<PAGE>
SUPPLEMENT TO THE PROSPECTUSES OF
EVERGREEN AGGRESSIVE GROWTH FUND, EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN
BALANCED FUND, EVERGREEN EMERGING MARKETS GROWTH FUND, EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND, EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN
FOUNDATION FUND, EVERGREEN FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND,
EVERGREEN GLOBAL LEADERS FUND, EVERGREEN GLOBAL REAL ESTATE EQUITY FUND,
EVERGREEN GROWTH AND INCOME FUND, EVERGREEN INTERMEDIATE TERM BOND FUND,
EVERGREEN INCOME AND GROWTH FUND, EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY
MARKET FUND, EVERGREEN HIGH GRADE TAX FREE FUND, EVERGREEN INTERMEDIATE TERM
GOVERNMENT SECURITIES FUND, EVERGREEN INTERNATIONAL EQUITY FUND, EVERGREEN
INSTITUTIONAL MONEY MARKET FUND, EVERGREEN INSTITUTIONAL TREASURY MONEY MARKET
FUND, EVERGREEN LATIN AMERICA FUND, THE EVERGREEN LIMITED MARKET FUND, INC.,
EVERGREEN MONEY MARKET FUND, EVERGREEN NEW JERSEY TAX FREE INCOME FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN PENNSYLVANIA TAX FREE
MONEY MARKET FUND, EVERGREEN SHORT-INTERMEDIATE BOND FUND, EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND, EVERGREEN SMALL CAP EQUITY INCOME FUND,
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN TAX EXEMPT MONEY MARKET
FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND, EVERGREEN TREASURY MONEY MARKET
FUND, EVERGREEN U.S. GOVERNMENT FUND, EVERGREEN U.S. REAL ESTATE EQUITY FUND,
EVERGREEN UTILITY FUND, EVERGREEN VALUE FUND, EVERGREEN VIRGINIA MUNICIPAL BOND
FUND, KEYSTONE CAPITAL PRESERVATION AND INCOME FUND, KEYSTONE FUND FOR TOTAL
RETURN, KEYSTONE GLOBAL OPPORTUNITIES FUND, KEYSTONE GLOBAL RESOURCES AND
DEVELOPMENT FUND, KEYSTONE INTERMEDIATE TERM BOND FUND, KEYSTONE OMEGA FUND,
KEYSTONE SMALL COMPANY GROWTH FUND II, KEYSTONE STRATEGIC INCOME FUND, KEYSTONE
TAX FREE INCOME FUND, KEYSTONE CALIFORNIA TAX FREE FUND, KEYSTONE FLORIDA TAX
FREE FUND, KEYSTONE MASSACHUSETTS TAX FREE FUND, KEYSTONE MISSOURI TAX FREE
FUND, KEYSTONE NEW YORK TAX FREE FUND, KEYSTONE PENNSYLVANIA TAX FREE FUND,
KEYSTONE QUALITY BOND FUND (B-1), KEYSTONE DIVERSIFIED BOND FUND (B-2), KEYSTONE
HIGH INCOME BOND FUND (B-4), KEYSTONE BALANCED FUND (K-1), KEYSTONE STRATEGIC
GROWTH FUND (K-2), KEYSTONE GROWTH AND INCOME FUND (S-1), KEYSTONE SMALL COMPANY
GROWTH FUND (S-4), KEYSTONE INSTITUTIONAL ADJUSTABLE RATE FUND, KEYSTONE
INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND, KEYSTONE INTERNATIONAL FUND
INC., KEYSTONE PRECIOUS METALS HOLDINGS, INC., AND KEYSTONE TAX FREE FUND (EACH
A "FUND" AND, COLLECTIVELY, THE "FUNDS")
The prospectus(es) of each of the Funds are hereby supplemented as follows:
CHANGES SUBJECT TO SHAREHOLDER APPROVAL
PROPOSED FUND REORGANIZATIONS
The respective Board of Directors or Trustees of each of the above Funds,
other than the Funds listed under the section captioned "Proposed Fund
Acquisitions" below, has approved a proposal to reorganize (the
"Reorganization") each Fund into a corresponding series (each a "Successor
Fund") of one of eight Delaware business trusts. If shareholders of a Fund
approve the Reorganization and the conditions to the Reorganization are
satisfied, all of the assets and liabilities of the Fund will be transferred to
the corresponding Successor Fund and each shareholder of the Fund will receive
shares of the corresponding Successor Fund. In connection with the
Reorganizations, each Board has approved, subject to shareholder approval, the
reclassification of most Funds' investment objectives from "fundamental" (i.e.,
changeable by shareholder vote only) to "nonfundamental" (i.e., changeable by
vote of the Board), the adoption by each Fund of certain standardized investment
restrictions, and the elimination or reclassification from fundamental to
nonfundamental of each Fund's other currently fundamental investment
restrictions.
