L. Perkins Name: Sally E. Ganem Title: Treasurer Title: Vice President STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY: By: /s/ Ronald E. Logue By: /s/ Stephanie L. Poster --------------------------- --------------------------- Name: Ronald E. Logue Name: Stephanie L. Poster Title: Executive Vice President Title: Vice President SCHEDULE A STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES Non-Mandatory Country Subcustodian Depositories - --------- ------------ ------------- Argentina Citibank, N.A. -- Australia Westpac Banking Corporation -- Austria Erste Bank der oesterreichischen -- Sparkasen AG Bahrain The British Bank of the Middle East -- (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Bangladesh Standard Chartered Bank -- Belgium Generale de Banque -- Bermuda The Bank of Bermuda Limited -- Bolivia Banco Boliviano Americano S.A. -- Botswana Barclays Bank of Botswana Limited -- Brazil Citibank, N.A. -- Bulgaria ING Bank N.V. -- Canada State Street Trust Company Canada -- Chile Citibank, N.A. Deposito Central de Valores S.A. People's Republic The Hongkong and Shanghai -- of China Banking Corporation Limited, Shanghai and Shenzhen branches Colombia Cititrust Colombia S.A. -- Sociedad Fiduciaria Costa Rica Banco BCT S.A. -- Croatia Privredana Banka Zagreb d.d -- Cyprus The Cyprus Popular Bank Ltd. -- Czech Republic Ceskoslovenska Obchodni -- Banka, A.S. Denmark Den Danske Bank -- Ecuador Citibank, N.A. -- Egypt National Bank of Egypt -- Estonia Hansabank -- Finland Merita Bank Ltd. -- France Banque Paribas -- Germany Dresdner Bank AG -- Ghana Barclays Bank of Ghana Limited -- Greece National Bank of Greece S.A The Bank of Greece, System for Monitoring Transactions in Securities in Book-Entry Form Hong Kong Standard Chartered Bank -- Hungary Citibank Budapest Rt. -- Iceland Iceland Limited -- India Deutsche Bank AG; -- The Hongkong and Shanghai Banking Corporation Limited Indonesia Standard Chartered Bank -- Ireland Bank of Ireland -- Israel Bank Hapoalim B.M. -- Italy Banque Paribas -- Ivory Coast Societe Generale de Banques -- en Cote d'Ivoire Jamaica Scotiabank Jamaica Trust and Merchant -- Bank, Ltd. Japan The Daiwa Bank, Limited; Japan Securities Sumitomo Bank, Limited Depository Center Jordan The British Bank of the Middle East -- (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Kenya Barclays Bank of Kenya Limited -- Republic of Korea The Hongkong and Shanghai Banking -- Corporation Limited Latvia JSC Hansabank - Latvija -- Lebanon British Bank of the Middle East -- (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Lithuania Vilniaus Bankas AB -- Malaysia Standard Chartered Bank -- Malaysia Berhad Mauritius The Hongkong and Shanghai -- Banking Corporation Limited Mexico Citibank Mexico, S.A. -- Morocco Banque Commerciale du Maroc -- Namibia (via) Standard Bank of South Africa - The Netherlands MeesPierson N.V. -- New Zealand ANZ Banking Group -- (New Zealand) Limited Norway Christiania Bank og -- Kreditkasse Oman The British Bank of the Middle East -- (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Pakistan Deutsche Bank AG -- Peru Citibank, N.A. -- Philippines Standard Chartered Bank -- Poland Citibank Poland S.A. -- Bank Polska Kasa Opieki S.A. -- Portugal Banco Comercial Portugues -- Romania ING Bank, N.V. -- Russia Credit Suisse First Boston AOW, Moscow -- (as delegate of Credit Suisse First Boston, Zurich) Singapore The Development Bank -- of Singapore Limited Slovak Republic Ceskoslovenska Obchodna -- Banka A.S. Slovenia Bank Austria d.d. Ljubljana -- South Africa Standard Bank of South Africa Limited -- Spain Banco Santander, S.A. -- Sri Lanka The Hongkong and Shanghai -- Banking Corporation Limited Swaziland Standard Bank Swaziland Limited -- Sweden Skandinaviska Enskilda Banken -- Switzerland UBS AG -- Taiwan - R.O.C. Central Trust of China -- Thailand Standard Chartered Bank -- Trinidad & Tobago Republic Bank Ltd. -- Tunisia Banque Internationale Arabe de Tunisie -- Turkey Citibank, N.A. -- Ottoman Bank Ukraine Ukraine ING Bank, Ukraine -- United Kingdom State Street Bank and Trust Company, -- London Branch Uruguay Citibank, N.A. -- Venezuela Citibank, N.A. -- Zambia Barclays Bank of Zambia Limited -- Zimbabwe Barclays Bank of Zimbabwe Limited -- Euroclear (The Euroclear System)/State Street London Limited Cedel SA (Cedel Bank, societe anonyme)/State Street London Limited INTERSETTLE (for EASDAQ Securities) SCHEDULE B STATE STREET GLOBAL CUSTODY NETWORK MANDATORY* DEPOSITORIES Country Mandatory Depositories - ---------- ------------------------------------------ Argentina -Caja de Valores S.A. Australia -Austraclear Limited; -Reserve Bank Information and Transfer System Austria -Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division) Belgium -Caisse Interprofessionnelle de Depots et de Virements de Titres S.A.; -Banque Nationale de Belgique Brazil -Compsnhis Brasileira de Liquidacaoe Custodia (CBLC) -Bolsa de Valores de Rio de Janeiro All SSB clients presently use CBLC -Central de Custodia e de Liquidacao Financeira de Titulos Bulgaria -Central Depository AD -Bulgarian National Bank Canada -The Canadian Depository for Securities Limited People's Republic -Shanghai Securities Central Clearing and of China Registration Corporation; -Shenzhen Securities Central Clearing Co., Ltd. Costa Rica -Central de Valores S.A. (CEVAL) Croatia -Ministry of Finance -National Bank of Croatia Czech Republic -Stredisko cennych papiru; -Czech National Bank Denmark -Vaerdipapircentralen - The Danish Securities Center Egypt -Misr Company for Clearing, Settlement, and Central Depository Estonia -Eesti Vaartpaberite Keskdepositooruim Finland -The Finnish Central Securities Depository France -Societe Interprofessionnelle pour la Compensation des Valeurs Mobilieres (SICOVAM) Germany -Deutsche Burse Clearing AG Greece -The Central Securities Depository (Apothetirion Titlon A.E.); Hong Kong -The Central Clearing and Settlement System; -The Central Money Markets Unit Hungary -The Central Depository and Clearing House (Budapest) Ltd. [Mandatory for Gov't Bonds only; SSB does not use for other securities] India -The National Securities Depository Limited Indonesia -Bank of Indonesia Ireland -Central Bank of Ireland, Securities Settle Office Israel -Tel Aviv Stock Exchange Clearing House -Bank of Israel Italy -Monte Titoli S.p.A.; -Banca d'Italia Ivory Coast -Depositaire Central-Banque de Reglement Jamaica -The Jamacian Central Securities Depository Japan -Bank of Japan Net System Kenya -Central Bank of Kenya Republic of Korea -Korea Securities Depository Corporation Latvia -The Latvian Central Depository Lebanon -The Custodian and Clearing Center of Financial Instruments for Lebannon and the Middle East (MIDCLEAR) S.A.I. -The Central Bank of Lebanon Lithuania -The Central Securities Depository of Lithuania Malaysia -Malaysian Central Depository Sdn. Bhd.; -Bank Negara Malaysia, Scripless Securities Trading and Safekeeping Systems Mauritius -The Central Depository & Settlement Co. Ltd. Mexico -S.D. INDEVAL, S.A. de C.V. (Instituto para el Deposito de Valores) Morocco -Maroclear The Netherlands -Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (NECIGEF) -De Nederlandsche Bank N.V. New Zealand -New Zealand Central Securities Depository Limited Norway -Verdipapirsentralen - (The Norwegian Registry of Securities) Oman -Muscat Securities Market Pakistan -Central Depository Company of Pakistan Limited Peru -Caja de Valores y Liquidaciones S.A. (CAVALI) Philippines -The Philippines Central Depository Inc. -The Registry of Scripless Securities (ROSS) of the Bureau of the Treasury Poland -The National Depository of Securities (Krajowy Depozyt Papierow Wartos'ciowych); -Central Treasury Bills Registrar Portugal -Central de Valores Mobiliarios (Central) Romania -National Securities Clearing, Settlement and Depository Co.; -Bucharest Stock Exchange Registry Division Singapore -The Central Depository (Pte.) Limited; -Monetary Authority of Singapore Slovak Republic -Stredisko Cennych Papierov; -National Bank of Slovakia Slovenia -Klirinsko Depotna Druzba d.d. South Africa -The Central Depository Limited Spain -Servicio de Compensacion y Liquidacion de Valores, S.A.; -Banco de Espana, Anotaciones en Cuenta Sri Lanka -Central Depository System (Pvt) Limited Sweden -Vardepapperscentralen AB - (The Swedish Central Securities Depository) Switzerland -Schweizerische Effekten - Giro AG; Taiwan - R.O.C. -The Taiwan Securities Central Depository Company, Ltd. Thailand -Thailand Securities Depository Company Limited Tunisia -Societe Tunisienne Interprofessionelle de Compensation et de Depot de Valeurs Mobilieres -Central Bank of Tunisia; -Tunisian Treasury Turkey -Takas ve Saklama Bankasi A.S.(TAKASBANK) -Central Bank of Turkey Ukraine -The National Bank of Ukraine United Kingdom -The Bank of England, The Central Gilts Office and The Central Moneymarkets Office Uruguay -Central Bank of Uruguay Venezuela -Central Bank of Venezuela Zambia -Lusaka Central Depository -Bank of Zambia * Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. SCHEDULE C MARKET INFORMATION
Publication/Type of Information Brief Description - ------------------------------------- ------------------- (Frequency) The Guide to Custody in World Markets An overview of saftekeeping and settlement - ------------------------------------- practices and procedures in each market in which (annually) State Street Bank and Trust Company offers custodial services. Global Custody Network Review Information relating to the operating history and - ----------------------------- structure of depositories and subcustodians located - in the markets (annually) in which State Street Bank and Trust Company offers custodial services, including transnational depositories. Global Legal Survey With respect to each market in which State Street - ------------------- Bank and Trust Company offers custodial services, (annually) opinions relating to whether local law restricts (i) access of a fund's independent public accountants to books and records of a Foreign Sub-Custodian or Foreign Securities System, (ii) the Fund's ability to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian or Foreign Securities System, (iii) the Fund's ability to recover in the event of a loss by a Foreign Sub-Custodian or Foreign Securities System, and (iv) the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars. Subcustodian Agreements Copies of the Subcustodian contracts State Street - ----------------------- Bank and Trust Company has entered into with each (annually) subcustodian in the markets in which State Street Bank and Trust Company offers subcustody services to its US mutual fund clients. Network Bulletin (weekly): Developments of interest to investors in the markets in which State Street Bank and Trust Company offers custodial services. Foreign Custody Advisors (as With respect to markets in which State Street Bank Necessary): and Trust Company offers custodial services which exhibit special custody risks, developments which may impact State Street's ability to deliver expected level of service.
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT Addendum to the Custodian Agreement between CASH RESOURCE TRUST (the "Customer") and State Street Bank and Trust Company ("State Street"). PREAMBLE WHEREAS, State Street has been appointed as custodian of certain assets of the Customer pursuant to a certain Custodian Agreement (the "Custodian Agreement") dated as of June 14, 1999; WHEREAS, State Street has developed and utilizes proprietary accounting and other systems, including State Street's proprietary Multicurrency HORIZONSM Accounting System, in its role as custodian of the Customer, and maintains certain Customer-related data ("Customer Data") in databases under the control and ownership of State Street (the "Data Access Services"); and WHEREAS, State Street makes available to the Customer certain Data Access Services solely for the benefit of the Customer, and intends to provide additional services, consistent with the terms and conditions of this Addendum. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the parties agree as follows: 1. SYSTEM AND DATA ACCESS SERVICES a. System. Subject to the terms and conditions of this Addendum, State Street hereby agrees to provide the Customer with access to State Street's Multicurrency HORIZONSM Accounting System and the other information systems (collectively, the "System") as described in Attachment A, on a remote basis for the purpose of obtaining reports and information, solely on computer hardware, system software and telecommunication links as listed in Attachment B (the "Designated Configuration") of the Customer, or certain third parties approved by State Street that serve as investment advisors or investment managers of the Customer (the "Investment Advisor"), and solely with respect to the Customer or on any designated substitute or back-up equipment configuration with State Street's written consent, such consent not to be unreasonably withheld. b. Data Access Services. State Street agrees to make available to the Customer the Data Access Services subject to the terms and conditions of this Addendum and data access operating standards and procedures as may be issued by State Street from time to time. The ability of the Customer to originate electronic instructions to State Street on behalf of the Customer in order to (i) effect the transfer or movement of cash or securities held under custody by State Street or (ii) transmit accounting or other information (such transactions are referred to herein as "Client Originated Electronic Financial Instructions"), and (iii) access data for the purpose of reporting and analysis, shall be deemed to be Data Access Services for purposes of this Addendum. c. Additional Services. State Street may from time to time agree to make available to the Customer additional Systems that are not described in the attachments to this Addendum. In the absence of any other written agreement concerning such additional systems, the term "System" shall include, and this Addendum shall govern, the Customer's access to and use of any additional System made available by State Street and/or accessed by the Customer. 2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE State Street and the Customer acknowledge that in connection with the Data Access Services provided under this Addendum, the Customer will have access, through the Data Access Services, to Customer Data and to functions of State Street's proprietary systems; provided, however that in no event will the Customer have direct access to any third party systems-level software that retrieves data for, stores data from, or otherwise supports the System. 3. LIMITATION ON SCOPE OF USE a. Designated Equipment; Designated Location. The System and the Data Access Services shall be used and accessed solely on and through the Designated Configuration at the offices of the Customer or the Investment Advisor located in Boston, Massachusetts ("Designated Location"). b. Designated Configuration; Trained Personnel. State Street shall be responsible for supplying, installing and maintaining the Designated Configuration at the Designated Location. State Street and the Customer agree that each will engage or retain the services of trained personnel to enable both parties to perform their respective obligations under this Addendum. State Street agrees to use commercially reasonable efforts to maintain the System so that it remains serviceable, provided, however, that State Street does not guarantee or assure uninterrupted remote access use of the System. c. Scope of Use. The Customer will use the System and the Data Access Services only for the processing of securities transactions, the keeping of books of account for the Customer and accessing data for purposes of reporting and analysis. The Customer shall not, and shall cause its employees and agents not to (i) permit any third party to use the System or the Data Access Services, (ii) sell, rent, license or otherwise use the System or the Data Access Services in the operation of a service bureau or for any purpose other than as expressly authorized under this Addendum, (iii) use the System or the Data Access Services for any fund, trust or other investment vehicle without the prior written consent of State Street, (iv) allow access to the System or the Data Access Services through terminals or any other computer or telecommunications facilities located outside the Designated Locations, (v) allow or cause any information (other than portfolio holdings, valuations of portfolio holdings, and other information reasonably necessary for the management or distribution of the assets of the Customer) transmitted from State Street's databases, including data from third party sources, available through use of the System or the Data Access Services to be redistributed or retransmitted to another computer, terminal or other device for other than use for or on behalf of the Customer or (vi) modify the System in any way, including without limitation, developing any software for or attaching any devices or computer programs to any equipment, system, software or database which forms a part of or is resident on the Designated Configuration. d. Other Locations. Except in the event of an emergency or of a planned System shutdown, the Customer's access to services performed by the System or to Data Access Services at the Designated Location may be transferred to a different location only upon the prior written consent of State Street. In the event of an