The Reorganizations and related proposals are scheduled to be voted on at a
joint special meeting of shareholders to be held on December 15, 1997 (the
"December Shareholder Meeting"). Information detailing each proposal will be
mailed to shareholders on or about October 27, 1997.
In addition, if the respective Reorganization of Keystone International
Fund Inc. and Keystone Precious Metals Holdings, Inc. is approved, effective
January 9, 1998, the following name changes will occur:
<TABLE>
<CAPTION>
CURRENT NAME NEW NAME
<S> <C>
Keystone International Fund Inc. Evergreen International Growth Fund
Keystone Precious Metals Holdings, Inc. Evergreen Precious Metals Fund
</TABLE>
<PAGE>
PROPOSED FUND ACQUISITIONS
The respective Board of Trustees of each Fund listed below has approved a
proposal to combine all of the assets of the Selling Fund and the Acquiring Fund
into a series (each a "Successor Fund") of one of eight Delaware business
trusts, with each Successor Fund to have substantially the same investment
objective and policies as the Acquiring Fund. If approved, all of the assets of
each of the Acquiring Fund and the Selling Fund would be sold to the Successor
Fund in exchange for shares of the Successor Fund and the assumption by the
Successor Fund of certain identified liabilities. If the proposal is approved,
shares of the Successor Fund would be distributed to shareholders of each of the
Acquiring Fund and the Selling Fund in liquidation and subsequent termination of
the Acquiring Fund and the Selling Fund. The Boards have scheduled the proposal
to be voted on at a joint special meeting of shareholders to be held on January
6, 1998. Each of the Acquiring Funds and the Selling Funds will mail information
detailing the proposal to its respective shareholders on or about November 14,
1997.
<TABLE>
<CAPTION>
SELLING FUND ACQUIRING FUND
<S> <C>
Evergreen Balanced Fund Keystone Balanced Fund (K-1)
Evergreen Intermediate Term Bond Fund Keystone Intermediate Term Bond Fund
Keystone Florida Tax Free Fund Evergreen Florida Municipal Bond Fund
Keystone Quality Bond Fund (B-1) Keystone Diversified Bond Fund (B-2)
Keystone Small Company Growth Fund II Keystone Small Company Growth Fund (S-4)
Keystone Tax Free Income Fund Keystone Tax Free Fund
</TABLE>
EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND, EVERGREEN PENNSYLVANIA TAX
FREE MONEY MARKET FUND AND EVERGREEN TAX EXEMPT MONEY MARKET FUND
The respective Board of Trustees of each of the above Funds has approved a
proposal to amend each Fund's investment objective, subject to shareholder
approval. Each Fund will amend its investment objective to permit the Fund to
invest without limitation in obligations subject to the federal alternative
minimum tax. If shareholders approve the proposed change at the December
Shareholder Meeting, under normal circumstances it is anticipated that each Fund
will invest its assets so that at least 80% of its annual interest income is
exempt from federal income tax other than the federal alternative minimum tax.
If the proposed amendment to a Fund's fundamental investment objective is
approved, effective January 9, 1998, the following name changes will occur:
<TABLE>
<CAPTION>
CURRENT NAME NEW NAME
<S> <C>
Evergreen Institutional Tax Exempt Evergreen Institutional Municipal
Money Market Fund Money Market Fund
Evergreen Pennsylvania Tax Free Evergreen Pennsylvania Municipal
Money Market Fund Money Market Fund
Evergreen Tax Exempt Money Market Fund Evergreen Municipal Money Market Fund
</TABLE>
EVERGREEN LATIN AMERICA FUND
The Board of Trustees of Evergreen Latin America Fund has approved a
proposal to amend the Fund's investment objective to permit the Fund to invest
without limit in securities of issuers located in Latin America. If the change
in investment objective is approved, the Fund would no longer be required to
invest a percentage of its assets in securities of issuers located in the United
States and Canada. In addition, the Board has approved a proposal to amend the
Fund's investment restriction relating to industry concentration to require that
the Fund invest at least 25% of its assets in issuers in the banking,
construction, energy, food and beverage, retail, telecommunications and utility
industries, and in conglomerates. Each proposal is scheduled to be voted on at
the December Shareholder Meeting.