emergency or System shutdown, the Customer may use any back-up site included in the Designated Configuration or any other back-up site agreed to by State Street, which agreement will not be unreasonably withheld. The Customer may secure from State Street the right to access the System or the Data Access Services through computer and telecommunications facilities or devices complying with the Designated Configuration at additional locations only upon the prior written consent of State Street and on terms to be mutually agreed upon by the parties. e. Title. Title and all ownership and proprietary rights to the System, including any enhancements or modifications thereto, whether or not made by State Street, are and shall remain with State Street. f. No Modification. Without the prior written consent of State Street, the Customer shall not modify, enhance or otherwise create derivative works based upon the System, nor shall the Customer reverse engineer, decompile or otherwise attempt to secure the source code for all or any part of the System. g. Security Procedures. The Customer shall comply with data access operating standards and procedures and with user identification or other password control requirements and other security procedures as may be issued from time to time by State Street for use of the System on a remote basis and to access the Data Access Services. The Customer shall have access only to the Customer Data and authorized transactions agreed upon from time to time by State Street and, upon notice from State Street, the Customer shall discontinue remote use of the System and access to Data Access Services for any security reasons cited by State Street; provided, that, in such event, State Street shall, for a period not less than 180 days (or such other shorter period specified by the Customer) after such discontinuance, assume responsibility to provide accounting services under the terms of the Custodian Agreement. h. Inspections. State Street shall have the right to inspect the use of the System and the Data Access Services by the Customer and the Investment Advisor to ensure compliance with this Addendum. The on-site inspections shall be upon prior written notice to the Customer and the Investment Advisor and at reasonably convenient times and frequencies so as not to result in an unreasonable disruption of the Customer's or the Investment Advisor's business. 4. PROPRIETARY INFORMATION a. Proprietary Information. The Customer acknowledges and State Street represents that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the Customer by State Street as part of the Data Access Services and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Customer shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The Customer agrees that it will hold such Proprietary Information in the strictest confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The Customer further acknowledges that State Street shall not be required to provide the Investment Advisor with access to the System unless it has first received from the Investment Advisor an undertaking with respect to State Street's Proprietary Information in the form of Attachment C to this Addendum. The Customer shall use all commercially reasonable efforts to assist State Street in identifying and preventing any unauthorized use, copying or disclosure of the Proprietary Information or any portions thereof or any of the logic, formats or designs contained therein. b. Cooperation. Without limitation of the foregoing, the Customer shall advise State Street immediately in the event the Customer learns or has reason to believe that any person to whom the Customer has given access to the Proprietary Information, or any portion thereof, has violated or intends to violate the terms of this Addendum, and the Customer will, at its expense, co-operate with State Street in seeking injunctive or other equitable relief in the name of the Customer or State Street against any such person. c. Injunctive Relief.The Customer acknowledges that the disclosure of any Proprietary Information, or of any information which at law or equity ought to remain confidential, will immediately give rise to continuing irreparable injury to State Street inadequately compensable in damages at law. In addition, State Street shall be entitled to obtain immediate injunctive relief against the breach or threatened breach of any of the foregoing undertakings, in addition to any other legal remedies which may be available. d. Survival.The provisions of this Section 4 shall survive the termination of this Addendum. 5. LIMITATION ON LIABILITY a. Limitation on Amount and Time for Bringing Action. The Customer agrees that any liability of State Street to the Customer or any third party arising out of State Street's provision of Data Access Services or the System under this Addendum shall be limited to the amount paid by the Customer for the preceding 24 months for such services. In no event shall State Street be liable to the Customer or any other party for any special, indirect, punitive or consequential damages even if advised of the possibility of such damages. No action, regardless of form, arising out of this Addendum may be brought by the Customer more than two years after the Customer has knowledge that the cause of action has arisen. b. Limited Warranties. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY STATE STREET. c. Third-Party Data. Organizations from which State Street may obtain certain data included in the System or the Data Access Services are solely responsible for the contents of such data, and State Street shall have no liability for claims arising out of the contents of such third-party data, including, but not limited to, the accuracy thereof. d. Regulatory Requirements. As between State Street and the Customer, the Customer shall be solely responsible for the accuracy of any accounting statements or reports produced using the Data Access Services and the System and the conformity thereof with any requirements of law. e. Force Majeure. Neither party shall be liable for any costs or damages due to delay or nonperformance under this Addendum arising out of any cause or event beyond such party's control, including without limitation, cessation of services hereunder or any damages resulting therefrom to the other party, or the Customer as a result of work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action, or communication disruption. 6. INDEMNIFICATION The Customer agrees to indemnify and hold State Street harmless from any loss, damage or expense including reasonable attorney's fees, (a "loss") suffered by State Street arising from (i) the negligence or willful misconduct in the use by the Customer of the Data Access Services or the System, including any loss incurred by State Street resulting from a security breach at the Designated Location or committed by the Customer's employees or agents or the Investment Advisor and (ii) any loss resulting from incorrect Client Originated Electronic Financial Instructions. State Street shall be entitled to rely on the validity and authenticity of Client Originated Electronic Financial Instructions without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by State Street from time to time. 7. FEES Fees and charges for the use of the System and the Data Access Services and related payment terms shall be as set forth in the Custody Fee Schedule in effect from time to time between the parties (the "Fee Schedule"). Any tariffs, duties or taxes imposed or levied by any government or governmental agency by reason of the transactions contemplated by this Addendum, including, without limitation, federal, state and local taxes, use, value added and personal property taxes (other than income, franchise or similar taxes which may be imposed or assessed against State Street) shall be borne by the Customer. Any claimed exemption from such tariffs, duties or taxes shall be supported by proper documentary evidence delivered to State Street. 8. TRAINING, IMPLEMENTATION AND CONVERSION a. Training. State Street agrees to provide training, at a designated State Street training facility or at the Designated Location, to the Customer's personnel in connection with the use of the System on the Designated Configuration. The Customer agrees that it will set aside, during regular business hours or at other times agreed upon by both parties, sufficient time to enable all operators of the System and the Data Access Services, designated by the Customer, to receive the training offered by State Street pursuant to this Addendum. b. Installation and Conversion. State Street shall be responsible for the technical installation and conversion ("Installation and Conversion") of the Designated Configuration. The Customer shall have the following responsibilities in connection with Installation and Conversion of the System: (i) The Customer shall be solely responsible for the timely acquisition and maintenance of the hardware and software that attach to the Designated Configuration in order to use the Data Access Services at the Designated Location. (ii) State Street and the Customer each agree that they will assign qualified personnel to actively participate during the Installation and Conversion phase of the System implementation to enable both parties to perform their respective obligations under this Addendum. 9. SUPPORT During the term of this Addendum, State Street agrees to provide the support services set out in Attachment D to this Addendum. 10. TERM OF ADDENDUM a. Term of Addendum. This Addendum shall become effective on the date of its execution by State Street and shall remain in full force and effect until terminated as herein provided. b. Termination of Addendum. Either party may terminate this Addendum (i) for any reason by giving the other party at least one-hundred and eighty days' prior written notice in the case of notice of termination by State Street to the Customer or thirty days' notice in the case of notice from the Customer to State Street of termination; or (ii) immediately for failure of the other party to comply with any material term and condition of the Addendum by giving the other party written notice of termination. In the event the Customer shall cease doing business, shall become subject to proceedings under the bankruptcy laws (other than a petition for reorganization or similar proceeding) or shall be adjudicated bankrupt, this Addendum and the rights granted hereunder shall, at the option of State Street, immediately terminate with notice to the Customer. This Addendum shall in any event terminate as to any Customer within 90 days after the termination of the Custodian Agreement applicable to such Customer. c. Termination of the Right to Use. Upon termination of this Addendum for any reason, any right to use the System and access to the Data Access Services shall terminate and the Customer shall immediately cease use of the System and the Data Access Services. Immediately upon termination of this Addendum for any reason, the Customer shall return to State Street all copies of documentation and other Proprietary Information in its possession; provided, however, that in the event that either party terminates this Addendum or the Custodian Agreement for any reason other than the Customer's breach, State Street shall provide the Data Access Services for a period of time and at a price to be agreed upon by the parties. 11. MISCELLANEOUS a. Assignment; Successors. This Addendum and the rights and obligations of the Customer and State Street hereunder shall not be assigned by either party without the prior written consent of the other party, except that State Street may assign this Addendum to a successor of all or a substantial portion of its business, or to a party controlling, controlled by, or under common control with State Street. b. Year 2000. State Street will take all steps necessary to ensure that its products (and those of its third-party suppliers) reflect the available state of the art technology to offer products that are Year 2000 compliant, including, but not limited to, century recognition of dates, calculations that correctly compute same century and multi century formulas and date values, and interface values that reflect the date issues arising between now and the next one-hundred years. If any changes are required, State Street will make the changes to its products at no cost to Customer and in a commercially reasonable time frame and will require third-party suppliers to do likewise. c. Survival. All provisions regarding indemnification, warranty, liability and limits thereon, and confidentiality and/or protection of proprietary rights and trade secrets shall survive the termination of this Addendum. d. Entire Agreement. This Addendum and the attachments hereto constitute the entire understanding of the parties hereto with respect to the Data Access Services and the use of the System and supersedes any and all prior or contemporaneous representations or agreements, whether oral or written, between the parties as such may relate to the Data Access Services or the System, and cannot be modified or altered except in a writing duly executed by the parties. This Addendum is not intended to supersede or modify the duties and liabilities of the parties hereto under the Custodian Agreement or any other agreement between the parties hereto except to the extent that any such agreement specifically refers to the Data Access Services or the System. No single waiver of any right hereunder shall be deemed to be a continuing waiver. e. Severability. If any provision or provisions of this Addendum shall be held to be invalid, unlawful, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired. f. Governing Law. This Addendum shall be interpreted and construed in accordance with the internal laws of The Commonwealth of Massachusetts without regard to the conflict of laws provisions thereof. ATTACHMENT A Multicurrency HORIZONSM Accounting System System Product Description I. The Multicurrency HORIZONSM Accounting System is designed to provide lot level portfolio and general ledger accounting for SEC and ERISA type requirements and includes the following services: 1) recording of general ledger entries; 2) calculation of daily income and expense; 3) reconciliation of daily activity with the trial balance, and 4) appropriate automated feeding mechanisms to (i) domestic and international settlement systems, (ii) daily, weekly and monthly evaluation services, (iii) portfolio performance and analytic services, (iv) customer's internal computing systems and (v) various State Street provided information services products. II. GlobalQuestR is designed to provide customer access to the following information maintained on The Multicurrency HORIZONSM Accounting System: 1) cash transactions and balances; 2) purchases and sales; 3) income receivables; 4) tax refund receivables; 5) daily priced positions; 6) open trades; 7) settlement status; 8) foreign exchange transactions; 9) trade history, and 10) daily, weekly and monthly evaluation services. III. SaFiReSM. SaFiReSM is designed to provide the customer with the ability to prepare its own financial reports by permitting the customer to access customer information maintained on the Multicurrency HORIZONR Accounting System, to organize such information in a flexible reporting format and to have such reports printed on the customer's desktop or by its printing provider. ATTACHMENT B Designated Configuration ATTACHMENT C Undertaking The undersigned understands that in the course of its employment as Investment Advisor to MENTOR FUNDS (the "Customer") it will have access to State Street Bank and Trust Company's ("State Street") Multicurrency HORIZONSM Accounting System and other information systems (collectively, the "System"). The undersigned acknowledges that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the undersigned by State Street as part of the Data Access Services provided to the Customer and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Undersigned shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The undersigned agrees that it will hold such Proprietary Information in confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The undersigned will not attempt to intercept data, gain access to data in transmission, or attempt entry into any system or files for which it is not authorized. It will not intentionally adversely affect the integrity of the System through the introduction of unauthorized code or data, or through unauthorized deletion. Upon notice by State Street for any reason, any right to use the System and access to the Data Access Services shall terminate and the undersigned shall immediately cease use of the System and the Data Access Services. Immediately upon notice by State Street for any reason, the undersigned shall return to State Street all copies of documentation and other Proprietary Information in its possession. MENTOR INVESTMENTS ADVISORS, LLC By: _________________________ Title: _________________________ Date: _________________________ ATTACHMENT C Undertaking The undersigned understands that in the course of its employment as Investment Advisor to MENTOR FUNDS (the "Customer") it will have access to State Street Bank and Trust Company's ("State Street") Multicurrency HORIZONSM Accounting System and other information systems (collectively, the "System"). The undersigned acknowledges that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the undersigned by State Street as