CHANGES NOT REQUIRING SHAREHOLDER APPROVAL
NAME CHANGES
Effective October 31, 1997, the following name changes will occur:
<TABLE>
<CAPTION>
CURRENT NAME NEW NAME
<S> <C>
Evergreen Intermediate Term Bond Fund Evergreen Intermediate Term Bond Fund II
Evergreen Limited Market Fund Evergreen Micro Cap Fund
Keystone Capital Preservation and Income Fund Evergreen Capital Preservation and Income Fund
Keystone Fund for Total Return Evergreen Fund for Total Return
Keystone Global Opportunities Fund Evergreen Global Opportunities Fund
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Keystone Global Resources and Development Fund Evergreen Natural Resources Fund
Keystone Institutional Adjustable Rate Fund Evergreen Institutional Adjustable Rate Fund
Keystone Institutional Small Capitalization Growth Evergreen Institutional Small Cap Growth Fund
Fund
Keystone Intermediate Term Bond Fund Evergreen Intermediate Term Bond Fund
Keystone Omega Fund Evergreen Omega Fund
Keystone Small Company Growth Fund II Evergreen Small Company Growth Fund II
Keystone Strategic Income Fund Evergreen Strategic Income Fund
Keystone Tax Free Income Fund Evergreen Tax Free Income Fund
Keystone California Tax Free Fund Evergreen California Tax Free Fund
Keystone Florida Tax Free Fund Evergreen Florida Tax Free Fund
Keystone Massachusetts Tax Free Fund Evergreen Massachusetts Tax Free Fund
Keystone Missouri Tax Free Fund Evergreen Missouri Tax Free Fund
Keystone New York Tax Free Fund Evergreen New York Tax Free Fund
Keystone Pennsylvania Tax Free Fund Evergreen Pennsylvania Tax Free Fund
</TABLE>
Effective January 9, 1998, the following name changes will occcur:
<TABLE>
<S> <C>
Evergreen Balanced Fund Evergreen Balanced Fund II
Keystone Balanced Fund (K-1) Evergreen Balanced Fund
Keystone Diversified Bond Fund (B-2) Evergreen Diversified Bond Fund
Keystone Growth and Income Fund (S-1) Evergreen Blue Chip Fund
Keystone High Income Bond Fund (B-4) Evergreen High Yield Bond Fund
Keystone Quality Bond Fund (B-1) Evergreen Quality Bond Fund
Keystone Small Company Growth Fund (S-4) Evergreen Small Company Growth Fund
Keystone Strategic Growth Fund (K-2) Evergreen Strategic Growth Fund
Keystone Tax Free Fund Evergreen Tax Free Fund
</TABLE>
EVERGREEN AMERICAN RETIREMENT FUND
Evergreen American Retirement Fund may invest up to 20% of its assets in
securities of foreign issuers.
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN GROWTH AND INCOME FUND
EVERGREEN INCOME AND GROWTH FUND
Each Fund may purchase futures contracts, including futures contracts based
on securities indices, and write options on such contracts. The Fund intends to
enter into such contracts and related options for hedging purposes. The Fund may
enter into other types of futures contracts that may become available and relate
to the securities held by the Fund.
EVERGREEN INCOME AND GROWTH FUND
FOREIGN ISSUERS. The Fund may invest up to 50% of its assets in the
securities of foreign issuers either directly or in the form of American
Depositary Receipts, European Depositary Receipts, Global Depositary Receipts or
other securities convertible into securities of foreign issuers.
PORTFOLIO COMPOSITION. The third sentence of the third paragraph under the
caption "Investment Objectives and Policies-Evergreen Income and Growth Fund" is
hereby amended to read as follows: Ordinarily, the Fund anticipates that
approximately 75% of its portfolio will consist of equity securities (including
convertible preferred stock) and the other 25% of debt securities (including
convertible debt securities).