part of the Data Access Services provided to the Customer and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Undersigned shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The undersigned agrees that it will hold such Proprietary Information in confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The undersigned will not attempt to intercept data, gain access to data in transmission, or attempt entry into any system or files for which it is not authorized. It will not intentionally adversely affect the integrity of the System through the introduction of unauthorized code or data, or through unauthorized deletion. Upon notice by State Street for any reason, any right to use the System and access to the Data Access Services shall terminate and the undersigned shall immediately cease use of the System and the Data Access Services. Immediately upon notice by State Street for any reason, the undersigned shall return to State Street all copies of documentation and other Proprietary Information in its possession. MENTOR PERPETUAL ADVISORS, LLC By: _________________________ Title: _________________________ Date: _________________________ ATTACHMENT C Undertaking The undersigned understands that in the course of its employment as Investment Advisor to MENTOR FUNDS (the "Customer") it will have access to State Street Bank and Trust Company's ("State Street") Multicurrency HORIZONSM Accounting System and other information systems (collectively, the "System"). The undersigned acknowledges that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the undersigned by State Street as part of the Data Access Services provided to the Customer and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Undersigned shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The undersigned agrees that it will hold such Proprietary Information in confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The undersigned will not attempt to intercept data, gain access to data in transmission, or attempt entry into any system or files for which it is not authorized. It will not intentionally adversely affect the integrity of the System through the introduction of unauthorized code or data, or through unauthorized deletion. Upon notice by State Street for any reason, any right to use the System and access to the Data Access Services shall terminate and the undersigned shall immediately cease use of the System and the Data Access Services. Immediately upon notice by State Street for any reason, the undersigned shall return to State Street all copies of documentation and other Proprietary Information in its possession. VAN KEMPEN MANAGEMENT, INC. By: _________________________ Title: _________________________ Date: _________________________ ATTACHMENT C Undertaking The undersigned understands that in the course of its employment as Investment Advisor to MENTOR FUNDS (the "Customer") it will have access to State Street Bank and Trust Company's ("State Street") Multicurrency HORIZONSM Accounting System and other information systems (collectively, the "System"). The undersigned acknowledges that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the undersigned by State Street as part of the Data Access Services provided to the Customer and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Undersigned shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The undersigned agrees that it will hold such Proprietary Information in confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The undersigned will not attempt to intercept data, gain access to data in transmission, or attempt entry into any system or files for which it is not authorized. It will not intentionally adversely affect the integrity of the System through the introduction of unauthorized code or data, or through unauthorized deletion. Upon notice by State Street for any reason, any right to use the System and access to the Data Access Services shall terminate and the undersigned shall immediately cease use of the System and the Data Access Services. Immediately upon notice by State Street for any reason, the undersigned shall return to State Street all copies of documentation and other Proprietary Information in its possession. WELLINGTON MANAGEMENT COMPANY, LLP By: _________________________ Title: _________________________ Date: _________________________ ATTACHMENT C-1 Undertaking The undersigned understands that in the course of its employment as Independent Auditor to MENTOR FUNDS (the "Customer") it will have access to State Street Bank and Trust Company's ("State Street") Multicurrency HORIZON Accounting System and other information systems (collectively, the "System"). The undersigned acknowledges that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation, and other information made available to the Undersigned by State Street as part of the Data Access Services provided to the Customer and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Undersigned shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The Undersigned agrees that it will hold such Proprietary Information in confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The Undersigned will not attempt to intercept data, gain access to data in transmission, or attempt entry into any system or files for which it is not authorized. It will not intentionally adversely affect the integrity of the System through the introduction of unauthorized code or data, or through unauthorized deletion. Upon notice by State Street for any reason, any right to use the System and access to the Data Access Services shall terminate and the Undersigned shall immediately cease use of the System and the Data Access Services. Immediately upon notice by State Street for any reason, the Undersigned shall return to State Street all copies of documentation and other Proprietary Information in its possession. *KPMG PEAT MARWICK LLP By: Title: Date: ATTACHMENT D Support During the term of this Addendum, State Street agrees to provide the following on-going support services: a. Telephone Support. The Customer Designated Persons may contact State Street's Multicurrency HORIZONSM Help Desk and Customer Assistance Center between the hours of 8 a.m. and 6 p.m. (Eastern time) on all business days for the purpose of obtaining answers to questions about the use of the System, or to report apparent problems with the System. From time to time, the Customer shall provide to State Street a list of persons, not to exceed five in number, who shall be permitted to contact State Street for assistance (such persons being referred to as "the Customer Designated Persons"). b. Technical Support. State Street will provide technical support to assist the Customer in using the System and the Data Access Services. The total amount of technical support provided by State Street shall not exceed 10 resource days per year. State Street shall provide such additional technical support as is expressly set forth in the fee schedule in effect from time to time between the parties (the "Fee Schedule"). Technical support, including during installation and testing, is subject to the fees and other terms set forth in the Fee Schedule. c. Maintenance Support. State Street shall use commercially reasonable efforts to correct system functions that do not work according to the System Product Description as set forth on Attachment A in priority order in the next scheduled delivery release or otherwise as soon as is practicable. d. System Enhancements. State Street will provide to the Customer any enhancements to the System developed by State Street and made a part of the System; provided that, sixty (60) days prior to installing any such enhancement, State Street shall notify the Customer and shall offer the Customer reasonable training on the enhancement. Charges for system enhancements shall be as provided in the Fee Schedule. State Street retains the right to charge for related systems or products that may be developed and separately made available for use other than through the System. e. Custom Modifications. In the event the Customer desires custom modifications in connection with its use of the System, the Customer shall make a written request to State Street providing specifications for the desired modification. Any custom modifications may be undertaken by State Street in its sole discretion in accordance with the Fee Schedule. f. Limitation on Support. State Street shall have no obligation to support the Customer's use of the System: (i) for use on any computer equipment or telecommunication facilities which does not conform to the Designated Configuration or (ii) in the event the Customer has modified the System in breach of this Addendum. EX-99.(H)(1) 7 0007.txt ADMINISTRATIVE SERVICES AGREEMENT - EIS ADMINISTRATIVE SERVICES AGREEMENT This Administrative Services Agreement is made as of this 10th day of June, 1999 between Mentor Funds, a Massachusetts business trust (herein called the "Trust"), and Evergreen Investment Services, Inc., a Delaware corporation (herein called "EIS"). W I T N E S S E T H: WHEREAS, Trust is a Massachusetts business trust consisting of one or more portfolios which operates as an open-end management investment company and is so registered under the Investment Company Act of 1940; and WHEREAS, the 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. The Trust hereby appoints EIS as Administrator of the Trust and each of its portfolios 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 the Trust, EIS will hereafter provide facilities, equipment and personnel to carry out the following administrative services for operation of the business and affairs of the Trust and each of its portfolios: (a) Prepare, file and maintain the 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 the Trust and the 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 the Trust with, among others, the Trust's distributor, and custodian and transfer agent; (d) Supervise the Trust's fund accounting agent in the maintenance of the Trust's general ledger and in the preparation of the Trust's financial statements, including oversight of expense accruals and payments and the determination of the net asset value of the Trust's assets and of the Trust's shares, and of the declaration and payment of dividends and other distributions to shareholders; (e) Calculate performance data of the Trust for dissemination to information services covering the investment company industry; (f) Prepare and file the Trust's tax returns; (g) Examine and review the operations of the 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 portfolios of the Trust; (k) Coordinate shareholder meetings; (l) Provide general compliance services; and (m) Advise the 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 the Trust hereunder, shall hereafter be referred to as "Administrative Services." Administrative Services shall not include any duties, functions, or services to be performed for the Trust by the Trust's investment adviser, distributor, custodian or transfer agent pursuant to their agreements with the 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 the Trust. The Trust shall be responsible for all other expenses incurred by EIS on behalf of the 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. For the Administrative Services provided, the Trust hereby agrees 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. Each portfolio of the Trust shall pay a portion of the administrative fee equal to the rate determined above times that portfolio's average annual daily net assets. 5. RESPONSIBILITY OF ADMINISTRATOR. EIS shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross 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 Trust) 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 Trust, shall be deemed, when rendering services to the Trust or acting on any business of the Trust (other than services or business in connection with the duties of EIS hereunder) to be rendering such services to or acting solely for the Trust 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, 1999, 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 Trust 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 the 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 the Trust hereunder by EIS shall be in writing and shall be duly given if delivered to the Trust at: 200 Berkeley Street, Boston, MA 02116, Attention: Secretary. Notices of any kind to be given to EIS hereunder by the 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 the Declaration of Trust and agrees that the obligations pursuant to this Agreement of a particular portfolio and of the Trust with respect to that particular portfolio be limited solely to the assets of that particular portfolio, and EIS shall not seek satisfaction of any such obligation from the assets of any other portfolio, the shareholders of any portfolio, 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 delimit 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 Administrative Services Agreement to be executed by their officers designated below as of the day and year first above written. MENTOR FUNDS ATTEST: __________________________ By: _______________________________ NAME: TITLE: EVERGREEN INVESTMENT SERVICES, INC. ATTEST: __________________________ By: _______________________________ NAME: TITLE: Dated June 14, 1999 SCHEDULE A Mentor Growth Portfolio Mentor Capital Growth Portfolio Mentor Money Market Portfolio Mentor U.S. Government Money Market Portfolio Mentor Tax-Exempt Money Market Portfolio Dated June 21, 1999 SCHEDULE A Mentor Balanced Portfolio Mentor Short-Duration Income Portfolio Mentor Municipal Income Portfolio Mentor Quality Income Portfolio Mentor Income and Growth Portfolio Mentor Perpetual Global Portfolio Mentor High Income Portfolio Dated June 10, 1999 SCHEDULE B Mentor Balanced Portfolio 0.15% Mentor Growth Portfolio 0.15% Mentor Short-Duration Income Portfolio 0.10% Mentor Capital Growth Portfolio 0.15% Mentor Municipal Income Portfolio 0.10% Mentor Quality Income Portfolio 0.10% Mentor Income and Growth Portfolio 0.15% Mentor Perpetual Global Portfolio 0.15% Mentor High Income Portfolio 0.15% Mentor Money Market Portfolio 0.02% Mentor U.S. Government Money Market Portfolio 0.02% Mentor Tax-Exempt Money Market Portfolio 0.02% Dated October 25, 1999 SCHEDULE A Mentor Money Market Portfolio Mentor U.S. Government Money Market Portfolio Mentor Tax-Exempt Money Market Portfolio Dated October 25, 1999 SCHEDULE B Mentor Money Market Portfolio 0.02% Mentor U.S. Government Money Market Portfolio 0.02% Mentor Tax-Exempt Money Market Portfolio 0.02% EX-99.(H)(2) 8 0008.txt TRANDFER 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 23146 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 23146 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 23146 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 23146 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 23146 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 Evergreen Select 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: 23146 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 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 23146 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 23146 EXHIBIT A Evergreen Select 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 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 23146 A-1 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 23146 A-2 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 23146 A-2 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. 23146 B-1 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 23146 B-2 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. 23146 B-3 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: Shareholder Account Confirmation As required Redemption Checks When redemption is made Certificates When requested Withdrawal plan payment checks On payment cycle Distribution checks As required Name and address labels (per account registration) As requested Proxy When required 1099 Annually 23146 B-4 1042-S Annually Transaction journals Daily Record date position control Daily Daily and (monthly) cash proof Daily Daily and (monthly) share proof Daily Daily master control Daily Blue Sky exception Daily Blue Sky master list Monthly and whenever a new permit is issued by a state Blue Sky sales report Cycle as designated in advance by distributor Check register Daily Account information reports When requested (Monthly) Cumulative Monthly transaction New account list Monthly Shareholder master list When requested Sales by State Monthly Activities statistics Monthly Distribution journals As required Proxy tallies and vote listings When requested Withdrawal plan account check Monthly reconciliation 23146 B-5 Dividend account check As required reconciliation 23146 B-6 EXHIBIT C TRANSFER AGENT FEE SCHEDULE CHARGES TO FUNDS GROUP 1 - MONTHLY DIVIDEND FUNDS Per open account per year $26.50 Per closed account per year 9.00 Per new account 10.00 GROUP 2 - QUARTERLY DIVIDEND FUNDS Per open account per year $25.50 Per closed account per year 9.00 Per new account 10.00 GROUP 3 - SEMI-ANNUAL AND ANNUAL DIVIDEND FUNDS Per open account per year $24.50 Per closed account per year 9.00 Per new account 10.00 GROUP 4 - MONEY MARKET FUNDS Per open account per year $26.50 Per closed account per year 9.00 Per new account 10.00 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 *These fees are not borne by the Funds, but are direct shareholder charges. **Fee waived for participants with assets in excess of $25,000. Funds that have "seed" capital only will not be charged until the Fund has public shareholders. 