FOREIGN CURRENCY TRANSACTIONS. To the extent the Fund may invest in
non-U.S. dollar denominated securities, it may enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange contracts
("forward contracts"). The Fund may also enter into forward contracts to protect
the Fund's assets denominated in a foreign currency against adverse changes in
foreign currency exchange rates or exchange control regulations. Such changes
could unfavorably affect the value of the Fund's assets which are denominated in
foreign currencies, such as foreign securities or funds deposited in foreign
banks, as measured in U.S. dollars. The use of forward contracts for hedging
purposes may limit any potential gain that might result from a relative increase
in the value of such currencies and might, in certain cases, result in losses to
the Fund. A forward contract is an obligation to purchase or sell an amount of a
particular currency at a specific price and on a future date agreed upon by the
parties. Generally, no commission charges or deposits are involved. At the time
the Fund enters into a forward contract, Fund assets with a value equal to the
Fund's obligations under the forward contract are segregated and are maintained
until the contract has been settled. The Fund will not enter into a forward
contract
3
<PAGE>
with a term of more than one year. In addition to forward contracts entered into
for hedging purposes, the Fund will generally enter into a forward contract to
provide the proper currency to settle a securities transaction at the time the
transaction occurs ("trade date"). The period between trade date and settlement
date will vary between 24 hours and 60 days, depending upon local custom.
INVESTMENT IN SMALL COMPANIES. The Fund may invest from time to time in
securities of little-known, relatively small and special situation companies.
Investments in such companies may tend to be speculative and volatile. A lack of
management depth in such companies could increase the risks associated with the
loss of key personnel. Also, the material and financial resources of such
companies may be limited, with the consequence that funds or external financing
necessary for growth may be unavailable. Such companies may also be involved in
the development or marketing of new products or services for which there are no
established markets. If projected markets do not materialize or only regional
markets develop, such companies may be adversely affected or be subject to the
consequences of local events. Moreover, such companies may be an insignificant
factor in their industries and may become subject to intense competition from
larger companies. Securities of small and special situation companies in which
the Fund invests will frequently be traded only in the over-the-counter market
or on regional stock exchanges and will often be closely held. Securities of
this type may have limited liquidity and be subject to wide price fluctuations.
As a result of the risk factors described above, the net asset value of each
Fund's shares can be expected to vary significantly.
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN VIRGINIA MUNICIPAL BOND FUND, EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX FREE INCOME FUND, EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND, EVERGREEN HIGH GRADE TAX FREE FUND, EVERGREEN
TAX EXEMPT MONEY MARKET FUND, EVERGREEN INSTITUTIONAL TAX EXEMPT MONEY MARKET
FUND, EVERGREEN PENNSYLVANIA TAX FREE MONEY MARKET FUND, KEYSTONE CALIFORNIA TAX
FREE FUND, KEYSTONE FLORIDA TAX FREE FUND, KEYSTONE MASSACHUSETTS TAX FREE FUND,
KEYSTONE MISSOURI TAX FREE FUND, KEYSTONE NEW YORK TAX FREE FUND, KEYSTONE
PENNSYLVANIA TAX FREE FUND, KEYSTONE TAX FREE FUND, AND KEYSTONE TAX FREE INCOME
FUND
Each Fund will invest at least 80% of its assets in bonds that, at the date
of investment, are rated within the four highest categories by Standard and
Poor's Rating Group ("S&P") (AAA, AA, A and BBB), by Moody's Investor Service
("Moody's") (Aaa, Aa, A and Baa), by Fitch Investors Services, LP ("Fitch")
(AAA, AA, A and BBB) or, if not rated or rated under a different system, are of
comparable quality to obligations so rated as determined by another nationally
recognized statistical ratings organization (an "SRO") or by the Fund's
investment adviser. A Fund may invest the remaining 20% of its assets in lower
rated bonds, but it will not invest in bonds rated below B. Subject to certain
exceptions for money market funds, a Fund is not required to sell or otherwise
dispose of any security that loses its rating or has its rating reduced after
the Fund has purchased it.
The Funds are permitted to make taxable investments, and may from time to
time generate income subject to federal regular income tax.
EVERGREEN SMALL CAP EQUITY INCOME FUND
Under normal conditions, the Fund will invest at least 65% of its assets in
equity securities (including convertible debt securities) of companies that, at
the time of purchase, have "total market capitalization" -- present market value
per share multiplied by the total number of shares outstanding -- of less than
$1 billion. The Fund may invest up to 35% of its total assets in equity
securities of companies that at the time of purchase have a total market
capitalization of $1 billion or more, and in excess of that percentage during
temporary defensive periods.