23146 C-1 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 C-2 23146 EX-99.(H)(3) 9 0009.txt LETTER AMENDMENT MENTOR FUNDS 200 Berkeley Street Boston, Massachusetts 02116 October 1, 1999 Evergreen Service Company 200 Berkeley Street Boston, Massachusetts 02116 To Whom It May Concern: Pursuant to Paragraph 1 of the Master Transfer and Recordkeeping Agreement dated September 18, 1997 between Evergreen Service Company and various Funds (the "Agreement"), as defined in the Agreement, this is to notify Evergreen Service Company that the Evergreen Reserve Money Market Fund (formerly Mentor Money Market Portfolio), Evergreen Reserve Tax-Exempt Money Market Fund (formerly Mentor Tax-Exempt Money Market Portfolio) and Evergreen Reserve U.S. Government Money Market Fund (formerly Mentor U.S. Government Money Market Portfolio), each a series of Mentor Funds, hereby elect to become Fund parties to such Agreement. MENTOR FUNDS On behalf of: Evergreen Reserve Money Market Fund (formerly Mentor Money Market Portfolio) Evergreen Reserve Tax-Exempt Money Market Fund (formerly Mentor Tax-Exempt Money Market Portfolio) Evergreen Reserve U.S. Government Money Market Fund (formerly Mentor U.S. Government Money Market Portfolio), By: /s/ Elizabeth A. Smith Name: Elizabeth A. Smith Title: Assistant Secretary Accepted and Agreed: EVERGREEN SERVICE COMPANY By: /s/ Ann Marie Becker Name: Ann Marie Becker Title: Managing Director Dated as of October 1, 1999 EX-99.(J) 10 0010.txt CONSENT OF KPMG LLP CONSENT OF INDEPENDENT AUDITORS Board of Trustees and Shareholders Mentor Funds: We consent to the use of our report dated November 3, 2000 incorporated herein by reference and to the references to our firm under the captions "FINANCIAL HIGHLIGHTS" in the prospectus and "Independent Auditors" in the Statement of Additional Information. /s/ KPMG Boston, Massachusetts January 25, 2001 EX-99.(M) 11 0011.txt PLAN OF DISTRIBUTION PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1 OF MENTOR FUNDS This constitutes the PLAN OF DISTRIBUTION of Mentor Funds (the "Trust") on behalf of the series of shares of beneficial interest of the Trust identified on Exhibit A attached hereto and made a part hereof (each, a "Portfolio"). 1. Each Portfolio shall pay to the principal underwriter of the Portfolio's shares (the "Distributor") a fee for services performed and expenses incurred in respect of the distribution of shares of the Portfolio, or, where applicable, of a class of shares of the Portfolio specified in Exhibit A, at the annual rate set forth opposite the Portfolio's name on Exhibit A of such Portfolio's average daily net assets attributable to its shares, or to such class of shares, such fee to be calculated and accrued daily and paid monthly. 2. The amount set forth in paragraph 1 of this Plan shall be paid for the Distributor's services as distributor of the shares of each Portfolio (or of the applicable class of shares of any such Portfolio, as the case may be) in accordance with the Distribution Agreement between the Distributor and the Trust and may be spent by the Distributor or its agents on any activities or expenses related to the sale and repurchase of the shares of the Portfolio (or any such class of shares, as the case may be), including, but not limited to, commissions and other compensation to persons who engage in or support distribution and repurchase of shares; printing of prospectuses and reports for other than existing shareholders; advertising; preparation and distribution of sales literature; and overhead, travel, and telephone expenses. 3. This Plan shall not take effect until it has been approved, together with any related agreements, by votes of a majority of both (a) the Trustees and (b) those Trustees who are not "interested persons" of the Trust (as defined in the Investment Company Act of 1940, as amended) and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Rule 12b-1 Trustees"), cast in person at a meeting or meetings called for the purpose of voting on this Plan and such related agreements. 4. This Plan shall continue in effect for successive periods of one year from its execution for so long as such continuance is specifically approved at least annually in the manner provided for approval of this Plan in paragraph 3. 5. Any person authorized to direct the disposition of monies paid or payable by a Portfolio pursuant to this Plan or any related agreement shall provide to the Trustees and the Trustees shall review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. 6. This Plan may be terminated at any time in respect of any or all of the Portfolios by vote of a majority of the Rule 12b-1 Trustees or, in respect of a Portfolio, by vote of that Portfolio's shares constituting a majority of the outstanding voting securities of such Portfolio (or the class of shares in question, as the case may be). 7. This Plan may not be amended to increase materially the amount of distribution expenses provided for in paragraph 1 hereof unless such amendment is approved by the vote of a majority of the outstanding voting securities (as defined in the Investment Company Act of 1940, as amended) of the affected Portfolio or class of Portfolio, as the case may be, and no material amendment to the Plan shall be made unless such amendment is approved in the manner provided for approval of this Plan in paragraph 3 hereof. 8. While this Plan is in effect, the selection and nomination of Trustees who are not interested persons (as defined in the Investment Company Act of 1940, as amended) of the Trust shall be committed to the discretion of the Trustees who are themselves not interested persons. 9. The Trust shall preserve copies of this Plan and any related agreements and all reports made pursuant to paragraph 5 hereof for a period of not less than six years from the date of execution this Plan, or of the agreements or of such reports, as the case may be, the first two years in an easily accessible place. A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of the Trustees or officers of the Trust or shareholders of any Portfolio of the Trust but are binding only upon the assets and property of the relevant Portfolio of the Trust. -3- EXHIBIT A Class of Shares 12b-1 Fee --------------- --------- Mentor Growth Portfolio B 0.75% Mentor Capital Growth Portfolio B 0.75% Mentor Strategy Portfolio B 0.75% Mentor Income and Growth Portfolio B 0.75% Mentor Perpetual Global Portfolio B 0.75% Mentor Quality Income Portfolio B 0.50% Mentor Municipal Income Portfolio B 0.50% Mentor Short-Duration Income Portfolio B 0.30% Mentor Balanced Portfolio B 0.75% Mentor Growth Opportunities Portfolio B 0.75% Mentor High Income Portfolio B 0.50% Mentor Asset Allocation Portfolio B 0.75% Mentor High Yield Portfolio B 0.50% Mentor Perpetual Global Emerging B 0.75% Companies Portfolio Mentor U.S. Gov. MM Portfolio Retail 0.38% Mentor MM Portfolio Retail 0.38% Mentor Tax-Exempt MM Portfolio Retail 0.33% EX-99.(O) 12 0012.txt MULTIPLE CLASS PLAN MULTIPLE CLASS PLAN FOR THE EVERGREEN FUNDS As of March 24, 2000 Each Fund in the Evergreen group of mutual funds currently offers one or more of the following nine 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 have a distribution plan adopted 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, as described in a Fund's current prospectus. B. Class B Shares 1. Class B Shares have adopted 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, as described in a Fund's current prospectus. C. Class C Shares 1. Class C Shares have adopted 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, as described in a Fund's current prospectus. D. Class J Shares 1. Class J Shares have adopted 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 J shares, as described in a Fund's current prospectus. 2. Class J Shares are offered with a front-end sales load, except that purchases of Class J Shares made under certain circumstances are not subject to the front-end load or may be subject to a CDSC, as described in a Fund's current prospectus. 3. Shareholders may exchange Class J Shares of a Fund for Class J Shares of any other fund named in a Fund's prospectus. E. Class S Shares 1. Class S Shares have 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, as described in a Fund's current prospectus. F. Class Y Shares 1. Class Y Shares have no distribution or shareholder services plans. 2. Class Y Shares are offered at net asset value without a front-end sales load or CDSC. 3. Shareholders may exchange Class Y Shares of a Fund for Class Y Shares of any other fund, as described in a Fund's current prospectus. G. Institutional Service Shares 1. Institutional Service Shares have adopted 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, as described in a Fund's current prospectus, to the extent they are offered by a Fund. H. 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, as described in a Fund's current prospectus, to the extent they are offered by a Fund. I. Charitable Shares 1. Charitable Shares have no distribution or shareholder services plans. 2. Charitable Shares are offered at net asset value without a front-end sales load or CDSC. 3. Shareholders may exchange Charitable Shares of a Fund for Charitable Shares of any other fund, 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 clas 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-99.(P) 13 0013.txt CODE OF ETHICS December 17, 1999 CODE OF ETHICS Evergreen Select Fixed Income Trust Evergreen Select Equity Trust Evergreen Select Money Market Trust Evergreen Municipal Trust Evergreen Equity Trust Evergreen Fixed Income Trust Evergreen International Trust Evergreen Money Market Trust Evergreen Variable Annuity Trust Mentor Funds Mentor Cash Resource Trust Mentor Income Fund, Inc. 1. Definitions (A) "Access Person" -- any trustee or officer of the Evergreen Trusts. (B) The "Act" -- the Investment Company Act of 1940. (C) "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 is 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. (D) "Compliance Officer" - James Angelos, Compliance Department, Evergreen Investment Management Company, 200 Berkeley Street, Boston, MA 02116 - (617)210-3690. (E) "Disinterested Trustee" -- a trustee of any Evergreen Trust who is not an "interested person" of the Evergreen Trust within Section 2(a)(19) of the Act. (F) "Fund" -- any portfolio established by any of the Evergreen Trusts. (G) "Purchase or sale of a security" -- includes the writing of an option to purchase or sell a security. (H) "Security" -- the same meaning as it has in Section 2(a)(36) of the Act, but excluding securities issued by the United States Government, bankers' acceptances, bank certificates of deposit, commercial paper and shares of registered open-end investment companies. 2. Prohibited Securities Transactions (A) No Access Person shall, in connection with the purchase or sale, directly or indirectly, by such person of a Security held or to be acquired by any Fund: (1) Employ any device, scheme or artifice to defraud the Fund; (2) Make to the Trust in connection with any Fund any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; (3) Engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any Fund; or (4) Engage in any manipulative practice with respect to any Fund. (B) Inside Information It is a violation of Federal Securities Laws to enter into transactions when in possession of material non-public information (i.e. inside information). Inside Information is 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 From time to time, Trustees may learn about transactions in which a Fund may engage and other information that may be considered Inside Information. (C) No Access Person shall purchase or sell, directly or indirectly, any security in which he or she has or thereby acquires any direct or indirect Beneficial Ownership and which to his or her actual knowledge at the time of such purchase or sale is being purchased or sold by any Fund or has been recommended or is being purchased or sold by any Fund. (D) Section 2(B) shall not apply to the following: (1) Transactions for any account over which the Access Person has no direct or indirect influence or control. (2) Involuntary transactions by the Access Person or any Fund. (3) Purchases under an automatic dividend reinvestment plan. (4) Purchases effected by the exercise of rights, issued by an issuer pro-rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sale of such rights. (5) Transactions approved in advance in writing by the Chairman of the Board of any Trust (and in his absence or unavailability by the President of the Trust) which he or she finds to be: (a) Only remotely potentially harmful to a Fund because they would be very unlikely to affect a highly institutional market, or (b) Clearly not related economically to the securities to be purchased, sold or held by a Fund. 3. Reports (A) Subject to subsection (B) below, each Access Person shall make the reports required by section 270.17j-1(d) of the rules and regulations issued under the Act. (B) A Disinterested Trustee of any Fund need only report a transaction in a Security if he or she knows at the time of such transaction or, in the ordinary course of fulfilling his or her official duties as trustee, should have known that during the 15 day period immediately preceding or after the date of the transaction, such Security was or would be purchased or sold by any Fund or was or would be considered for purchase or sale by any Fund or its investment adviser. 4. Enforcement (A) Each violation of or issue arising under this Code shall be reported to the Board of Trustees at or before the next regular meeting of the Boards. (B) The Board of Trustees may impose such sanctions or penalties upon a violator of this Code as it deems appropriate circumstances. (C) The Compliance Officer shall review reports filed under the Code to determine whether any violation may have occurred. 5. Recordkeeping The Compliance Officer shall maintain the appropriate records and reports of the Code, any violations and/or sanctions for at least 5 years. CODE OF ETHICS CAPITAL MANAGEMENT GROUP OF FIRST UNION NATIONAL BANK EVERGREEN INVESTMENT MANAGEMENT FIRST CAPITAL GROUP FIRST INVESTMENT ADVISORS EVERGREEN ASSET MANAGEMENT CORP. EVERGREEN INVESTMENT MANAGEMENT COMPANY LIEBER & COMPANY MENTOR INVESTMENT ADVISORS MENTOR PERPETUAL ADVISORS MERIDIAN INVESTMENT COMPANY TATTERSALL ADVISORY GROUP, INC. Effective December 17, 1999 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 one geographic location will not have knowledge of transactions effected in another 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 cancelled" orders are forbidden and "no - limit" orders must be cancelled 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 First Union Capital Management Group, First Capital Group, and Evergreen Investment Management (not EIMCO) Employees: First Union National Bank 201 South College St./CP3 Charlotte, NC 28202-0137 ATTN: CMG Compliance For Lieber & Company and Evergreen Asset Management Corp. Employees: Evergreen Funds 2500 Westchester Avenue Purchase, NY 10577 ATTN: Compliance Department For Evergreen Investment Management Company, Inc. Employees: Evergreen Funds 200 Berkeley Street Boston, MA 02116 ATTN: Compliance Department For Mentor Investment Advisor and Mentor Perpetual Advisors Employees: Evergreen Funds 901 E. Byrd St. Richmond, VA 23219 ATTN: Compliance Department For Tattersall Advisory Group, Inc. Employees: Tattersall Advisory Group, Inc. 6802 Paragon Place, Suite 200 Richmond, VA 23230 ATTN: Compliance Department For Meridian Investment Company Employees: Vicki Calhoun First Union National Bank/Trust Compliance PO Box 7558 Philadelphia, PA 19101-7558 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 being notified of the hiring of a new Employee or of a change in an Employee's job title or responsibilities, the appropriate Compliance Officer will determine and notify the Employee as to whether he/she is or has become an Access Person under the Code. 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: First Union Capital Management Group Evergreen Investment Management, and First Capital Group ------------------------------------ Clint Lackey 704/374-3476 Karen Knudtsen 704-374-2249 Joni McCabe 704/374-6404 Donna Mooney 704/383-8197 Vicki Calhoun 215/985-8742 Evergreen Asset Management Corp. Lieber & Company ------------------------------- Christina Carroll 914/641-2301 Jim Angelos 617/210-3690 Evergreen Investment Management Company, Inc. -------------------------------------------- Cathy White 617/210-3606 Jim Angelos 617/210-3690 Meridian Investment Company --------------------------- Vicki Calhoun 215/985-8742 Tattersall Advisory Group ------------------------- Margaret Corwin 804/289-2663 Mentor Investment Advisors Mentor Perpetual Advisors -------------------------- Taylor Nelson 804/782-3209 COVERED COMPANY: Includes Evergreen Asset Management Company, Evergreen Investment Management Company, Inc., Lieber & Company, Mentor Investment Advisors, Mentor Perpetual Advisors, Meridian Investment Company, Tattersall Advisory Group, Inc. and the investment groups included within the Capital Management Group of First Union National Bank, which currently include Evergreen Investment Management, First Capital Group, and First Investment Advisors. Covered Company also includes any CMG 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-----