EVERGREEN SHORT-INTERMEDIATE BOND FUND
The Fund will invest at least 65% of its assets in bonds that, at the date
of investment, are rated within the four highest categories by S&P (AAA, AA, A
and BBB), by Moody's (Aaa, Aa, A and Baa), by Fitch (AAA, AA, A and BBB) or, if
not rated under a different system, are of comparable quality to obligations so
rated as determined by another nationally recognized statistical ratings
organization or by the Fund's investment adviser. The Fund may invest the
remaining 35% of its assets in lower rated bonds, but it will not invest in
bonds rated below B. The Fund is not required to sell or otherwise dispose of
any security that loses its rating or has its rating reduced after the Fund has
purchased it.
The Fund may invest in foreign securities, securities denominated in or
indexed to foreign currencies, and foreign currencies.
The Fund may acquire privately placed securities that are not registered
under the Securities Act of 1933 but that can be offered and sold to qualified
institutional buyers under Rule 144A under the Act ("144A Securities"). The
Fund's Trustees have adopted guidelines that delegate to the Fund's investment
adviser the daily function of determining and monitoring the
4
<PAGE>
liquidity of 144A Securities. The Fund may invest up to 10% of its net assets in
illiquid securities, which includes securities issued in private placements
(other than 144A Securities determined to be liquid under the foregoing Rule
144A Securities procedures and commercial paper issued under Section 4(2) of the
Securities Act of 1933).
The Fund may enter into dollar rolls in which the Fund sells income
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period, the Fund foregoes principal and
interest paid on such securities. The Fund is compensated by the difference
between the current sales price and forward price for the future purchase (often
referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. Dollar rolls are treated by the Fund in the same
manner as reverse repurchase agreements for leverage purposes.
KEYSTONE BALANCED FUND (K-1)
The Fund may invest up to 25% of its assets in below-investment grade
securities issued by United States and foreign issuers having a rating range of
BB to CCC by S&P or Fitch and/or Ba to Caa by Moody's or, if unrated or rated
under a different system, believed by the Fund's investment adviser to be of
comparable quality.
Securities rated BB or lower by S&P or Fitch, or Ba or lower by Moody's,
are considered predominantly speculative with respect to the ability of the
issuer to meet principal and interest payments. For more information on
below-investment grade securities, see the statement of additional information.
KEYSTONE CAPITAL PRESERVATION AND INCOME FUND
The Fund may invest in (i) securities rated AAA by S&P, Moody's and/or
Fitch or, if not rated or rated under a different system, believed by the Fund's
investment adviser to be of comparable quality, and (ii) high grade commercial
paper of United States or foreign issuers. The Fund may invest up to 20% of its
assets in the foregoing investments.
KEYSTONE DIVERSIFIED BOND FUND
KEYSTONE INTERMEDIATE TERM BOND FUND
KEYSTONE HIGH INCOME BOND FUND (B-4)
Each Fund may invest up to 50% of its assets in securities that are
principally traded in securities markets located outside the United States.
KEYSTONE INTERNATIONAL FUND INC.
The Fund may enter into cross hedging transactions. A cross hedge is
accomplished by entering into a forward contract or other arrangement with
respect to one foreign currency for the purpose of hedging against a possible
decline in the value of another foreign currency in which certain of the Fund's
portfolio investments are denominated. The Fund's investment adviser may enter
into a cross hedge, rather than hedge directly, in instances where (i) the rates
for forward contracts, options, futures contracts or options on futures
contracts relating to the currency in which the cross hedge is effected are more
favorable than rated for similar instruments denominated in the currency that is
to be hedged and (ii) there is a high degree of correlation between the two
currencies with respect to their movement against the U.S. dollar. Cross hedging
may be effected using the various hedging instruments described below. A cross
hedge cannot protect against exchange rate risks perfectly, and if the Fund's
investment adviser is incorrect in its judgment of future exchange rate
relationships, the Fund could be in a less advantageous position than if such a
hedge had not been established.
KEYSTONE PENNSYLVANIA TAX FREE FUND
The Fund offers Class Y shares which are available only to (i) persons who
at or prior to December 31, 1994, owned shares in a mutual fund advised by
Evergreen Asset Management Corp., (ii) certain institutional investors, and
(iii) investment advisory clients of First Union National Bank or its
affiliates.
EVERGREEN INTERMEDIATE TERM GOVERNMENT SECURITIES FUND
EVERGREEN SHORT-INTERMEDIATE BOND FUND
Effective October 1, 1997, the Funds will declare dividends of net
investment income daily and pay such dividends monthly.
September 18, 1997
5
